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When it comes to cash, it’s all about the wealth

Unlocking value
By Gareth Parrington, Commercial Partnerships Director – Asia

A new report reveals country wealth strongly influences consumers’ likelihood to pay by card or cash and why digital isn’t always best.

Despite mobile payments and card schemes very much dominating the conversation over the last 18-24 months, in the Asia Pacific region cash is still king. But, like the very diverse range of countries that make up the region, the payments landscape within APAC shows a high degree of variation.

On the one hand, there is the still developing India with its burgeoning urban middle class yet still highly diffuse, agricultural and traditional rural population. On the other there are the high-tech centres of Japan and Mainland China where payments have moved from card to mobile and are now beginning to take over messenger platforms.

According to the PYMNTS Global Cash Index, India is the region with the strongest continued cash growth at 11.9% projected between 2015 and 2020 while its propensity to use cash is only trumped by South Africa at 58.2% versus 51.8%. South Africa’s cash share has fallen dramatically from a highly cash-dependent nation in 2010 at 73% cash share of wallet to a projected 49.1% in 2020.

Cash usage linked to relative wealth

The report has discovered that cash use is closely linked to relative wealth of the nation. The wealthier the country, the lower the cash share. In APAC, the wealthy nations: Japan, South Korea and Australia all have very low cash shares compared to the much poorer ones: India, South Africa (though huge differences exist between rich and poor in this area) and Mainland China. Similar patterns can be found in other zones with Eastern Europe having higher cash share and lower GDP than Western Europe and a similar pattern found in the Americas.

There is clear evidence within the country’s infrastructure that points to the likelihood of high or low cash usage. In particular, the presence of lots of point of sale terminals would suggest a much higher tendency towards card use.

The Indian government’s experiment with demonetization has done little to dent the company’s preference for cash. Cash usage dipped slightly as limits were put on ATM withdrawals following Prime Minister Modhi’s removal of 500 and 1,000 bank notes - 86% of the currency in circulation.

Digital payments briefly took up the slack with digital wallet use increasing by 271% a month after Modhi’s action, but it soon fell back to usual levels.

The Indian experiment has moved the needle slightly with a few more consumers using digital and card payments than before but overall the cultural preference is highly towards cash. That said, as the country’s GDP and spending power grows and more western brands with westernised payment methods become standard, increased card or digital card use can be expected. As India is unlikely to ever become a truly cashless society, payments providers who succeed will be those who offer vendors and customers a breadth of choice at low cost.