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The digitalisation of payments has slowed the use of cash long before the global pandemic, but rapid changes in consumer behavior due to COVID-19 will hasten its decline.

In the latest instalment of our 3 Point Perspective series, Barclays Research draws on its proprietary analysis to model the global transition from cash to digital payments. The upshot: we believe this emerging fintech trend is set to reach a tipping point in 2025, at which point absolute cash usage begins to decline, dropping from 41% in 2019 to 20% by 2030.

COVID-19 is accelerating consumer behavioral changes and speeding up the adoption of digital payments.

The COVID-19 virus has triggered profound changes in consumer behavior, both because of increased online spending and concerns about the cleanliness of cash. To varying degrees, countries have encouraged the use of digital payments, businesses have reduced cash acceptance and consumers have embraced digital alternatives.

Major cards and regulators have raised contactless payment limits in Canada, Australia and parts of Europe since the emergence of the virus. Early data shows that these increases are being met with high consumer demand. Barclaycard, for example, processed more than 7 million transactions above the previous limit in the UK and Ireland in less than a month, and the average transaction value rose by more than half to £14.

Global cash usage projection by 2030

Source: Barclays Research estimates, combined with data from Bank for International Settlements, World Bank, ECB, selected central banks and Euromonitor

The increased convenience of contactless payments is the true cash killer.

A profound shift towards digital payments was already underway before COVID-19 in the form of contactless payments via mobile apps, peer-to-peer payments and near-field communication, 0r NFC-enabled credit cards. In any form, contactless payments are the true cash killer. Contactless payments allow for faster, more convenient check-out experiences, do not require a signature or personal identification number and they are appealing as a substitute for cash especially for small transactions.

In the long-standing battle of cash versus card, the rise of contactless represents an almost unfair advantage in support of digital adoption.
Barclays Research

The future of contactless payments is mobile. Big tech companies offer established solutions that have gained popularity among consumers. Given the organic development of mobile payment in China, the Central Bank launched a new clearing house for mobile payments that required digital transactions to pass through the Bank’s infrastructure. However, there's still time before cash completely disappears.

Many countries have yet to adopt ubiquitous peer-to-peer payment systems to replace cash for secondary uses like gifting and personal transactions. There is also a concern that the push towards digital payments may have adverse effects on the 1.7 billion people globally who do not have a bank account and are reliant on cash day-to-day. Fintech and mobile banking will likely bridge this gap during the transition.

Examples of contactless payment integrations

Source: Barclays Research

Barclays’ Global Cash Model base case suggests a fall in cash’s share of value to 20% by 2030.

Barclays Research built a Global Cash Model using detailed information on country-level payment trends, including ATM, card transaction data and other digitalisation factors, to analyse trends in global cash use. The model shows that the relative share of cash is declining across the world, with the most digitally advanced economies leading the way.

However, the decline in relative cash use is offset by overall economic growth in cash-centric economies. Our Global Cash Model post-COVID base case suggests that 2025 will be a tipping point for payments, with cash usage declining in absolute terms, down to 30% of value from nearly 50% in 2014 and falling to 20% by 2030.

Absolute cash usage in digitally-advanced economies vs. cash-centric economies projections by 2030

Source: Barclays Research estimates, combined with data from Bank for International Settlements, World Bank, ECB, selected central banks and Euromonitor

Growth in mobile banking, advancements in fintech and sheer convenience are addressing or outweighing many of cash’s shortcomings, suggesting that the future of payments will soon be digital.

Read the full report

Authorized clients of Barclays Investment Bank can log in to Barclays Live to read the full report from Barclays Research:

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About the analysts

James Goodman leads coverage of the European Software, Payments and Fintech sector at Barclays. James and team focus on thematic research across areas such as the digitalisation of payments and innovation in manufacturing technology. James joined Barclays in 2013, having previously spent three years covering UK technology at Investec. Prior to that, James qualified as a Chartered Accountant with PwC. He holds a first class degree in Economics from the University of Exeter.

Ramsey El-Assal is a Director and Equity Research analyst covering the Payments, Processors & IT Services sector with a decade of sell-side experience. Ramsey was at Jefferies and UBS prior to Barclays. Before moving to sell-side research, Ramsey worked in the payments industry, and was a Managing Consultant in Mastercard’s in-house professional services group, Advisors. Ramsey came to Mastercard from Coinstar e-Payments, where he was Vice President of Operations, and prior to that co-founded a start-up prepaid card transaction processor.

Ramsey has been involved in the Payments industry for nearly two decades as both an industry participant and analyst. He has a B.A. in Music from the University of California, Riverside, and an MFA and Ph.D. in Music History from Princeton University.

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