By UNI.CORN Team Seichō | Lay Ping, Palmer, Sherman and Yun Yi
Killing the King
August 8, 2017
Many have heard of the adage: “Cash is King”, and indeed this 3,000-year-old monarch has kept an ironclad grip over his kingdom since his coronation. With the advent of Financial Technology, many start-ups have sought to overthrow the King via the means of Digital Wallets, Mobile Payments and the like. However, few succeed in rallying the community and achieving scale and commerce via their product.
Just what is it about Cash that makes him so hard to kill? Why do people still endure long queues at ATM machines just to carry a wad of paper, which will be eventually fed back into the Deposit machine right next to the same ATM?
Firstly, to the user, Cash is versatile and widely accepted, it provides a convenience that Digital Wallets and Mobile Payments find hard to replicate (for now). Secondly, Cash is final, and spending can be limited to the physical wallet amount. It provides the feeling of control, which Digital Wallets cannot, given that they can be topped up from anywhere with an internet connection. Lastly, Cash is free, in the sense that there are no extra costs or transaction fees in using nor accepting it, well, at least in smaller amounts there isn’t.
Many still dream of the day where the world could be free from Cash’s clutches, with their fervour fueled by a legend that came from East, The Middle Kingdom: Capital of FinTech. China is currently the largest and fastest growing Mobile Payments market, with a Digital Payments market 50 times the size of US. E-Wallet giants like Alipay and WeChat Pay have capitalised on the unprecedented growth of smartphone adoption in China over the past five years and built their empires off the backs of their online mall and messaging app respectively.
Due to the slow adoption of plastic card payments in China, many of its citizens have skipped the entire phase of Chip & PIN, jumping right into the sphere of Mobile Payments. In other parts of the world, the largest roadblock to the growth of Mobile Payments is attributed to the consumers’ psychology where Cash and Chip & PIN are viewed as secure payment methods.
Many of the brave FinTech warriors neglect one important aspect in their conquest of Cash: for every User making a Payment, there is a Merchant making a Collection. To the Merchant, Cash is often the cheapest and best option, and few find a problem with the time and manpower cost involved in counting, tallying and depositing it. Smaller Merchants typically run on paper-thin margins and any additional tax or charges could potentially erode any profit motive which they have. Beyond monetary factors there is a strong pushback against the “Digital Trail”, a by-product of the solutions, especially in high corruption ecosystems.
Given the nature of scale, community and commerce, it is highly unlikely that Cash will be dethroned any time soon. However, one could still hope that the cash to non-cash ratio might eventually reverse soon, given the possible spillover effect from China due to globalisation. The dollar cost, time and effort saved by both the customers and the banks would then be put to other productive uses, which would eventually benefit economies and societies.