Money in a Cashless World

While in developed countries money has been digital for some time, for the rest of the world cash is still the undisputed king.

Globally 85 per cent of consumer transactions are done with cold hard cash, whereas in Australia we’ve seen cash transactions drop as low as 14 per cent. So, with the ever-increasing adoption of mobile technologies, will we see the end of traditional paper money?

At the centre of this rapid transformation is the smartphone, which has become the network for people’s lives both online and offline. Among the biggest opportunities may be the digital currency. The convenience and speed of this type of payment has been ­beneficial for cashless payment and the availability of “tap and pay” on mobile phones is set to drive this transition even faster.

In a series of interviews, Microsoft founder Bill Gates highlights the value of digital currency. He says because many people in developing countries don’t have access to traditional banking — it’s not financially viable for banks to put branches in areas where the amounts stored and transferred are very small — “these people” are at a huge disadvantage when it comes to exchanging, saving, and accessing money.

The move toward a cashless society is supported by the United Nations Capital Development Fund’s “Better Than Cash” alliance, which aims to accelerate the shift to electronic payments. The group focuses on raising awareness of the benefits of replacing physical cash with electronic payments — particularly in a way that expands the benefits of financial inclusion and savings for the poor.

For businesses, a cashless future may require the complete overhaul of how the retail sector thinks and operates. Powered by technology, the payment landscape is shifting. Globally, almost six billion people now have access to a mobile phone.

The Australian National University research confirms Australia will be a cashless economy in the next decade. CBNC rank Australia as number six in the top 10 cashless societies worldwide. Currently 86 per cent of consumer payments use an electronic method. Although mobile technology, specifically phones, currently make up the majority of technical payment focus, other lesser -known technologies are poised to enable a broad new world of internet-connected commerce.

For example, near-field communication is a set of ideas and technology that enables smartphones and other devices to establish radio communication with each other.

NFC chips could be placed inside wearable smart technology, allowing for nothing more than what you’re wearing as a form of ID and payment authorisation. Even a smartwatch, ring, or smart glasses could be easier than a phone because you would not have to pull those items from a purse or pocket — simply tap, swipe, or blink an eye.

Another approach is PayPal’s Beacon and Apple’s iBeacon, which use proximity-based Bluetooth connections instead. A small vibration alerts customers’ phones upon crossing a store’s “digital fence” and syncing with apps to provide inventory, floor plans, discounts, and preordered items. Payment would occur online, with the cashier simply confirming your registered picture for purchase security.

Eventually, unique biometric information might also suffice for payment. Voice recognition or scans of fingerprints, retinas, or DNA could replace the need for more traditional forms of payment.

However, it is not just mobile payments that technology is advancing; it has also given modern retailers insights to customer behaviour and in real time. By understanding customer behaviour at a more granular level, retailers are finding tremendous benefit by aligning their in-store labour to meet customer demand and optimal product placement.

No longer are retailers relying on ancient technologies to measure the performance of their most expensive asset — their stores. The use of advanced forms of analytics allows retailers to assess and implement changes that drive increased conversions in much the same way online retailers have done.

A cashless future is inevitable. The obsolescence of paper cheques illustrates how forms of transaction have changed with technology and the use of cash will soon follow. The evolution to digital money won’t happen overnight, but it isn’t so much a question of “if”, but “when”, and those who start thinking about how to equip this new cashless world may very well be those who make the most cash.

theaustralian.com.au