scorecardresearch Skip to main content

What’s in your phone?

A 111 percent increase in consumer use of mobile person-to-person payment methods between 2014 and 2017, according to Boston-based research firm Aite Group. Adobe Stock

Dylan Oesch-Emmel, a freshman at Tufts University, can count on one hand the times he has used cash recently: to convert currency for a trip to Montreal, and for cab fare when his smart phone died and he couldn’t use Uber.

“Quite frankly, I use zero cash,” said Oesch-Emmel, 19, a Stoneham native.

Like many in his age bracket, Oesch-Emmel does his banking online, rarely uses an ATM, and keeps a credit card for backup. Nearly all his purchases are made with payment apps on his iPhone 7 linked to his debit card: Venmo to split dinner and ride home with friends, for example, or goPuff to have the essentials of college life, such as shampoo, floss, and Cheetos, delivered to his dorm.


Yet while younger people such as Oesch-Emmel don’t have much use for cash, the United States actually lags other nations in moving toward a largely cashless financial system. Credit and debit cards have been in wide use here for much longer, and the nation’s large, complex banking system makes it difficult to adopt change quickly.

Shaun Ferrari, managing director of Currency Research, said electronic payment businesses are still at the stage here where they are competing against each other more so than cash.

“It appears as though electronic forms of payment are cannibalizing each other rather than replacing cash,” Ferrari said. “Mobile has a long way to go to be a significant player in the payment landscape in the US.”

Indeed, the Federal Reserve Bank of San Francisco and the Bank of International Settlements each report that cash remains the most frequently used payment instrument overall, especially for smaller amounts, both in the United States and other advanced nations.

Outside the United States, change has been significant. A number of nations, including Canada, China, India, and the United Kingdom, are at varying stages of going all-digital. Japan has advanced its target date for cashless up by two years, to 2025.


Meanwhile, Sweden has moved so swiftly to eliminate cash use by its 2023 target that it has had to slow down because a few holdouts are sticking with the krona, no matter what, so businesses will still have to accept it. Moreover, the Krona will serve as a plan B, in the event of a national emergency, such as failure of the electrical grid.

In the United States, the generational shift is hard to miss, according to Kenneth Rogoff, an economist and Harvard University professor.

“Young people are rejecting cash because they find the newer methods faster and more convenient,” said Rogoff, who notes that bit-by-bit, the amount of cash in the financial system is declining. “The use of cash in legal, tax compliant transactions is falling rapidly and probably now accounts for under 7 percent of the value of retail sales and only a very small fraction of the business to business,” Rogoff said.

Boston-based research firm Aite Group in February reported a 111 percent increase in consumer use of mobile person-to-person payment methods between 2104 and 2017. A few of the big names are showing commanding gains: Zelle had a 59 percent rise in processing volume in 2018, to $119 billion. Venmo, for its part, processed $62 billion last year, up from $35 billion the year before.

One explanation for those increases, said Talie Baker of the Aite Group, is the ability of payment systems to be made in real time, instead of that lag people used to experience waiting for money to clear. This has made digital payments feel the same as getting cash, more or less instant and around the clock.


Baker also credits Uber and Lyft, with their “frictionless” user experience, for driving adoption of mobile payments. “More and more, consumers are viewing mobile payments as a convenient, secure, and ubiquitous way to make payments,” she said.

The private sector is expected to continue driving innovation; fintech, for example, is seeing record capital investments, while technology powerhouses Apple, Google, and Facebook and financial firms keep adding more digital options for customers.

For now, cryptocurrencies, posed as an outright digital alternative to national currencies, are still trying to make a case as a financial instrument, and remain a wild card at the retail level.

“We’re at the very early stages of technology adoption with uses that will eventually flourish beyond investment and trading,” said Josh Hawkins, a spokesman for Circle, a cryptocurrency firm in Boston. The startup, which has raised $246 million in venture funding, recently introduced a cryptocoin that is fixed at par to the US dollar, and can be used to transfer greenbacks anywhere in the world with little to no transaction fees.

Hawkins remembers that back during the 1990s high tech boom, some people questioned the future of e-mail or webpages at a time when the US Postal Service and the Yellow Pages were the rule. The same is happening now — digital tokens will just be one more way to convey money, investments, even contracts.


“In time, the actual technology fades to the background and the utility benefits are simply realized by end users,” said Hawkins, predicting physical cash will eventually “go the way of dinosaurs.”

And, if left to Dylan Oesch-Emmel and his generation, it probably will.

“I hope the future of money’s a place where cash is non-existent,” said Oesch-Emmel. “It makes life much easier.”