A cashless society is one of those predictions that’s been around for 100 years.
Even longer actually if you count American science fiction author Edward Bellamy, who in 1888 was already writing about a future where people use credit cards to pay for things, instead of bank notes or coins.
Now, coronavirus is not only reviving talk about the end of cash, it’s also making the transition to all-electronic payments look more likely — something that looks set to benefit payments startups such as Checkout.com and SumUp.
Earlier this year analysts at Barclays said that we were at the “global tipping point” for the death of cash, saying the move to a cash-lite world was a “near certainty”. But now, even central banks in Europe are chiming in.
Cash usage by consumers had already dropped more than 13% since 2012 in France, according to a new publication from the French central bank, and with Covid-19 promoting contactless payments at a tremendous pace, the shift from paper to digital money is likely to further accelerate.
“The general context is of an erosion of cash usage, as consumption and payment habits change,” Bank of France wrote in a report. “The exact impact of the sanitary crisis is still uncertain, but the strong jump in contactless payments may further accelerate the shift from cash to electronic payments.”
Spread the virus
Just the month before, the European Central Bank made similar comments.
It highlighted how central banks across the region have been “observing double-digit growth rates in terms of volume” of online and mobile payments since the start of the coronavirus pandemic. But the ECB also argued in favour of a change in consumer behaviour that’s likely to be more than just temporary.
Of course it has helped that consumers stuck at home during lockdowns around Europe have shopped more online than in stores. But even with life sort of back to normal and consumers leaving their houses again, the idea that using cash could help spread the virus has stuck with people, according to the European Central Bank.
Consumers have been encouraged by retailers to tap their bank cards and pay using contactless technology rather than pull bills out of their wallets or even input PIN codes into machines, it said.
Banks are adapting to the shift in consumer behaviour. In France, they’re sticking to a strategy that’s been deployed for several years, shutting down cash machines progressively as there proves to be less need for them. The number of ATMs is now just above the 50,000 mark, down more than 4% from the year before, according to the Bank of France.
And investors are adapting too.
In June, Checkout.com became one of Europe’s highest valued fintechs, after tripling its valuation upon closing its Series B funding round. It said then that transaction volumes were benefiting from small businesses rapidly moving online.
Last week, London-based payments startup TransferWise said it had completed a secondary share sale that translated into a mega jump in its valuation. It is now valued at $5bn, up from the $3.5bn valuation it had achieved last year, in a further sign of the increased excitement about online payments startups amid the coronavirus pandemic.
The report by Barclays said that the biggest winners of the cashless society would likely be big multinational companies such as Cardtronics, Fidelity National Information Services, Global Payments, Mastercard, Network International, JCB, Nexi, PayPal, Square and Visa.
But European tech companies, such as TransferWise, are nipping at their heels.
And with central banks now expressing excitement too, albeit in their own way, the timing may finally be right for the century old cashless prophecy to come true.