LONDON–Another analysis is confirming the “rising expectation” of the cashless society.
According to the second annual report of the Economist Intelligence Unit, there is growing acceptance of digital currencies, a trend that has been accelerated by COVID-19.
“Consumers are increasingly adopting cashless payment methods while governments are stepping up planning or piloting of central bank digital currencies (CBDCs) and companies are experimenting with accepting open-source digital currencies, such as Bitcoin, for treasury or portfolio allocation,” the report states.
The Economist Intelligence Unit noted a cashless trend was already strong, according to the previous year’s research but in 2021, COVID-19 prompted more movement away from physical cash.
“In 2020, only about 72% of respondents said that their country was likely to become a cashless society; that grew to over 81% this year,” the EIU said. “Meanwhile, the percent of respondents believing their country would never become cashless, saw a stark drop from 28% to 19%.”
Means to Store Value
The analysis further suggested that while transaction settlement is a main function of any currency, digital or otherwise, the institutional investor and corporate treasurer respondents in the EIU research appear to be using digital currencies more as a store of value with a deflationary hedge than purely as a settlement option.
About 76% of corporate treasury and institutional investor executives say COVID-19 accelerated demand for, and adoption of, digital currencies, the analysis added.
“The concept of a digital currency playing a role as a ‘digital gold’ asset in corporate treasuries or institutional investor portfolios is gaining acceptance among executives,” the EIU said.
The EIU noted that in 2020, the Economist Intelligence Unit conducted a survey to measure the relative acceptance of digital currencies and other digital payment methods, finding that a cashless trend was strong with consumers globally.
In February and March of 2021, a new survey set out to gauge how sentiment has changed in the past year, the organization explained. Results from this year indicate favor for both digital transactions and currencies has risen further.
‘Examining the Metric’
“Over the past 12 months, 27% of survey respondents report that they always (as close to 100% of purchases as possible) use digital payments instead of physical banknotes, coins or credit cards versus 22% in the previous year’s study,” the EIU said. “Examining the metric from the opposite angle—those reporting only very rare use of digital payment options—the rate declined from 14% to 12%, indicating a shrinking holdout for physical cash.”
The report points out there are a variety of ways people can transact digitally—including smartphone apps or digital currencies—the most common form of digital currency consumers recognize is the open-source variety, typically called a cryptocurrency—such as Bitcoin. According to the survey, cryptocurrencies remain the most commonly known form of digital currency options; more than half (55%) of consumers in the 2021 survey say they are aware of them even if they have never owned or used one. Despite increased media coverage of CBDCs recently, it was still the least recognized form of digital currency, the analysis added.
Common Commercial Uses
While a majority of respondents classified a digital currency as something that should be used primarily for transactional purposes (i.e. settling payments), the most common commercial uses presently appear to be for capital appreciation and asset diversification, according to the EIU.
“Money is rapidly evolving,” said Jason Wincuinas, the Economist Intelligence Unit editor who spearheaded the report. “Only a few years ago there seemed to be very little commercial or popular support for even the idea of a digital currency and within the past year, we’ve seen several governments announce new plans to create digital versions of their currencies. It’s like a new space race on that level. At the same time, we’ve seen interest and trust in cryptocurrencies grow among consumers. Now that we’ve added perspective from some of money’s heaviest users—corporate treasuries and institutional investors—we have a more comprehensive view of how digital currencies might evolve. Sentiment on the institutional side of the scale already seems much higher than expected.”