The End of Cash

​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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