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The End of Cash, or, Barron’s Gets Religion

Theodore Iacobuzio |

See, it’s not just us. Barron’s, much more of the tip sheet than its statesmanlike cousin, The Wall Street Journal, points to some pretty compelling McKinsey & Co. data to make its case that, yes, cash is increasingly on the way out, and there’s an infrastructure in place on the rails of which such a migration is already taking a ride.

First things first. The story cites some pretty trenchant sources as to that infrastructure already in place: Wallets and others like PayPal  and Square are essentially “‘a new way of initiating a good old-fashioned card transaction,’ according to Gareth Lodge, an analyst for Celent, a financial-services research firm.” In other words, you can have all the fancy Pullman coaches you like: you’re not going anywhere without the rails.

But there’s meat in the McKinsey numbers as well: according to the story, McKinsey pegs cash payments in the U.S. as 29 percent of the total, down from 36 percent 10 years ago. In addition, “McKinsey says that cash comprises just 2% of point-of-sale payments for households earning more than $60,000 a year,” according to Barron’s.

That’s one demographic stake in the ground: the aspirant affluent, and the affluent proper drive cashless payments.

But what about that secular loss of seven percentage points in cash’s overall share? That’s pretty significant. Again, Barron’s answers, if incompletely, the question: “Waiting in the wings is a generation of kids that have [sic] grown up with debit cards, prepaid cards, and iTunes accounts. The ATM is now as foreign to teenagers and bank tellers were to their parents.”

It’s the “waiting in the wings” part Global Insights takes issue with. It’s Youth driving the secular shift. End of story. Banks have got to put payments functionality on devices Youth uses today. The ones that do, or do it efficiently, will get that share shift.

Topics: Payments Strategy

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