These days, more and more people are using cards and digital wallets to pay for goods and services. Although many people still use cash on a day-to-day basis, digital payment options are becoming more common, especially among members of the younger generations.
As the world turns more and more towards digital solutions, many people wonder what the future of cash will be in America and around the world. While it seems unlikely that cash is going to suddenly disappear, the trend towards digital banking continues to gain steam. The implications for credit unions is that they must focus on enhancing their digital banking solutions if they wish to stay competitive.
What factors are contributing to cash's decline?
It’s undeniable that the pandemic helped accelerate a global shift towards digital payments and away from a cash-based society. The rise in e-commerce and mobile and digital options is unprecedented and coupled with the climate created by the virus, the perfect storm was created for digital transactions and banking options to continue their ascent. Consumers have never had so many digital options, and they are only getting safer, faster and more user-friendly.
Listed below are a few of the specific factors and technologies that are replacing cash:
- Digital wallets: By 2024, mobile wallets are predicted to account for 33% of all global in-store purchases. By that same year, online digital wallets could account for over 50% of all global purchases.
- Credit and debit cards: In the first quarter of 2021, major credit card companies like Mastercard reported the increased usage of debit and credit cards.
- Fintech: The encroachment of fintech companies into the banking space is contributing significantly to the decline in cash.
- Ecommerce: As the pandemic forced people inside, e-commerce saw an unprecedented boom, growing by 19% in 2020 globally.
The ubiquitous use of smartphones has given nearly everyone access to digital wallets and digital banking technologies. As people continue to discover more and better digital banking solutions, it’s likely the use of cash will decline further.
What are the benefits of going cashless?
While America moves away from using cash, whether this is a good or bad thing remains debatable. Here’s a look at some of the benefits of going cashless.
- Speed: Cash is difficult to move from place to place, whereas digital payments and transfers can be done immediately and quickly.
- Costs: Printing and protecting fiat money can be expensive for businesses and banks. In a cashless future, security teams hired to protect the transport of large quantities of cash could become a thing of the past.
- Crime and paper trails: In a world without cash, there is less incentive for criminals to rob people. Cash is also the form of payment most often used for illegal activities such as drugs, prostitution, and gambling. But with digital payments, there is a record of every transaction, so crimes such as money laundering and tax evasion become more difficult.
- Security: While cash can easily be lost or stolen, electronic payments are secure and can be traced.
- International payments: Anyone who’s left the country knows that when they withdraw money abroad, they often lose out because of poor exchange rates and high ATM fees. Digital payments can eliminate this problem.
The convenience of digital payments and digital banking is undeniable, which is why so many are moving in that direction. For credit unions, it’s important to understand the trend towards digital transactions and take steps to provide a top-quality digital banking platform for members.
Choose the right credit union core provider
One of the best ways credit unions can enhance their digital banking platform is by choosing the right credit union core provider to partner with. At FLEX, we’ve helped hundreds of credit unions build award-worthy digital banking platforms. Digital banking allows credit unions the opportunity to give their members superior service on a bigger, broader and better scale than ever before. Download our Digital Account Services eGuide to learn more about how FLEX can help improve the digital services you offer to your members.
