Way back in 2000, a new millennium began. Little did we know then, that sixteen years later, there would be a group of consumers that would influence business as much as Millennials have, including pushing for a change in how financial transactions are handled. While the use of eCash payments has evolved during this time, today's technology and the preferences for digital transactions is now reshaping how we do business and make purchases.
Back to the Future
To understand the changes, let's first go back in time to 2000 and an article from Direct Marketing about how eCash would change the future of online shopping and transactions between businesses. The article profiled eCash Technologies Inc. (sold to InfoSpace in 2002, which is now known as Blucora), a company that originally started out as DigiCash and introduced the concept of an online cash currency where consumers and retailers could receive online payments without having to use credit or debit cards.
The concept was introduced because consumers at the time were still very unsure about the security of their account information in an online environment. Retailers were also worried about the potential for fraud. However, they were eager to shop online and make and receive payments, and retailers and businesses were eager to conduct transactions this way.
This eCash currency was thought to be a way to address these concerns while providing a global standard for electronic cash payments. And, with the advent of more transactions conducted across borders, this eCash also addressed currency exchange issues.
Now, fast forward to 2016 where the concept of eCash payments is becoming a standard way to make payments. And, we have Millennials to thank for influencing us all to consider the benefits of digital payments.
Digital Natives Expect Everything to be Digital
Millennials essentially have grown up in the digital environment. Right now there are 2+ billion people under 20 years old. This is a very young audience that controls a large part of the population. Since this is all they know and are comfortable with, it makes sense that they would assume payments and transactions should all be digital rather than carrying cash around in their pockets. As The Pew Center explains in labeling Millennials as digital natives, this group has decided to migrate to digital transactions based on numerous factors tied to the experiences they have had over the last decade and a half.
For example, this group has had to weather more debt and economic downturns, changing how they spend their money since many were unable to get credit during and after the last recession of 2007-2009. Yet, wanting to still buy things online or take advantage of the new freelance economy to work with clients around the world, but having to rely on cash instead of a credit card influenced the adoption of eCash payment systems.
In further explaining the Millennial influence, where check writing and cash clips in your pocket are a thing of the past. Now, payments are handled by pay-by-phone apps, swiped debit cards, and mobile wallet services as well as Internet currency and other e-payment platforms.
A Cash-Free Future
The potential for a cash-free future is potentially becoming a global phenomenon. For example, CNBC recently looked at the revolutionary changes in Sweden in terms of how people are paying and getting paid and where paper currency and coins only account for two percent of all transactions in the country. In comparison, paper currency still comprises 7.7% of the U.S. economy, 10% of Europe's economy, and 75% in the rest of the world that typically includes primarily developing economies.
The article cited parishioners who test their tithes and homeless street vendors who have mobile credit-card readers to sell their wares. Whether it is the fact that Sweden's banks no longer accept or give cash, or the country is just extremely tech-forward and willing to migrate to digital currency, the fact is they are showing other countries a glimpse of their own futures.
However, Sweden is also illustrating an issue that came up so long ago in terms of concerns over fraud and crime related to these digital transactions. This means that, as more countries adopt digital currency for transactions, more has to be done in terms of increasing online security to protect consumers and businesses from tech-savvy criminals.
With these trends in mind, retailers are one major component of the global business environment that is paying close attention to the digital currency movement. A 2014 Retail Touchpoints article noted everything from Google Wallet and PayPal to bitcoin and social currency solutions in which more consumers are expecting--and even demanding--that they make digital payments in-store and online. The article cited the example of someone buying a Tesla car in 2013 with $100,000 in bitcoin currency, so more of these types of transactions are expected to become the standard form of payment in the near future.
In response, retailers believe that mobile and digital currency will become mainstream in the near future with POS terminals acting as "beacons for the mobile consumer." Further, social capital may lead to personal pricing while gamification will grow in popularity.
Not Quite Cash Free Yet
By these findings, it might be easy to assume that the future is already here when it comes to going cash-free. However, two recent surveys find data that concludes we are not quite there yet.
According to an article from Digital Transactions, Cardtronics, Inc., a leading retailer ATM network, offered results from its survey that suggested cash -- and, in some situations, the check -- was still king when it came to paying other people and among many merchant sectors. These sectors included convenience stores, grocery stores, payments to small businesses, restaurants, and tips for service workers. The survey also found that close to 70% of Americans still used cash to buy "small, inexpensive items."
This same survey even questioned whether Millennials were as committed to digital payments as others have concluded. For example, the Digital Transactions article noted, "While 57% of young adults surveyed reported using more payment methods than before, 45% said they are more likely to pay more with cash now than they were a few years ago," the company said. It would seem that perhaps this demographic is willing to be flexible in terms of the type of payment methods it uses for various situations.
Digital Transactions also offered information from a second survey about the common use of cash on a worldwide basis. In a December 2015 article, the industry publication referenced a report from Retail Banking Research Ltd, a London-based research firm that included 60 countries in its study. It found that "cashless transactions in the aggregate rose 7.6% annually from 2010 to 2014, to 417 billion payments. These included card transactions as well as checks, direct debits, and so-called credit transfers, used in some countries to automatically deposit wages and government benefits."
Specific data related to the rise in cashless payments included the following:
However, this growth did not mean that cash has died. The Retail Banking Research report also acknowledged that the volume of cash withdrawals from ATMs rose almost as fast, at 7.1% per year. It appears that cash is particularly popular for transactions in Central Europe and certain areas of Asia. Other countries also are not rushing to abandon cash perhaps due, in part, to continued concern over the safety and privacy of online transactions.
The research does point to the influence of Millennials as digital influencers on the rest of us and to businesses that are now looking to offer a greater mix of payment methods. However, no one in the world is completely ready to give up on cash--well, maybe Sweden, but even that country has some hold-outs on becoming completely digitally dependent.
The main takeaway here is that the evolution toward digital payments, including Internet currency and eCash solutions, is ongoing. As it continues to evolve and change, retailers, businesses, and consumers will need to think about issues related to privacy, identity theft, and funds protection. Until then, these payment trends illustrate that there are simply more payment alternatives available that help to propel new aspects of our global economy, including the sharing economy and the freelancer economy.