Will there Be Cash in the Future? 1 Scenario in 9 Scenes

Money has been found in many forms: Homer calculated the value of arms in cattle, subsequent cultures used shells, grain, oil, salt and, of course, precious metals as means of payment. In the 17th century, Europe switched from payment in kind to paper for reasons of efficiency. However, development did not end here, on the contrary: Sweden wants to do away with cash by 2023, new cryptocurrencies are springing up and assets can suddenly be bought and sold easily thanks to new digital technologies and are consequently acquiring cash-equivalent functions. 

Today, digital payments are already embedded in more and more customer journeys; more and more people pay for taxis, shopping or a cup of coffee via apps while devices become ever smarter thanks to the Internet of Things (IoT) – where will this lead? Banks are required to open interfaces to their digital vaults and customer data (open banking), which allows third parties to launch their own services and products based on these and to develop their own relationships with bank customers – what impact will this have on traditional banks? For their part, central banks are considering creating their own digital currencies – what impact will this have on traditional currencies? We’ve come up with seven scenarios. In the most likely scenario, we assume that in a fragmented world “digital” rules, but cash persists. Let me briefly outline this scenario in nine scenes:

1. Reduction in the Number of ATMs
   The cash infrastructure is being operated centrally to increase its efficiency. But pressure to reduce costs remains. As a result, the number of ATMs have fallen by 30 to 40%, which is in line with the elimination of cash services in bank branches.
   
   
2. Pervasive Connectivity
   Banks are required to open interfaces (APIs) to their digital vaults and customer data, allowing third parties to seamlessly connect their digital wallets, as well. Banks expand into services “beyond banking” to counter falling margins in their traditional business and to fight for the ownership of customer relationships.
   
   
3. Ubiquitous Digital User Interfaces
   Digital payments have substantially increased in convenience compared to cash as digital user interfaces’ presence has expanded into ever more human activities. What started with mobile Internet and smartphones, has continued with voice interfaces, augmented reality (AR) and IoT. Digital payments are seamlessly embedded through apps, websites, AR or chats for example.
   
   
4. Paying with Nonmonetary Digital Assets
   People have reduced their holdings of digital money. They invest an increasing share of their capital instead of letting it lie idle in bank accounts. Non-monetary digital assets are thus increasingly replacing digital money as a digital “store of value”. Finally, an increasing number of people regularly pay with nonmonetary digital assets in lieu of digital money.
   
   
5. Crowd-Sourced Cash Infrastructure
   Convenience and cost pressure have also led to crowdsourcing (P2P, P2M) becoming an essential part of the cash infrastructure. Smart-banknote-based infrastructures may provide another new solution. Both infrastructures could individually have disrupted the traditional cash infrastructure by promising the same or better coverage at lower costs.
   
   
6. Circular Local Cash Economies
   In rural areas, local merchants fill the ATMs and keep an almost circular local cash economy going.
   
   
7. One-Stop-Shop Platforms
   Digital platforms integrate all now unbundled services by different financial service providers and synthesizes information about account balances and savings.
   
   
8. Cash Persists as a Store of Value
   At the same time, cash continues to be perceived and widely used as a “store of value”. Despite this, cash holdings have fallen by 40 to 60%, mainly driven by a 40 to 70% decline in cash being used as means of payment.
   
   
9. Interoperable Payment Schemes
   In response to increasing concerns over reliance and dependence on (foreign) global players, national or regional infrastructures (e.g. national payment schemes) have seen the light. They are interoperable with third-party global infrastructures, but can be run in complete isolation.