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Is the future of money digital?

The Pew Research Center recently released a report called The Future of Money in a Mobile Age, in which they asked experts in the field whether or not technology will have eliminated the need for cash or credit cards in the United States in the next 8 years.

65% of the experts agreed that we would move away from cash and credit. So the headline many touted was “Cash banished by 2020, say experts!” However, when taking a closer look, you see that the experts were asked to agree with one of two statements.

Here’s the statement 65% of experts agreed with:
By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries.

And here’s the other statement, which 33% of experts said they agreed with:
People will not trust the use of near-field communications devices and there will not be major conversion of money to an all-digital-all-the-time format. By 2020, payments through the use of mobile devices will not have gained a lot of traction as a method for transactions. The security implications raise too many concerns among consumers about the safety of their money. And people are resistant to letting technology companies learn even more about their personal purchasing habits. Cash and credit cards will still be the dominant method of carrying out transactions in advanced countries.

Obviously, these two statements are very different, taking opposite points of view. The reality will likely end up being a combination of the two scenarios, and not simply due to security and privacy concerns. In order for people to embrace and fully adopt mobile payments as a replacement for cash, funds must be moved instantly from one bank account to another at a different bank. Currently, in the U.S., those person-to-person payments move along the same rails as checks, which can take a few days.  When people send cash using their mobile phone they expect the funds to transfer immediately.  They are not likely to adopt a system where funds transfers are delayed. If the banks find a way to solve this, even if it means taking on the credit risk to deliver instant money transfers between individuals, more people will be ready to go cashless.  

However, even if there is a way for person-to-person payments to transfer immediately, there must be more of an incentive for people to make purchases at the point-of-sale with their mobile phones other than just convenience.  People are more likely to use their mobile phone instead of cash or plastic if they receive a discount or accumulate loyalty points as a result.  What’s more, banks, retailers, mobile carriers and others involved in the development of mobile wallets will need to educate consumers on the benefits of moving money via mobile phones in order to change behavior on a large scale, and that will take time, perhaps more than 8 years. 

What do you think? Are we headed for a definite future with mobile money as a primary payment method, or will it be something a minority of Americans will embrace?


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