The use of cash as the sole means of payment is slowly coming to an end. Not only is the appearance of Digital Payment Methods (DPM) leading this medium oeconomicum towards obsolescence; the pandemic situation of the last two years has contributed to its overcoming, both in the increase of online purchases and in the deterrence of direct contact. MBK, involved at the forefront of the topic, has carried out an interesting research on the subject.
Cashless is the goal towards which several countries are directing their economies.
The transition from the use of cash, both for important transactions (over €1000) and for simpler, everyday ones (a coffee, for example), to digital payment methods (cards and apps) has been on the agenda of several European countries and beyond for some years now. What most inflames the debate on this transition are the consequences; a system in which the bar for movement control and data buying and selling is raised, as well as the abandonment of a traditional and practical means, are frowned upon by a substantial portion of the population.
As part of the constant evolution of its position on the digital payments scene, MBK wanted to investigate various aspects of the topic.
Why is there a move away from cash?
Like all epochal changes, the shift from currency to digital is driven by specific motivations; from fiscal to more social needs, passing through radical transformations in purchasing processes.
The need for tracking and control of financial movements (both small and large entities) is perhaps among the first necessities; in this way it would certainly be easier to put a brake on tax evasion present in many EU countries, as well as give a clean break to cash flows that feed criminal organizations, and that push to action pickpockets, robbers and thieves. In terms of security, therefore, there would be a not indifferent gain; what some analysts (radicalizing the situation) fear, however, is a disproportionate control by the banks and the government system, which would meet a violation, overt or otherwise, of many individual freedoms.
Let’s start with a basic fact: 6 out of 10 consumers today prefer a card (debit, credit or prepaid) to cash for their purchases; of these, more than 85% use a credit card, and about 81% a debit card. The number of transactions paid for by mobile payment (payment services through apps) has grown by almost 150% in recent years. The convenience of having multiple solutions on a single device, of being able to share expenses and personalize the sales and purchasing experience is slowly taking hold in everyone’s buying heart.
A “natural” accelerator of the whole situation was undoubtedly the Covid-19 pandemic. While contact phobia (which also involves money) has not particularly affected all European countries, the various closures and lockdowns have forced many shoppers to shop online, and many retailers to renew on these terms. About 44.7% of EU citizens admitted to having almost doubled the frequency of online purchases after the first lockdowns; moreover, if before the pandemic the percentage of purchases with cash was around 80% (EU average), today DPMs, both in paper and in app, are the preferred method by almost 53% of shoppers.
As many as 8 out of 10 industry experts questioned on this subject saw this combination of factors as an acceleration towards the abandonment of cash, albeit always gradually and in the long term.
Benefits of DPM
If at the level of companies-states-banks there are specific reasons to opt for this kind of systems, there are several reasons why many consumers choose alternative payment methods to cash.
One of the biggest benefits, encouraged by many countries and individual businesses, is cashback; a small percentage return on the spending just made that creates a very high level of loyalty in customers and consumers. The possibility of keeping one’s entire economic and financial situation under control through mobile payment and mobile banking apps is not to be underestimated. Over the years, many consumers have blamed the lack of outgoing cash calculation on an incorrect personal savings policy. In addition, many apps in both categories allow the setting of spending and withdrawal limits.
The contribution of e-commerce
It goes without saying that, in a panorama that tends to be increasingly digital and differently inclined towards direct retail and the exchange of cash, e-commerce is the fundamental marketplace to play on.
We asked Luca M., Junior Finance Specialist at MBK, to give us an overview of the phenomenon from the point of view of a marketplace like ProduceShop:
“Every chain is only as strong as its weakest link: as we have tens of thousands of exchanges with users every day, both incoming and outgoing, we at ProduceShop are the first to have an interest in collaborating with DPM providers who can protect and provide guarantees for each of these transactions; as well as providing a transparent, functional system that can be easily integrated by our systems. Otherwise, it would be like relying on shoddy logistics for the preparation of orders, or disorganized couriers for the delivery of shipments.
Moreover – Luca continues – we must not ignore the implications that DPMs have at the level of neuromarketing and treatment of customer bias; digital money is always there, it is an intangible asset that the average customer sees as inexhaustible or easily recoverable. In this terrain, a proper cross-selling strategy can sometimes increase the cart considerably, often moving away from the buyer’s original intent.”
Since this is an (albeit slow) epochal shift, it’s clear that the consequences on a societal level are quite important; moving away from a payment method that is almost as old as society itself, many segments of the population, especially those not very inclined to digital changes (but not everywhere), are still reluctant to part with it.
If for many people digital possession and transactions are now the norm, for many others the true value of money is linked to its tactile and material presence; an online account is still seen by many as something too dematerialized, non-existent, with all the risks that could result.
In addition, still too many merchants fail to enter into the perspective of the evolution of the means of payment (and related legislation); too often we still hear “No POS for so little“, or “I don’t know this APP“. A correct digital education, a great plague of a consistent slice of Mediterranean Europe, should be implemented also in the category.
Finally, a brief consideration of the segment of buyers that covers the Last Millennials and GenZ.
The fact that we are already at a time when not only do digital payments exist, but they are slowly becoming the norm, leads to a relationship with cash that is almost “nostalgic”; it is seen as a past resource, something linked to the older generations, a guarantee of almost cinematic wealth. The risk, however, is that this segment of users loses contact with the true value of money; the trivialization of the transaction implemented in the various RPGs and online games, then, makes the limit of recognition of real currency even more blurred. It leads to a general sense of loss of contact with money and its implications.
As anticipated, it is impossible to completely cancel a method of exchange as old as the society; the transition from cash to a 100% cashless economy therefore remains, if not a utopia, a long way to go, if only for all the social implications of the case.
What can make the difference, in this case, is to continue to work on digital payment systems that are increasingly secure and functional; the “marketing” contribution that a platform like ProduceShop can give, along with the service, is the guarantee of quality that customers can witness first hand, thus giving more and more credit to the various DPMs.
- Corporate PR
- ProduceShop Finance Dept.
- ProduceShop Marketing Dept. (https://mbkfincom.com)
- Il Sole 24Ore
- La Libre
- Corriere – Finance