Breaching the Last Bastion of Cash
The emergence of technologies like contactless cards and mobile wallets has dramatically changed the payments space forever. These technologies have enabled customers to live increasingly cashless lives, particularly in more mature contactless markets like Canada, Australia and the UK. But while virtually every element of the payment chain is now served by various digital payment services, the need for cash has not been totally removed. There is one last sector that remains almost entirely dominated by cash: in-person, cash-in-hand transactions. That this segment, made up of both consumer-to-business (C2B) and consumer-to-consumer (C2C) payments, has not yet been digitized is surprising, especially considering the tremendous growth of the mobile payment industry. While recent estimates predict that the mobile payment market will be worth $780 billion in 2017 and reach $3.39 trillion by 2022, the FinTech revolution has so far left the sector of in-person, cash transactions largely untapped.
Defining P2P transactions
As a part of the payment landscape, in-person cash transactions represent a variety of activities. They cover peer-to-peer (P2P) transactions like friends splitting the bill at a restaurant, housemates sharing the rent or co-workers chipping in on a group gift. They include service providers or micro-merchants like accountants, landscapers or tutors. P2P transactions also represent informal sales, like a garage sale or transactions through Kijiji or Craigslist. They can even be activities outside of buyer-seller transactions—like donating at a charity event.
Underestimated market, unrealized potential
Taken individually, in-person cash transactions are usually small. But collectively they represent a significant portion of the payment world. A 2016 study by the World Bank Group and the World Economic Forum focusing on the total value of micro, small and medium retailers’ transactions estimated that of $19 trillion of a total $34 trillion global transactions were cash or cheque transactions. Beyond retailer transactions, figures from Mastercard Advisors indicate that cash still accounts for roughly 85 per cent of consumer transactions globally. Together these figures highlight not only the size of this sector, but also the massive potential that exists for technologies that provide a digital alternative to in-person, cash transactions.