A cashless society is on the horizon, and the factors propelling this narrative encapsulates the ongoing evolution of money. Due to the emergence of the digitized economy, the Economist Intelligence Unit and Crypto.com in a 2020 survey, titled Digimentality: Fear and Favouring of Digital Currency, reported consumers’ perspective on matters relating to the growing affinity for digital money and paradigms potent enough to drive the scope of a cashless society. In this article, I will highlight the findings of this survey and determine the drivers, barriers, and trust factors molding the global stance on digital currency.
For this survey, The Economist defined digital currency as:
“financial assets that exist electronically, with no physical form, accessible via computers or digital devices, which include but are not limited to cryptocurrencies such as Bitcoin, Ether, XRP, etc.”
According to the report, digital payments include transactions enabled via online banking, mobile payment, online money transfer services, and cryptocurrencies.
From these definitions, it is clear that digital payments have somewhat become a trend, even as digital platforms continue to reinvent themselves in line with the simplicity that cashless transactions enable. In support of this assertion, 64% of respondents of the survey claimed that they used digital modes of payment for over half of their purchases in the last 12 months, while 20% of survey respondents disclosed that they had not used any form of digital payments in the same timeframe. However, of the 3000 digital payment users engaged in this survey, just 10% believe that their countries have fully implemented cashless infrastructures and policies. Regardless, this number is projected to rise in the coming future, considering the growing penetration of mobile technology including digital payment innovations.
Nevertheless, the outlook for digital currencies is optimistic: over ¼ (28%) of respondents stated they are ‘extremely likely to rely on digital payments for almost all their future transactions. 32% answered “very likely” when asked the same question, and just 4% stated the unlikelihood of sidelining cash payments and adopting digital payments for their daily transactions. When analysts isolated respondents from developing economies, those who would rather stick to cash payments dropped to 1%.
In light of this, it was clear that the cashless campaign is accelerating faster in developing economies vs. developed countries. In addition to the apparent disparity in the resistance threshold of developed and developing countries, the survey also identifies age as an important factor in the subject matter. According to the survey, people aged 18 to 38 are more likely to opt for a cashless society, while respondents aged 39 and above showed a lower inclination to digital payments. Here, there is a tendency for the younger generation, who rank high in mobile internet usage, to be receptive to the concept of a cashless society. Apparently, the same applies to developing economies, like Turkey, India, Indonesia, and China, topping the list of nations with the highest mobile internet usage.
In the last decade, the digital currency has evolved in such a way that it has become one of the most-revered innovative contributions to the modern financial terrain. Without any doubt, governments are looking to capitalize on this technology to create new aberrations of fiat currencies and offer trusted alternatives to decentralized cryptocurrencies and institutionally-backed digital assets. However, data from the survey show that cryptocurrency remains at the bottom of the pile regarding favored payment methods. Just 5% of surveyed respondents affirmed that they always use crypto for daily transactions. The report showed that physical credit and debit cards had overthrown cash as the most common payment method. Next on the list is online banking, closely followed by cash.
Irrespective of the low usage of cryptocurrency compared to other forms of digital payments, the media hype surrounding China’s proposed Central Bank Digital Currency (CBDC) pilot program and the emergence of tech and financial firms-backed digital assets suggests higher demand for this form of payment method in the coming future. Already, global cryptocurrency awareness has risen to 85% — 79% in developed economies and 92% in developing countries.
The first hurdle for cryptocurrency adoption revolves around the perceived complexity of the technology. According to the survey, respondents who use cryptocurrency and have a university or a high degree were twice as many as crypto proponents with vocational training or a high school diploma. As such, it was not surprising that 44% of respondents agreed that using digital currencies is a complex process. Likewise, 25% reported that the process of buying digital currencies is not all that straightforward.
Also, data privacy, which is one of the talking points of the emerging institution or central bank-backed digital currency, plays a major role in the acceptance of digital payments. 61% of respondents ranked data privacy as extremely important when considering the viability of digital payments. Another limiting factor is the security challenges attributed to the payment method. Hence, 32% of respondents reported that using digital currency is not secure, while 25% believe that they are mostly used for illicit activities.
Surprisingly, the consensus that cash is a trusted means of payment did not reflect in the survey, as 84% of respondents trust in the viability of their local fiat currencies. In contrast, there is an uptick in the trustworthiness of digital currency, especially now that people are expecting more countries to adopt government-issued digital currencies. Therefore, 54% of respondents agreed that the issuance of CBDC could propel the trustworthiness of digital currency. 40% and 36% of respondents argued that compelling trust factors are the issuance of digital currencies by large financial and technology firms respectively. This data gives us a glimpse of the market relevance of the proposed Libra and JPM Coin. Remarkably, just 26% of respondents trust digital currencies without any ties to central authorities or organizations.
More importantly, a high percentage of respondents — specifically 55% — believe that businesses have a bigger role to play in the establishment of a cashless society. This revelation shows why stakeholders of the crypto industry are pushing for merchant adoption of digital currency as a payment method. Besides, the coronavirus pandemic has forced some countries to enforce digital payment directives as a preventive measure against the spread of the novel virus. What this means is that the concept of a cashless society is more or less inevitable. And as always, the arguments for and against digital currency will continue to lead this narrative.