What Does the Rise in Cashless Payments Mean?

A meme made its way onto Forbes a couple of months ago. Somehow, we didn’t see it until this week. But the content bears repeating here:

Who led your digital transformation?

  1. CEO
  2. CIO
  3. COVID-19

In the meme, option C is circled. If you don’t get the joke already, let me ruin it by explaining it to you:

Most businesses have been resisting digital transformation for years. Decades, even. And suddenly, all the little changes that organizations have made—all the small technological advances that improve the consumer experience—are now a necessity for modern survival… not just a convenience.

Coincidentally, cashless payments have been on the rise for years. What does the future look like with respect to cold, hard, cash?

 

COVID-19 and the Cashless Trend

It’s no secret that consumer behavior has changed in the face of the pandemic. The entire state of the economy has altered, and the U.S. GDP dropped considerably—enough to make any economist’s butthole pucker.

Sorry.

And these trends aren’t that surprising, considering. Yet, there’s one trend that has been so completely unsurprising that it barely feels worth talking about.

Which is exactly why we need to talk about it. It feels… inevitable… doesn’t it?

The rise in cashless payments. Consumers don’t want to handle wads of sticky bills. They could be covered with COVID-19 germs! Or just regular germs. But yes, they are often seen as vectors.

Furthermore, coin production halted temporarily. The resulting coin shortage has annoyed consumers and businesses alike—and sent financial institutions scrambling to keep up with the demand.

But an aversion to cash—and a shortage of coins—points to something bigger. Cashless payments are on the rise. And, as with many things in the age of COVID-19 (like work from home policies), we may never see a return to pre-pandemic behavior.

This issue absolutely should be part of every credit union’s and fintech’s strategic planning.

 

What to Expect from a Cashless Society

The U.S. is filled with a surprising amount of conspiracy theorists. That is, it’s filled with people who haven’t been trained to properly evaluate information, vet sources, and use common sense. (I blame memes and social media, which distill lengthy, nuanced issues into punchy, 2-sentence quips. And yes, I did start this blog with a meme. Sorry again.)

And these conspiracy theorists are sure that cashless payments are a move toward government control. Or maybe it’s about big businesses further eroding our privacy. Who knows.

They’re interesting thought experiments, but there are two things to actually worry about here—and one thing to look forward to.

  1. How can financial institutions meet consumer needs for cashless payment strategies?
  2. How can financial institutions and businesses serve the un- and underbanked?

And the thing to look forward to:

  1. What kind of efficiencies can be gained by going cashless?

Right now, we don’t have many answers. And to be frank, we have a lot more questions. It’s probably a good idea to start asking them now—and talking about them, too.

 

Additional Reading

What got us started on this topic? Honestly, besides the obvious (coin shortage signs on every business in town, constant “cashless payments” headlines)…

It was this short blog from PaymentVision. Check it out, give us your thoughts, and join the discussion on our Facebook group.

If you’re a credit union or fintech leader asking this question, talk it through with your peers. You can do that here.

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