The Less-Cash Society

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Talk about the death of cash goes back thousands of years. Of course, to many Gen Yers, the world began in 1978, so what ever happened before that is irrelevant.

Recently, talk of a cashless society has grown louder with the growing popularity of debit cards, prepaid cards, and digital wallets. A Barron’s article titled The End of Cash? said: 

“This year, greenbacks will account for an estimated 29% of U.S. retail payments, according to McKinsey & Co., down from 36% a decade ago. Among the wealthy and the upper-middle class, cash is almost extinct in the U.S., having given way to credit and debit cards. McKinsey says that cash comprises just 2% of point-of-sale payments for households earning more than $60,000 a year. Cash’s disappearance has been slow but inexorable.”

My take: We are nowhere — NOWHERE — near a cashless society. 


First off, if the percentage of retail payments made in cash dropped from 36% to 29% over the course of a decade, that’s not even a single percentage point per year!

Really? You telling me that with the popularity of debit cards, prepaid cards, credit cards, online payments, alternative payments (e.g., Paypal), etc. , these alternatives to cash have only put a 7 percentage point dent in cash-based retail spending? 

I mean, c’mon, now. We know that the use of checks has declined significantly over the past 10 years. But with all these card-based payment mechanisms, the drop in cash has averaged 0.7% per year. Ha!


The McKinsey numbers also hint at another factor that will keep cash from dying off. 

IF cash will account for 29% of retail spending this year, AND cash comprises just 2% of point-of-sale payments for households earning more than $60,000 a year, THEN cash-based spending among people earning less than $60k must be incredibly high (unless, of course, they don’t spend any money, which doesn’t seem likely). 


But there’s another big reason why cash is far from dead.

In the US, retail sales (B2C) is about $4.3 trillion, monthly bill pay is about $4.7 trillion, and I have no idea how big the underground economy is. If you want to assert that cash disappears from these categories, fine.

Nearly every article and analysis about the end of cash ignores P2P (person-to-person) spending, however. (That’s because, as far as I know, Aite Group — more specifically, yours truly — is the only company to actually estimate the size of P2P spending in the US, UK, and Australia).

When we did the analysis in 2010, the P2P economy was about $865 billion, 53% of which was in cash. Looking at it from a different angle, cash-based P2P spending accounts for about 40% of the total use of cash among US consumers.

If you think that that $460 billion or so in cash-based P2P transactions has gone electronic or mobile in the past two years, then don’t bogart that joint, my friend, and pass it over to me.

Actually, I’ve sized online and mobile P2P in the US for 2012, and although the growth rate since 2010 is respectable, it’s nowhere near what it could be if financial institutions did a better job of marketing their electronic P2P capabilities.


When it surveyed consumers in 14 countries last year, ACI Worldwide found that the percentage of consumers who prefer cash for P2P transactions — while declining since 2009 — is still quite high in some countries.

In the US, for example, the percentage of consumers who prefer cash for P2P transactions fell just one percentage point between 2009 and 2012, from 51% to 50%.

       % of consumers that prefer to use
           cash for P2P transactions
             2012   2009   Chg
Italy         62%    74%   -12%
Brazil        57%    58%   -1%
Australia     51%    62%   -11%
US            50%    51%   -1%
UK            45%    54%   -9%
UAE           44%    48%   -4%
China         42%    67%   -25%
Canada        41%    46%   -5%
Germany       39%    52%   -12%
Sweden        34%    52%   -18%
India         31%    42%   -11%
Singapore     22%    40%   -19%
South Africa  20%    43%   -22%
France        12%    14%   -2%

Source: ACI Worldwide survey of 4,200 consumers, Q1 2012


In addition, ACI found that in 2012, 44% of US consumers said they used less cash in than they did in 2009. But nearly one in four said they used more. What might surprise you is that about one in five Gen Yers, Gen Xers, and Boomers all used more cash.


Bottom line: As we enter the year 35 AM (Anno Millenial), it makes for great headlines to pronounce the death of cash. But in the US, at least, it’s simply not true. Until we crack the P2P nut, cash isn’t going away. 

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