Three Future Scenarios for Cash
Last year, the Deutsche Bundesbank launched the "National Cash Forum" initiative. Within this framework, participants aim to find answers to a question that has long been pressing for various cash stakeholders: How can easy access to cash for everyone be maintained? To achieve this, an idea of what the future of cash might look like is necessary. Three scenarios provide insights.
Current Cash Study – with Great Future Goal
Studies on the use, distribution, and acceptance of cash can be found regularly. The consensus: Alternative payment methods are gaining popularity. But cash is not so easily shaken off. In their study conducted by the service company VDI/VDE Innovation + Technik and the opinion research institute Sinus from February 2022 to November last year, scientists, various cash stakeholders, and social associations have their say. ALVARA was also part of the study. Robert Wolf, Managing Director at ALVARA | Digital Solutions, provided valuable insights as an interview partner in the cash stakeholder analysis – to be read from page 77. The study is also based on a literature review and a representative online survey.
The central question: How will cash be used in the future? With this, the Bundesbank is practically approaching the topic from the back. It wants to get an idea of how cash could be integrated into our society and economy in the future to derive policy recommendations. Because cash takes on different perspectives, which should also be maintained in the future.
Payment World 2037
For this reason, the study evaluates current trends and provides a glimpse into three payment worlds. What all three scenarios have in common: In no future story does cash disappear completely, and in two, it is even almost equivalent or better positioned than alternative payment methods. A good omen to find ways to maintain attractiveness, acceptance, and availability.
Scenario 1: “Hyper-Digital Payment World”
Modernization, digitalization, innovation – this triad, which experienced a boom in the 2020s, has introduced the hyper-digital payment world. Cash mainly plays a supporting role. Coins and notes are hardly found in payments at the cash register or between two private individuals. Even in former cash bastions, one searches in vain. Weekly markets, flea markets, and gastronomy manage entirely without cash, relying on mobile payment terminals.
A development seen as rather disadvantageous for people over 80. Data protection and a complicated handling of cashless payment methods are the focus of their annoyance. However, these doubts do not find room in the political debate.
Online trade is booming. Even goods that have so far still been bought more locally are sometimes shopped more cheaply online by consumers, for example, groceries. The stationary trade exhibits increasing technological maturity. Pick-&-Go systems, where goods are recorded during shopping and quickly paid for by app at the end, or self-checkout systems with greater functionality, ensure convenient shopping. Markets with or without staff are the new standard, as cash registers with employees are hardly needed anymore. There is no difference in rural shops. Even here, small stores without staff are spreading.
In light of increasing digitalization, the state and companies are betting on protective measures. Cyberattacks that wound society must be contained. Particularly providers of cashless payment solutions are in the crosshairs of attackers.
Scenario 2: “Payment World in the Cash Renaissance”
As the use of the term Renaissance already suggests, cash experiences a reawakening in this future scenario, which was already foreshadowed in the early 2020s. The coronavirus pandemic, Ukraine war, climate change, and even the artificial intelligence boom have not passed the German society without a trace. People longed for independence (from other countries), solidarity (for their own economy, especially local stores), and a right to an analog life (due to suspected AI dangers).
In this context, trust in cashless payment methods declined. Cash, however, was associated with sovereignty, independence, and distancing from the mainstream at the time and thus became a lifestyle asset. Gradually, the advantages radiated to many milieus. This is also contributed by the abolition of 1- and 2-cent coins or the introduction of rounding rules by the 2030s.
The trend of shopping at local retailers continues. Since they already offered cash payments in the past and did not switch to cashless means, the payment process with coins and notes has become a matter of course. However, some major retail chains with digitally inclined customers had already discontinued cash payment by the beginning of the 2030s. Due to the EU regulation and the recommendations of the federal government to accept cash payments, they switched back. So now all supermarket chains offer staffed checkouts and self-checkout systems again, with at least one cashierless checkout also having a cash payment module.
Savings banks and banks continued to close, and ATMs were dismantled, but at a slower pace. Thus, access to cash is still provided in 2037.
Scenario 3: “Vanishing Hybrid Payment World”
Traditional milieus, the bourgeois middle, or conservative-established milieus – society was more divided in the 2020s. According to the study, this development carries over to the next decade. This is where milieu affiliation influences the favored payment method. Distrust of digital providers and the state, economic restrictions and disadvantages, or the appreciation of a quick overview of one's expenses continue to drive people into the arms of cash.
Contrary to previous studies, age no longer plays a role. Rather knowledge of digitalization is present in all age groups. Now, the attitude toward the digital world determines preferences. Informed and skeptical consumers still prefer cash. In contrast, convenient, risk-taking buyers prefer cashless payment options.
For tips, gifts, and smaller amounts, citizens continue to use coins and notes. Milieu-spanning, they appreciate cash as a store of value. However, sole inclusivity can no longer be attributed to it. Cashless payment methods have been upgraded and, through improved input and output technologies, also provide a good alternative for people with motor impairments or visual limitations. For education, parents increasingly rely on apps that allow controlled spending of money by offspring.
The various payment preferences are also apparent in stationary retail. The equipment of the checkout systems adapts to customer needs. There are shops with staffed checkouts, cashierless markets, or shops that rely on a combination of staffed checkouts and. Retailers who know about their customers' cash preference will offer at least one self-checkout with a cash payment function in the future.
However, the acceptance of cash in retail is declining – for a simple reason. The costs of cash supply and cash disposal are burdensome. Private banks, cooperative banks, and savings banks close branches, the ATM network is further dismantled, which in sum affects the cash cycle.
Conclusion
Surely each of us has their own tendency in which direction cash will develop. Since 2030 is no longer far in the future, it will soon become clear which payment world will prevail. But until then, financial institutions, retailers, and cash service providers should already be active. They already face challenges today that make cash logistics inefficient, non-transparent, and costly. Therefore, our motto is: Regardless of each scenario described above – and beyond – cash stakeholders should prepare. With digital solutions that facilitate cash management while also accommodating modernity and efficiency, the path to the future is paved.
Do you want to set the course now for a modern future with cash?