In late March, a story popped up in the New York Times with the title “Going Cashless: My Journey into the Future”. I mean, that’s awfully bizarre, right? Why would anyone envision a future where they’re broke? Ah, but with further reading it turns out that the word cashless here describes a situation in which transaction payments are exclusively made digitally, whether online or through a card reader or other devices. This conversation surrounding the future as a cashless society is just another marker in how financial transactions have been affected with technological development in the 21st century, giving rise to the term FinTech, short for Financial Technologies. If you’re deciding on which shares to buy for your investment, going with such companies might not be such a bad bet.
For a glance at our utopian (or dystopian, depending on how you look at it) future envisioned by our technological overlords, look no further than the Amazon Go Store, first opened to the public in January this year. Any unsuspecting onlooker will be terrified at what seems to be mass looting occurring inside a grocery store but further detailed examination will eventually reveal the revolutionary thinking behind this concept store that is so far limited to Seattle, in the building that serves as Amazon’s headquarters. So what exactly is the Amazon Go Store? Well, a picture is worth a thousand words and a video is worth a thousand pictures so in lieu of writing a million words, see how the store works in real time. That is so far, the best representation in what a cashless society would look like. While Amazon is undoubtedly one of the most visible companies pushing for a cashless society, they are far from the only one and investing in this field could definitely pay off in the future. Here are a couple reasons why:
A number of governments is pushing for this
Sweden is the prime example for this where more than 95% transactions are already digital. This initiative isn’t exclusive to developed countries where credit and debit cards are common. In a bid to force its citizens to migrate to a cashless society, the still-developing India, the second most populous country in the world where cash is still king, moved to remove all ₹500 and ₹1000 (two of the most circulated bill) from circulation in a process dubbed demonetization back in 2016. Not wanting to be left behind, in 2017 Vietnam announced their ambitious intention on transitioning to a cashless society by 2020. These examples are only a fraction of nations around the world with a major cashless initiative.
Cashless is growing, fast
Venmo, the social wallet app from PayPal that was originally made to facilitate P2P (person-to-person) payments, such as when sharing dinner bills, rents, movie tickets and whatnots is one example. Despite only available for use in the United States, the volume of transactions handled by Venmo grew seven times from US$1.3 billion in the start of 2015 to a whopping US$9.0 billion by the end of 2017. To a lesser degree, mobile payments, spearheaded by Apple Pay and Samsung Pay, are also experiencing similar growth, with worldwide revenues growing from a total of US$450 billion in 2015 to a projected US$930 billion by the end of 2018.
Digital payments are seeing wide usage in public events
Ever been annoyed when you go to a music festival or to the Australian Open only to find endlessly long line for beers and chips? Well, not anymore. The local indie darlings of music festival, Laneway, introduced cashless payments in 2017 by partnering with Visa, enabling visitors to make payments with their card, phone, or an honest-to-God pair of sunglasses. The sunglasses part is still experimental, mind you, with the sunglasses being handed out to festival-goers for testing during the event. Coachella, one of the biggest music festival in the world where this year’s edition became the stage of the heavily-discussed Beyoncé comeback performance went cashless in 2016, opening support for mobile payments app, bypassing the traditional RFID wristbands used in a number of festivals around the world.
It’s being driven by the rise of on-demand transportation
The rise of Uber can, to a certain extent, be described as paving the way for cashless transactions and fintech in general. Abolishing the need for cash is just one-half of the equation but integrating the payment process into the mobile app itself? Now that is a stroke of genius. You get in and then you get out, completely hassle-free. There’s absolutely no need to worry about payment, it just happens in the background. This is why Uber’s rivals in the Southeast Asian region, Singapore-based Grab and Indonesian Go-jek went one step further earlier in 2018 with Grab announcing a new platform for financial services, the aptly-named Grab Financial, and Go-jek acquiring a total of 3 local fintech firms to make further inroads into the world of digital payments.
In an ideal world, transitioning to a cashless society would be quick and painless, as the benefits are quite obvious compared to having to manage paper bills but as the term ideal world itself is an oxymoron, it hasn’t been exactly smooth sailing. India’s demonetization move for example, wasn’t exactly successful as Indians; especially of the lower to middle class still rely mostly, if not solely on cash. This resulted in ATMs across India running out of cash twice since the demonetization. Delving further into this, a cashless society is a closed ecosystem, where the barrier of entry is a bank account and a level of digital literacy, two things that poor and marginal communities don’t always have the luxury for. Wealth gap and inequality is a growing and major problem and a cashless society is going to make that problem even more pronounced. Still, as it’s the national government themselves that are pushing for this, a cashless society is looking more and more to be the inevitable future every day. While there is no such a thing as a sure bet in investment, it can get a lot worse than going with fintech as you look for shares to buy.
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