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Deutsche Bank: Cash is Here to Stay. Cards will go Away.

Categories : Cash facilitates budgetary control
January 27, 2020
Published in : Cash substitution, Demand, Digital Currency, Future of Cash
Deutsche Bank Research has published a series of three reports on the future of payments. They predict that cash will be around for decades to come. Digital payments will grow at light speed leading to the death of cards.
Communication Team

In 2016, John Cryan, the CEO of Deutsche Bank, speaking at the World Economic Forum in Davos,  boldly announced “Cash, I think, in ten years’ time probably won’t (exist). There is no need for it, it is terribly inefficient and expensive”. The panel was shared by Christine Lagarde, then head of the International Monetary Fund and Dan Schulman, President and CEO of PayPal. Lagarde spoke about the disruption presented by virtual currencies. Schulman said “Money is absolutely digitizing. However, let’s not forget 85% of the world’s transactions are still in cash”.

Fast-forward to 2020. Christine Lagarde now presides over the European Central Bank where she will be signing billions of banknotes. Deutsche Bank – which is no longer headed by John Cryan – announces that cash will stay around for decades. As for digital currencies, they will lead to the extinction of cards, not cash.

The reports are based on a survey of 3,600 customers across the US, UK, China, Germany, France and Italy and forecast trends in cash online, mobile, crypto and blockchain. The reports are in three parts; the third is not yet published:

“When people discuss the future of payments they tend to predict the end of cash,” the study states. “Our view is different. Not only do we think cash will be around for a long time, we see the transition to digital payments as having the potential to do no less than rebalance global economic power.”

Two-thirds of the people surveyed said they had considered increasing cash holdings given the economic uncertainty around the US-China trade war, conflict in the Middle East, and the potential effects of Brexit. The report also recognizes that cash has attributes which are unmatched by other payment methods. It helps users remain anonymous and protects against cyberattacks. Buy over 40% say cash enables them to easily track spending and make payments faster. They find cash to be convenient, accepted almost everywhere, and secure.

To predict the future of digital payments, the authors turn to China, where the value of online payments amounts to three-quarters of GDP, almost double the proportion in 2012. Today, just under half of in-store purchases in China are made using a digital wallet, way above the levels in developed markets.

The authors are also confident about the potential for private digital currencies, pointing out that if the growth in blockchain wallet users continues to mirror that of internet users, then by the end of the decade, they will number 200 million, quadruple the current level.

Yet, that is barely 2.5% of the current world population. In 1950, Diners Club card president Alfred Bloomingdale foresaw a cultural and socioeconomic divide across two classes of people: those with credit cards, and those without. When that chasm emerges, “there’s going to be one hell of a split in society,” he said. Will that prediction apply to digital currencies?

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