Cash Forward Blog

The History and Future of Cash - Part 2

June 25, 2020

As we learned in the last article, ATM’s were the first spark that gave consumers independence over their cash management. They were the initial inspiration for digital cash management platforms and banking apps, which ironically are beginning to phase out the ATM. Over time, companies continued to evolve and demand more out of these machines. This resulted in rising costs for maintenance and a shrinking benefit to small businesses and consumers alike.

As it turns out, only 14% of U.S. based consumers use ATM’s anymore. At the end of the day, cash and ATM use steadily declining, so businesses need to adapt and overcome.

The Real Cost of ATM’s

The cost for building, maintaining, and running ATM’s (not to mention the associated transaction fees) make it especially difficult for small business owners to justify investing in one. The median price for an average ATM is around $10k, with the cheapest, used models costing around $2k. At their best, these ATM’s can bring in up to $1500 a month. This means it can take over 6 years to begin to turn a profit.

So why would any business invest in an ATM then?

The answer is foot traffic and profit potential. In the past, many businesses have opted for this in an attempt to increase people coming in, getting cash, and using it in their store. Statistics have shown that people spend over 20 percent more money in stores with an ATM for this reason, so the potential is ripe.

But, consumer trust in ATM’s and their potential ROI is not what it used to be. The digital age has given access to better options right in your pocket. This has led to the new digital money craze.

The Age of Digital Money

The progression of ATM technology has led innovators to the idea of putting an ATM right in your pocket. PayPal was among the first successful projects to bring this idea to life and show the benefit of a digital cash management gateway on your phone. In addition, apps such as Venmo and Cash App have also given new levels of simplicity to digital money management. They allow consumers to freely exchange money without ever having to touch any cash.

Many have speculated that these modern applications are trending towards physical money not being necessary anymore - but this is simply not true.

As history has shown us, the evolution of money is slow.

The majority of the world still uses cash to pay for things. What’s more, is that many still swear by cash for its immediate protective benefits. The benefits of cash today include:

Privacy

Cash use allows you to physically own your money. Many argue that digital money leaves consumers vulnerable to government intervention and monitoring of their every move.

Access

This stat may surprise some, but 11% of people in the U.S. still do not use the internet. This includes mainly elderly and poor communities, but still signifies the need for cash use among disenfranchised and impoverished communities. Also, in times of crisis, there is no better alternative to having solid cash on hand if your phone is dead or power is out.

Tradition

While digital money has its obvious convenience benefits, many just simply still prefer to have cash available to them. Bartering is a practice as old as time and it will be a long time before people are ready to sacrifice their cold-hard cash in place of an all-digital money system.

Cash Isn’t Going Anywhere

The overwhelming evidence is showing that while we continue to become more digital, it is unlikely that cash is going to ever completely phase out. The European Central Bank conducted a study on this topic that showed over 80% of households in the eurozone still preferring cash despite the rapid growth of digital means. It also reported that while consumers report preferring to use debit cards and digital means, they are actually still using cash more often.

With this in mind and also with digital money platforms evolving at a rapid pace, small businesses need to adopt new and innovative plans for keeping these titans at bay while still managing their money intelligently. With cash looking like it is going to stick around, maybe it is time for a new take on the ATM system.

In the next instalment, we’ll dive into some innovative new business models and technologies that are helping small businesses keep their heads above water in these evolving times.

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