Last month, Denmark became the first country to seriously propose the concept of the cashless society. With a third of Danes already using mobile apps to conduct their daily business, this may be no big surprise for our technologically superior Scandinavian brethren, but perhaps a little jarring for the rest of us. However, if you visit Copenhagen next year, be prepared for some shopkeepers to tell you to keep those Danish Crown coins to yourself.
The Financial Tech industry is growing by leaps and bounds and making this reality closer than you think, but perhaps we need to understand better why this is happening, what key FinTech developments are accelerating this shift, and when we can expect our wallets to become antiquated accessories.
Let’s get this out of the way first; cash is a messy way to do business and a hassle for pretty much everyone. The finance industry can tell you the cost of security and maintenance at bank branches and ATMs required for handling cash is a headache. The government can tell you that you that the best way to evade taxes is to deal only in cash and leave no paper trail.
The police can tell you that the best way to discreetly conduct illicit activities is through cash. And most importantly I can tell you my occasional odysseys around Madrid to find a cash machine that won’t charge withdrawal fees is really annoying because that cool bar I was at won’t just let me use my damn card. Cashless transactions dramatically lower a bank’s cost of doing business, makes tax collection simpler and more efficient, makes illicit transactions nearly impossible, and allows me to enjoy my gin and tonic with the swipe of a card or smartphone app. So now we just need the technological backbone to make this possible.
Major banks and heavy hitters in the tech industry have bought in, and the groundwork is being laid for a cashless society at a dizzying pace with the smartphone at the center of everything. Mobile payment apps have skyrocketed with Facebook, Apple, and Google competing against hundreds of startups to ensure you can transact business on your phones with ease.
Banks and credit card companies are taking a beat them or join them approach, either investing billions in developing their own mobile technologies or collaborating with Silicon Valley to join forces. All are riding a wave of mobile payments that is expected to continue to grow as smartphones get more sophisticated, secure, and ubiquitous. The line between tech and finance is being blurred, and the more they collaborate the closer we come to putting banknotes out to pasture.
So how close are we? It depends on where you are reading this post from. In the UK, where the majority of transactions are cashless, sooner than you think. In Colombia where 98% of transactions are in cash, there’s a long way to go. A cashless society needs three important things; saturation of bank accounts, saturation of smartphones and complete government support. According to World Bank, 100% of adult Danes have bank accounts, eMarketer estimates 81% have smartphones, the highest in Western Europe, and the government seems keen to be the canary in the coal mine on this topic.
It is a uniquely advantageous situation for sure, but many countries are not far behind. Denmark’s growing experimentation with the concept will be ripe with key learnings that will only make this reality more possible. Most smartphone users already entrust their device over their wallet with their family pictures; now they just need to be convinced it can manage all of their money. If Denmark is any indication, it is only a matter of time.