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Why we are not abolishing cash

At least once a year, a major discussion on the subject of cash crops up in the media. At the latest when a new statistic shows the (further) decline in cash transactions in retail. So why don't we just do away with cash?

by Maik Klotz, 2023-04-26
4 min

Looking at the POS in any given store, there are four major interest groups. There are the merchants, who simply want to make sales. The customers who want to pay for a bag of rolls, a coffee, their weekend shopping or a delicious meal. And then, in the background, two market participants that could not be more different. The companies that make an excellent living from all cash-related activities. These are the manufacturers of cash drawers, counting machines and cash-in-transit companies. On the other side are the companies that don't like cash at all. Terminal manufacturers, payment processors and, of course, card issuers. 

Both camps never tire of presenting the superiority of the other way. Interestingly, they use more or less the same arguments. Cash processing is expensive. Retailers should rather calculate what a card transaction costs. Card payments would be much faster. Not true, cash is already in the cash register while customers are still looking for the card. 

And so it goes on and on.

Fact: Cash is being used less

Of course, all supporters of mobile payment and card fans don't like to hear that. Even according to the latest statistics from the Bundesbank and trade associations, cash is the most frequently used means of payment in Germany. At least in terms of the number of transactions. When it comes to sales, however, the share is "only" around one third. 

Over the years, there has actually been a steady decline in customers' preferences. There is a clear trend away from cash. But this process is what can best be described as gradual.

Back to statistics once again. No one needs to be a mathematical genius to conclude that cash tends to be used to settle smaller amounts, but many of them. So when it comes to larger sums, customers reach for their cards.

Social networks are full of postings of photos that supporters of cashless methods put on the net as an uproar. "Why can't I pay by card at the bakery?" "Why card payment only from 10 euros? Let him calculate better!"

The users are therefore aware that the merchants have to give up a percentage of the amount, precisely because a card or smartphone was used. The appeal to "calculate better", i.e. to simply add this percentage to the prices, sounds understandable. But it does not lack a certain arrogance and ignorance. After all, it's often precisely those stores that don't accept card payments that operate in segments where the retail margin is low anyway. Or the price tolerance of the clientele is high. 

Reasons against the abolition of cash

So why not simply abolish cash and oblige retailers to accept only cards or mobile payments?

1. economic risks

Anyone who studies the topic more intensively will bring Sweden as an example. A country on the way to a cashless society. Superficially. After all, just because cash can no longer be used for payment doesn't mean it has disappeared. And that's a good thing from an economic point of view. After all, by controlling the money supply, central banks perform an important task with regard to the stability of a currency and inflation. And that is only one aspect. Economists see a number of other problems.

2. Cash Always Works

For the past year, a war has been raging in the middle of Europe. And the media show only the dimension that can be depicted. For a long time now, war has also been taking place in the global networks. In a cashless society, an aggressor would only have to successfully attack and paralyze the payment infrastructure in a targeted manner - chaos would be the result.

The networks set up to process transactions at the POS are not technically infallible either. And whether a software error or a power failure is to blame for the terminals not working is irrelevant. As long as people still have an alternative. And that alternative is cash. 

There is a reason why the emergency response agencies in Germany and Austria urge people to keep a supply of cash in their homes.

3. Cash is participation 

Paying with a card or smartphone doesn't seem to be a particularly demanding matter. 

That is, if the person finds it easy to handle money. It is courted by banks and credit card companies to use cards. And has no physical or cognitive limitations.

This does not include all people. And the consumer advice centers have good reasons to recommend that people who have to live particularly frugally avoid card payments and instead keep their budget in the form of cash right in front of them. 

4. cash creates anonymity

It's almost ironic that there are people who do everything possible to detect trackers in their browsers or apps on their smartphones and turn them off. But then reach for a card payment in the store without hesitation.

After all, payments made with cash are anonymous (unless a car is to be paid for with it, i.e. the limit for establishing identity is crossed). When you check the cash register in the store, no one can tell what someone has bought with that money. So cash is also a kind of protection against the vision of the transparent consumer.

Finally, one aspect shouldn't be completely unmentioned. Precisely because it can be understood in the purest sense of the word, cash gives our children an idea of otherwise abstract concepts such as "money" and of the value of money. Paying out pocket money in cash - is still a good idea.

In short, we won't be doing away with cash anytime soon - and perhaps we'd better not. By the way, we at Paymenttools offer the right solution for all cashless payment methods!

Maik Klotz is a consultant, speaker and author specializing in banking, payment, digital identity, e-commerce and retail. He was profiled by the Süddeutsche Zeitung in the industry's "Influencer" series and moderates and speaks at many industry events. Maik is co-founder of Payment & Banking.

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