Amol Desai
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The End of Cash

5/17/2020

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​The digital attack on cold, hard cash and checks has gained momentum for the past decade.  As digital payment systems have evolved, so have their ease of use.  This ease has made a visit to an ATM or writing a check - not only an arduous task – but an unnecessary one.  The growth in peer-to-peer systems, the proliferation of frictionless payments (e.g. Uber) has made this a smooth transition.  But in a Covid-19 world, the use of cash has graduated from inconvenient to hazardous.  Cash is a virus transfer mechanism. 
 
I fully expect a growing number of retail outlets to offer digital payment options, and an even greater number of consumers to demand these options.  Why exchange a credit card when you can make a payment on your phone and eliminate all risk? 
 
It takes a substantial upfront investment to build a true payment network infrastructure to process the first transaction.  Once built, the incremental transaction has low marginal costs.  Simply put, Payment networks are a high fixed cost and low marginal cost models.  They are also scalable, which makes incremental profitability significant and sustainable. 
 
Our societal behavioral change only feeds the network effects of Payment business models.  These network effects are extraordinarily strong.  The increase in the number of consumers (demand) brings more merchants onto the platform (supply) which makes the network better and easier to use, with more perks.  A higher-quality network then attracts even more consumers.  The snowball keeps rolling downhill at a faster and faster pace.
 
China has led the digital payment revolution, a place where cash belongs in museums.  China entirely skipped the credit card phase.  The proliferation of mobile devices and the rise of dominant digital payment models of AliPay (Alibaba) and TenPay (Tencent) has defeated cash. 
 
The longer it takes for a treatment to be introduced, the deeper our habits are ingrained.  When we return to a virus-free world, we as consumers will wholeheartedly embrace our favorite experiences; those being travel, concerts, and sporting events.  A visit to an ATM will not be on that list.  We have built all the essential payment infrastructure, and we are accelerating our transition to a cashless society.  This will be a boon for Payment businesses and profitability will explode along with it.

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​This material does not constitute an offer or solicitation to purchase an interest in Latticework Partners, LP (the "Fund").  Such an offer will only be made by means of a confidential offering memorandum and only in those jurisdictions where permitted by law.  An investment in the Fund is speculative and is subject to a risk of loss, including a risk of loss of principal.  There is no secondary market for interests in the Fund and none is expected to develop.  No assurance can be given that the Fund will achieve its objective or that an investor will receive a return of all or part of its investment.

This material contains certain forward-looking statements and projections regarding the future performance and asset allocation of the Fund.  These projections are included for illustrative purposes only, are inherently speculative as they relate to future events, and may not be realized as described.  These forward-looking statements will not be updated in future.

1 Comment
vidmate link
5/3/2024 01:51:15 am

I wanted to express my gratitude for your insightful and engaging article. Your writing is clear and easy to follow, and I appreciated the way you presented your ideas in a thoughtful and organized manner. Your analysis was both thought-provoking and well-researched, and I enjoyed the real-life examples you used to illustrate your points. Your article has provided me with a fresh perspective on the subject matter and has inspired me to think more deeply about this topic.

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    Amol Desai

    I am an investor and these are my personal thoughts on investing, behavioral finance, markets, and sports viewed through the prism of a Latticework

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