The 2020 coronavirus pandemic has brought a lot of sudden and sharp changes to the way we used to live our lives. Many of these changes, such as social distancing, will probably turn out to be mostly temporary, once the pandemic passes into history. But many other trends, such as more of us working from home and using the internet to do our shopping will probably be here to stay. One of the most profound trends we have seen is the move away from cash payments towards electronic, ‘cashless’ payment methods.
According to reporting from the ABC, cash now makes up less than 25% of the total proportion of payments in the economy, down from nearly 40% just 4 years ago.
No wonder shares of companies providing cashless payment solutions are among some of the biggest winners over the past few months. That’s got to be why Afterpay Ltd (ASX: APT) is up more than 670% since 23 March. Or why Pushpay Holdings Ltd (ASX: PPH) is up nearly 150% and Zip Co Ltd (ASX: Z1P) up nearly 390%. It’s a similar story with United States payments shares like PayPal, Visa, Mastercard and Square.
Cash is as good as dead, right?
The death of cash? Not so fast
According to separate reporting in the Australian Financial Review (AFR), the reports of the death of cash might be greatly exaggerated. According to the AFR, the levels of cash in circulation is actually on the rise across many advanced economies. Apparently, there are 8% more banknotes in circulation across the US today than there were in 2019. It’s a similar situation in Europe. In fact, the AFR states that “of the largest economies, only China has begun to see an absolute decline in the ratio of physical currency to GDP.”
The ABC report backs this up, noting that in Australia, the proportion of $50 and $100 notes in circulation has ballooned since the 1980s. The report tells us that there was around $10 billion worth of $50 notes in circulation across the Australian economy in the year 2000. Today, in ‘cashless’ 2020, the number is close to $80 billion. It also notes that there are still around 500,000 bank accounts in Australia that are not tied to a debit card, instead linked to cash-only passbook accounts.
My conclusion? Cash isn’t going anywhere anytime soon.
I certainly think cash will continue to decline as a major form of day-to-day payments. But I’m not betting the house that cash will be going extinct anytime soon. So by all means, invest in ASX payments shares that facilitate cashless payments. But don’t count on the death of cash just yet.