In 2015, when Apple Pay was first introduced, some claimed it would be the beginning of the end for cash payments. Of course, credit and debit cards had already helped move societies in that direction for a while. But having the convenience and ease of simply using your smartphone for payments suggested the days of the physical wallet were over. Since then, the transition to a cashless society has been rather slow but one that has consistently made progress. And while there are many reasons why consumer adoption has dragged, it certainly appears a cashless future is on the horizon. In fact, a handful of nations is almost there already.
Recent research reports now show that there are 3.4 billion digital wallet users worldwide. By 2026, these same reports project this figure to grow by 53% to 5.2 billion as many developing nations embrace the technology. Combined with advancing options of “Buy Now, Pay Later” and app-less digital wallet offerings, a cashless future looks inevitable. But what will a cashless society look like? And which companies are likely to come out on top as the digital wallet takes over? In all likelihood, digital and contactless payment systems will soon start adding new features to attract customers. And those who do it well will likely reap the rewards.
Apple’s Vision of a Cashless Future
The initial launch of Apple Pay certainly didn’t go as expected. Apple predicted that iPhone users would rapidly embrace the new technology, sealing the demise of the traditional wallet. But adoption was slow to say the least. The first year out, only 10% of iPhone users activated the Apple Pay feature. This only increased to 20% the next year. But unlike some of Apple’s other projects, like the Home Pod speakers, it chose to stick to its guns. Ultimately, the company believed in a cashless future that would eventually go digital. So, Apple Pay continued waiting for the world to catch up.
Now it seems that the world is much more likely to embrace a cashless future. Thanks in part to a pandemic that saw a boost in contactless payments, Apple Pay activation grew to 50% in 2020. It stands at 75% among iPhone owners. But even more importantly, roughly 90% of all U.S. stores and payment systems have Apple Pay options. Not only does it look more and more like a cashless society, but digital wallets are on the rise. Consumers use Apple pay to buy online, to purchase in stores, and to send money to friends. Apple believed a cashless future was inevitable, and it endured until that reality appeared.
“There’s a legitimate chicken-and-egg problem in payments. Consumer habits are very hard to change, and merchant acceptance takes many, many, many years.”- Harshita Rawat, Senior Research Analyst for AB Bernstein
Barriers to a Cashless Society
Despite many people now having active Apple Pay and other similar accounts, that doesn’t mean they use it constantly. There remain some barriers to use when it comes to contactless systems and digital wallets. One of the most notable barriers is that some vendors are reluctant to change their payment systems. Specifically, using Apple Pay and similar systems at restaurants and gas stations may not be possible. Other obstacles also exist among consumers themselves. While digital apps offer contactless transactions, they do not otherwise provide that much greater convenience or ease than credit cards. Thus, it has taken longer than expected for many customers to change their existing payment habits.
While these barriers to a cashless future remain, innovative solutions are continuously being developed. One such company, eTip, offers a contactless, app-less platform that allows consumers to digitally tip for various services. Even if a restaurant or vendor does not allow Apple Pay or other digital wallets, eTip gives customers an alternative. If a customer wishes to tip a server, valet, or other person, they simply scan that person’s eTip QR code. From there, they rate the person, assign a tip, and choose their digital payment method. Options include Apple Pay, Google Pay, or even debit cards in their digital wallets. These are the type of innovative solutions that are driving us toward a cashless society.
“A highly competitive wallets’ landscape means that vendors must differentiate themselves by integrating machine learning to provide spending insights and introduce new services such as wealth management to add value.” – Damla Sat, Researcher in FinTech at Juniper
Trends Toward a Cashless Future
Believe it or not, the U.S. is lagging behind when it comes to progression to a cashless society. Other countries embraced contactless, digital payments years ago, and some are nearly cashless today. In fact, there are roughly a dozen countries today where cash represents 2% or less of all transactions. The top three include Norway, Finland and New Zealand. And as you might have guessed, these are the same countries where ATMs are becoming increasingly scarce. Because they are essentially a cashless society, the use for these “dinosaurs” are no longer needed. At the same time, other countries like Vietnam, the Philippines, and Thailand are expected to increasingly embrace digital wallets. By 2026, experts suggest that 75% of these countries’ populations will have activated various digital cashless apps. All of these trends point to a cashless future where digital payments are king.
Perhaps, all of this is not that surprising. Blockchain, cryptocurrency and fintech innovations look to be ushering in a new age of digital currency. Likewise, Apple Pay has many major competitors today, including Alipay, Google Pay, Cash App and Venmo. This means that a cashless future is likely to bring additional innovations to entice consumers use. Loyalty programs, personalized marketing, and unique features will soon appear with some systems. And as already evident with companies like Apple, tech giants are beginning to increasingly explore the banking and finance sector. It might have taken some time, but trends strongly suggest a cashless society looms on the horizon.
Rest in peace, cash.