August 2, 2017
Despite strongly rooted belief in the digital future of businesses, cash is still the king in the vast majority of countries. Even with highly fragmented digital payments market, in 2013, around 85% of all retail payment transactions were still done with cash, equating to 60% of retail transaction value. Furthermore, the most recent estimates suggest that cash continues to be used in around 85% of global consumer transactions. Transactions in cash may be declining around the world, but cash still remains the most commonly used payment mechanism for the vast majority of individuals and businesses.
Even countries with highest rates of cashless transactions still have room to grow: cashless transactions account for 61% of consumer payment transactions in Singapore, 60% in Netherlands, 59% in France and Sweden. Meanwhile, only 1% of consumer payment transactions in such countries as Egypt, Peru, Saudi Arabia, and Malaysia, are cashless. In the Eurozone, 75% of point-of-sale payments are in cash.
WEF emphasizes that even India’s demonetization experiment has not broken the country’s heavy cash dependence. Five months after the country demonetized 86% of its currency, cash withdrawals were actually 0.6% higher than a year earlier.
However, with the fast pace of technology development and improving digital experience, electronic payments globally are being adopted at an outstanding pace. Even with increasing concerns over data privacy and security, the trend is expected to continue. Over the course of development and adoption, electronic payments are expected to have a tremendous effect on economies. Moreover, digital systems overall are seen as an undeniably positive force in driving globalization, connectivity, and borderless innovation in addition to boosting inclusive economic growth within national borders.
A report from Moody’s published last year quantified the impact of electronic payments on economic growth – electronic payments added $296 billion to GDP in the 70 countries studied between 2011 and 2015, which is equivalent to the creation of ~2.6 million jobs on average per year over the five-year period, or about 0.4% of total employment in the 70 countries.
The Digital Planet 2017 report states that digitalization is now driving globalization. As such, achieving a competitive advantage in the global digital arena has become a key priority for governments, businesses, and citizens who strive for inclusion and relevance in this global marketplace.
Two important themes emerge as distinctive features of this report:
The report by Tufts that was mentioned earlier distinguishes four key drivers of digital evolution: supply conditions, demand conditions, institutional environment, and innovation & change.
Source: Digital Planet 2017