Why Cash Is Here To Stay

By Hari Sivan


We live in a world where many payments can be made without cash. If you need a ride, hail an Uber and pay with the card linked to your account. Go on a grocery run and leave your wallet behind, just pay with your phone’s mobile wallet instead.


While there’s a constant push for us to adopt ‘cashless’ payment methods, the eventual results may not be as rosy as they are made out to be.


What impact will the transaction costs have on our living costs? How do we ensure that our data security is not compromised? Would the money spent on creating the infrastructure justify the benefits promised for the common man?


Although we may eventually operate in a global ecosystem where all payments are processed electronically, according to PwC, cash still accounts for 85% of transactions worldwide, with 60% of their value corresponding to hard cash.


For us to go cashless, financial infrastructures need to shoulder massive transaction volumes seamlessly. Simultaneously, consumers and businesses need to see how they can benefit from going cashless; as many still choose cash for its immediacy and convenience.


In Asia, Cash Is Still King
While the US and Europe are moving towards credit driven consumption, the Asia-Pacific region still prefers to use cash for everyday transactions. Although many growing Asian economies are still developing their financial infrastructures, what’s interesting is that even in Asia’s leading financial hubs, Singapore and Hong Kong, there’s still a strong preference for cash.


Despite the availability of e-payment options – such as TNG Wallet, PayMe, Alipay and Samsung Pay – they may not be suitable for all expenditures. A hawker today may still get confused if you ask to pay for the meal with your phone.


Moreover, while governments in Asia are pushing for development in their internet and mobile banking spaces, banking access remains an issue as only an estimated 27% of Southeast Asia’s 600 million people have a bank account. Thus, a cashless evolution is not on the cards yet. At 98%, cash remains the dominant form of payment in developing Asian markets.



Getting Businesses On Board
Many small businesses in Asia have shied away from implementing e-payment services as electronic transactions often lower their margins and increase their business costs. This may result in them raising the prices of their goods and, in turn, could cause them to lose their customers to their competitors.


In Singapore, despite the availability of cashless solutions, merchants still prefer cash. This is especially so for Singapore’s SMEs, who are major contributors to the national income but may not have the same amount of capital as multinational corporations.


Even when we consider the exponential growth of Southeast Asia’s e-commerce sector, cash-on-delivery (COD) today still accounts for 75% of these transactions.


Why Smart Nations Still Need Cash
We need to recognize that cash does not conflict with the goals of building a Smart Nation. Cash is just a payment instrument like any other alternative. It just happens to be free and efficient in many scenarios where the alternative modes increase business costs and restrict cash flow of businesses.


Even with the rise in cashless options, cash circulation in Singapore remains at 8.8% of the national GDP and growing at 7% Compund Annual Growth Rate, compared to 4.4% in Australia and 2.12% in Sweden.


Unlike conventional cashback options, customers using soCash can collect their money from vendors as they would at an ATM without purchasing anything – with merchants being paid electronically from the customer’s bank account through soCash. Using technology, we are converting cash into a commodity that they sell and earn revenue.


Instead of getting carried away by profit-motivated evangelization of cashless payments, we’re working towards building an intelligent future where we have easy access to multiple payment options – be it cash or otherwise – at our disposal.


About The Author
Hari Sivan is a former banker with more than
12 years of experience working in global financial institutions. During his time as a banker, he realized that cash circulation remained a significant challenge for many financial institutions – with uncirculated cash being locked away in ATMs which were placed in locations with low footfall – and decided to start soCash.

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