By Matthew Carr There’s a war on cash.
“Old money” is outnumbered, fighting multiple fronts.
The rise of credit and debit cards has eroded the need for cash. Meanwhile, the quick uptick of mobile payments over the last several years has been pushing physical money to the brink of obsolescence.
It’s a war cash isn’t likely to win…
In fact, in many countries, cash is already disappearing. In several, it could soon be banned altogether.
Businesses Embrace the Cashless Society
“We’re focused on putting cash out of business.” That was Visa (NYSE: V) CEO Al Kelly at the company’s investor day in June.
During the summer, Visa announced it would grant up to $10,000 to 50 small merchants if they stopped accepting cash completely, instead accepting only debit cards, credit cards and mobile payments.
Some restaurants, like Sweetgreen, have already phased out cash as a form of payment in many states.
That’s a credit card executive’s dream. And more importantly, I believe that’s what a credit card CEO should be focused on – eliminating cash. It’s their competition.
Consumers are foreseeing cash being eliminated much more quickly than executives are.
A recent survey found that consumers thought they’d be using 32% less cash in the future. Executives in the same survey thought the decline would be a more conservative 5%.
At the same time, a study by NTT Data found that companies that accept mobile payments are growing faster and are more profitable than those that don’t.
Of companies that reported annual revenue growth of 11% or more, 43% offered an app that supported purchases and payments.
So executives – if they haven’t already – really must sit up and take note.
AliPay and WeChat Take China Cashless
There may be no more perfect picture of a cashless society than what we’re seeing in Asia.
In China, cash is gravely wounded and on its deathbed.
And if you don’t have a mobile payment account, you’re going to have a difficult time accomplishing even the most basic tasks.
Mobile payment volume in China doubled to $5 trillion last year.
No surprise, China’s tech giants dominated this sector.
Alibaba’s (NYSE: BABA) Alipay accounted for 54% of the market, while Tencent’s (OTC: TCEHY) WeChat Pay represented 40%.
And here we have to remember the economies of scale. Both are largely China-centric. Given the size of its domestic economy, why race to expand internationally?
Alibaba’s Alipay has 520 million users.
Tencent’s WeChat messaging app – the most popular in China – has 963 million monthly active users.
Just for comparison, Facebook’s (Nasdaq: FB) Messenger – which spans the globe – has 1.3 billion monthly active users.
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Because of the country’s sheer size, China’s embrace of mobile payments is forcing surrounding countries to follow suit.
For example, earlier this year, it was announced that the number of stores accepting Alipay in Japan would double to 45,000. That’s solely to accommodate Chinese tourists. And Alipay is gaining a foothold among Japanese consumers as a result.
You also can’t ignore that Alipay encourages people to invest by linking to the online money market fund Yu’e bao. With its near 4% interest rate and Alipay’s help, Yu’e bao became …read more
Source:: Investment You
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