According to a report from Citbank and Imperial College entitled «The March Towards the Digital Money : Bringing the Unbanked from the Cold» the overall shift towards digital money is slow and patchy. More importantly, it is widening the monetary divide between those who have access to an increasing range of digital forms money and those who remain financially excluded.
While two billion adults do not have an account at a formal financial institution, the report states that “a 10% increase in digital money adoption would allow 220 million people to enter the formal financial sector”. But this can only happen if efforts to promote digital money are geared specifically to those who need it. And this is not the case.
The report measures a Digital Money Index, which ranks 90 countries according to their readiness to adopt digital money, based on government and market support, financial and technology infrastructure, amount of digital options, and the population’s propensity to adopt.
Progress towards digital money has shifted by only 2% since 2014
Progress is slow, very slow. The report finds that since 2014, digital money readiness has increased by 2% worldwide. That is significantly lower than global GDP growth (approximately 2.7% in 2014 and 2015).
The monetary divide is broadening
More worrying than the slow progress, is the fact that the gap between the best performing countries and those at the bottom of the index is widening. The rankings show that the top quartile has seen the average index improve by 3% whereas the bottom quartile has experienced an increase of only 0.5%.
And cash is increasing in many of the best performing countries
The chart opposite lists the 23 best performing countries based on the Digital Money Index. One might expect to see a decline in cash usage in these countries due to substitution by digital money. Far from it.
- Singapore (ranked 1st) has seen the value of banknotes grow by 10.3% per year between 2005 and 2014.
- In the United States ranked 2nd), the value of notes in circulation grew by 6.2% in 2015.
- Six countries in this cluster are part of the euro-zone, where cash is used for over 75% of point-of-sale payments.
- In the UK, the value of notes and coins in circulation grew by 5.6% in 2015 and 6% in 2014.
- Hong Kong has the highest number of banknotes per person in the world.
- In Japan, cash demand has outpaced growth since 2012. 80% of transactions were settled in cash in 2012.
- In Switzerland, year-on-year growth of cash in circulation has exceeded 6% since 2014.
- In Australia, the Reserve Bank has opened a new vault to accommodate the increase in banknotes as the value of notes in circulation in 2016 was the highest in 50 years relative to GDP.
- In Canada, cash in circulation reached 3.8% of GDP in 2015, up from 3.3% in 2008.
- Korea has the highest ATM density in the world with over 2,400 machines per million inhabitants.