Cash Still King For Cross-Border Payments? (The Monito Briefing Issue #2)

Hello and welcome to this week's issue of The Monito Briefing. With digital cross-border payments steadily on the rise, we look at the other side of the coin: cash.

Today, we explore how physical cash is used in the world of cross-border payments. What were cash remittances doing in 2020? Is cash still king — as the old saying goes — or is it slipping into obscurity as a means of making cross-currency payments?

Industry Highlights

First up, here's what's happened over the past two weeks:

• Payments giant Nium, which operates InstaReM, has kicked off its expansion plan into Africa by adding four local markets into its sending platform for bank and mobile money transfers: South Africa, Tanzania, Kenya, and Ghana;
• After two years of benefiting from Ripple's cross-border crypto technology, MoneyGram has scrapped its partnership with the blockchain startup over the former's SEC litigation, hinting that the break may only be temporary;
• Only three months after its release, ICICI's new mobile payments app iMobile Pay has already reached the one-million-user milestone in India.

What Happened To Cash-Based Remittances in 2020?

In the world of remittances, just as with so many things, 2020 was a year quite unlike any other. This was not only true for electronic money transfers (which surged in parts of the world) but also for cash.

According to search trends from Monito's comparison tools, several key observations can be gleaned from how users sent cash in 2020:

• Cash-based remittances remained robust to Latin America, Africa, and Arab countries, where they made up over 40% of comparisons respectively;
• On the other hand, cash remittances to Europe (8.5%), North America (1.9%), and Asia-Pacific (11.3%) formed a small minority of comparisons;
• Latin America was the largest destination by the absolute number of cash pickup and home cash delivery remittances in 2020;
• The global cash-based remittance market remains highly competitive, with no single operator offering the lowest pricing on a significant majority of searches in 2020.

"While the remittances sending rails are more and more digital, cash is still king on the receiving end in many markets," Monito's CEO and Co-Founder François Briod observed.

Long the preferred receiving method for communities without access to banking services (particularly in regions such as Latin America and Africa), cash-based remittances play a key role in facilitating funds transfers to some of the world's most isolated communities.

In Mexico, for example, a majority (64%) of households relying on remittances are located in towns with fewer than 15,000 inhabitants, according to BBVA research from 2020. "In a country where only 2% of the population has adopted mobile payments due to regulatory capture by the banking sector, the status quo favouring cash will probably continue for a while," added Briod.

See Monito's full data and analysis here.

Post-Cash Societies?

While there aren't (yet) any fully cashless countries to place under the microscope, some countries are further along the road than others. When it comes to inward cross-border payment volumes to countries with low cash use, a few noticeable trends emerge:

• In Australia, cash was used in some 19% of transactions in 2020, with FIS's Global Payments Report estimating a decline of up to 5% by 2023.
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• Sweden, which probably has the clearest roadmap of any country toward becoming a fully-cashless society, is in the midst of trialling a digital version of its currency called the "e-krona" despite some regulatory roadblocks.
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• In the UK, cash use has slumped by 38.1% between 2000 and 2020 and the country is predicted to be completely cashless by 2026;
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In A Cashless World, What Becomes of the ATM?

As searches for non-cash payment methods on international money transfers have gone down in Europe, North America, and Asia-Pacific, so too have ATM numbers there. But the future of the cash machine can look very different depending on where you look:

• There has been a decline in both ATM numbers and cash machine usage over the past decade in Europe, North America, and the Asia-Pacific region, but it has accelerated since the beginning of the COVID-19 pandemic;
• Some countries like the UK have lost approximately 6,000 ATMs in a year;
• Although cash usage is declining throughout the world, emerging economies where cash pickup is still the norm are seeing an increase in new ATMs, which experts believe is a reflection of the diminution of unbanked and underbanked populations;
• Some countries, like the UK and Sweden, are taking action to guarantee continued access to cash, and many believe apps like that of Swiss fintech Sonect are the way of the future.

What To Watch

The meteoric rise in digital banks, virtual cards, and other innovations at the confluence of the financial and tech sectors in recent years is set to continue to leave an indelible mark on the use of cash for cross-border payments in the years ahead.

At Monito, we're keeping our eyes on the following trends as clues:

• Fintech innovation, such as Wise, which is quietly joining the ranks of Revolut and others to release a virtual card for contactless cross-border spending;
• Government pressure in the wake of COVID-19, such as in the Philippines, where the handling of physical money is disincentivized in a top-down manner.

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