Cashless or Classless: The Flaws in Today’s Payment Debate


There is a constant debate on whether global economies should continue to offer cash payments or go cashless by converting solely to digital. Critics say this move would disenfranchise unbanked, cash-dependent consumers and does not drive financial inclusion, while others claim that a failure to go cashless limits innovation in the fintech sector. But what if the best solution lied somewhere in the middle?

Cash and digital payments don’t have to be mutually exclusive; this is not a zero-sum game as the two payment options can exist together. According to new PPRO data, over half of US and UK consumers will stop the checkout process if it is too complicated or their preferred methods are not available. Consumers prefer having multiple payment options, whether it be using a bank transfer, a credit card, a mobile wallet or even cash. Payment flexibility is a crucial factor in offering a seamless checkout experience. Some shoppers never carry cash while others view cash as the only way they want – or are able – to pay.

The key is for merchants to offer a personalized experience for each and every consumer.


The Road Ahead for Cash

Despite a seemingly rapid shift towards digital payment methods, cash is not going anywhere. Many regions are tied to cash-based payments. For example, in Latin America, 21% of e-commerce transactions are completed by cash. Via cash vouchers, many consumers are able to access the global, online marketplace: at the checkout page, consumers are shown a barcode for their order. They take this barcode (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.

This local payment method is innovating how consumers pay, meeting their needs and ensuring financial inclusion. Removing cash vouchers would not only limit access to e-commerce but also eliminate a fourth of the addressable LATAM market for retailers. Further, 48% of LATAM consumers are unbanked, showcasing the need to offer various methods for payment.

Cash is often preferred for a plethora of reasons: It can be easier to use cash for smaller purchases, older consumers may be wary of digital payment methods, and avoiding credit can help shoppers stay within budget. This past year, Philadelphia recently became the first US city to propose a ban on cashless payments and the Central Bank of China made it illegal to reject cash payments. New York City has just become the fourth city in the US to follow suit. The Mercedes-Benz Stadium in Atlanta became the first US sports venue to go fully cashless. Although to ensure all consumers are included, kiosks were installed on each level of the stadium where cash can be loaded onto prepaid cards with no fees attached. Merchants must be able to provide multiple options to consumers or risk excluding part of the market.


Are Digital Payments Inclusive?

Financial inclusion is not just limited to offering cash payments. Each region has its own nuances that influence consumer payment preferences. Consumers want to pay with the payment methods they are comfortable with; a majority of online shoppers will abandon their cart and purchase items on another site if they aren’t offered their preferred way to pay. For US shoppers, this could mean all the major credit cards, but for EU consumers, this could be a bank transfer method like iDEAL.

Local payment methods serve as the bridge to connect shoppers with merchants across the globe.

A great example of this is the rise of the mobile payment method M-Pesa in Kenya. According to PPRO research, more Kenyan consumers have a smartphone (60%) than a bank account (56%). Payment innovations have helped solve consumer needs and enable financial inclusion by turning a smartphone into a virtual bank account. Similarly, in southeast Asia, GrabPay, which started out as food delivery and on-demand taxi app, has evolved into a leading payment method used by 115 million consumers across the region. These sentiments resonate in the US as well;64% of millennials think they will use online-only banks exclusively in five year’s time.


Finding a Balance

Payment methods need to enhance the consumer shopping experience, and a combination of cash and digital payments is a way to do so. In some cases, the lines between cash and digital payments start to blur. In Argentina, Mexico and Brazil, cash-based payment methods like RapiPago, Oxxo and Boleto Bancario give many cash-dependent consumers a chance to shop online. Cash will continue to complement many digital payment methods, not restrict them.

The key is for merchants to understand the factors driving consumer behaviors around the world and offer the specific local payment methods their target customer prefers. In some cases, this is cash and others a digital method. Having a choice is what will not only drive inclusion but also increase sales around the globe. Innovation does not necessarily mean cashless, but rather the industry creating solutions to solve consumer needs.