Cash to digital payments transition

Cash to digital payments transition: Case studies of Japan, Germany, Brazil, and Mexico

16 May 2024 in Blog,Case Study

by Ludovic Plisson

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The transition from cash to digital payments is a crucial topic in modern finance. Many countries strive to reduce their reliance on cash in favor of more efficient and secure digital solutions. This transition is essential not only for modernizing payment systems but also for promoting financial inclusion and stimulating economic growth. This article explores the challenges and opportunities associated with this transition by examining the cases of Japan, Germany, Brazil, and Mexico.

Global context of cash and digital payments


Current state of payments worldwide

Digital payments have grown exponentially in recent years, driven by the rise of e-commerce and mobile technologies. In 2023, digital wallets accounted for 50% of global e-commerce spending and 30% of point-of-sale (POS) transactions. By 2027, they are expected to reach 49% of global transaction value, totaling over $25 trillion​ (Global Payments Report 2024 | Worldpay)​.

Credit and debit cards remain strong, even within digital wallets, indicating that consumers are not abandoning cards but using them differently. Cards still represent 24% of POS sales​.

Advantages and disadvantages of cash and digital payments

Cash offers unmatched immediacy and simplicity, especially valued in cash-heavy economies. However, it presents significant disadvantages, such as the risk of theft, difficulty in tracking transactions, and high costs associated with cash handling.

In contrast, digital payments offer numerous advantages. They provide transaction traceability, reduce processing costs, and facilitate access to financial services for the unbanked populations. Additionally, digital payments can boost economic growth by facilitating e-commerce and integrating new economic models like “Buy Now, Pay Later” (BNPL), which has gained popularity despite challenges like high-interest rates and increasing regulation​ (PwC)​​​.

Factors influencing the transition

Several key factors influence the transition from cash to digital payments:

  1. Technological Development: The adoption of smartphones and the improvement of digital payment infrastructures are major catalysts. For example, instant payment solutions like Brazil’s PIX system have transformed payment habits by significantly reducing cash usage​ (McKinsey & Company)​.
  2. Government Regulations: Government policies play a crucial role. Initiatives like the European PSD2 directive encourage open banking, fostering innovation in digital payments and enhancing transaction security​ (PwC)​.
  3. Consumer and Merchant Adoption: Building consumer trust and merchant acceptance is essential. Digital wallets and QR code payments are gaining popularity due to their increased convenience and security​ (Global Payments Report 2024 | Worldpay)​.


Japan 🇯🇵

A culture deeply rooted in cash payments


Current state of payments in Japan

Japan is known for its heavy reliance on cash, despite advanced technological infrastructure. In 2023, cash payments still accounted for 60.7% of consumer spending​ (DataReportal – Global Digital Insights)​. However, digital payments are gaining ground. In 2024, mobile and card payments are increasing steadily, although cash payments still dominate.


Specific challenges in digital payment adoption

  • Cultural Barriers: Japanese people have a strong preference for cash. They consider cash payments to be safer and more private. This creates resistance to adopting digital payments.
  • Existing Infrastructure: Although the infrastructure for digital payments is in place, adoption remains low. Merchants and consumers do not always see the benefit of changing their payment habits.

Opportunities and solutions for digital payments

  • Government Initiatives: The Japanese government actively promotes cashless payments as part of its digital growth strategy. Initiatives like subsidies for contactless payment terminals encourage merchants to adopt these technologies​ (DataReportal – Global Digital Insights)​.
  • Role of Private Companies: Companies like MerPay and PayPay are leading campaigns to promote mobile payments. These campaigns include cashback offers and rewards to incentivize consumers to use digital payments​ (DataReportal – Global Digital Insights)​.


Germany 🇩🇪

Tradition and transition in payments


Current state of payments in Germany

Germany presents a mix of cash and digital payments. In 2023, cash payments accounted for about 40% of consumer transactions, while debit and credit cards made up 55%​ (PwC)​.


Specific challenges in digital payment adoption

  • Mistrust of Digital Payments: German consumers are concerned about security and data privacy. This hinders the adoption of digital payments.
  • Importance of Data Protection: The emphasis on data protection in Germany reinforces the reluctance to adopt digital payment solutions perceived as intrusive​ (PwC)​.

Opportunities and solutions for digital payments

  • Initiatives to Build Trust: Awareness campaigns about the security of digital payments can help build consumer trust. Support from European regulations, like PSD2, can also enhance the security of online payments.
  • Modernization of Payment Infrastructure: Introducing real-time payment systems, such as the EU’s Instant Payment Scheme, can encourage the adoption of digital payments by offering a fast and secure alternative to cash​ (PwC)​.


Brazil 🇧🇷

Rapid adoption of digital payments


Current State of Payments in Brazil

Brazil is a global leader in adopting digital payments. In 2023, digital payments accounted for about 75% of transactions, with growing adoption of instant payment systems like PIX​ (McKinsey & Company)​.


Specific challenges in digital payment adoption

  • Economic Inequalities and Limited Technology Access: Economic disparities mean not all regions have equal access to digital technologies. This can limit adoption in rural areas and low-income communities.
  • Uneven Infrastructure: While major cities have robust infrastructure, rural areas often lack the necessary connectivity for digital payments​ (McKinsey & Company)​.

Opportunities and solutions for digital payments

  • Government Programs for Financial Inclusion: The Brazilian government supports initiatives to expand access to digital financial services. PIX, for example, is designed to be accessible to all Brazilians, even those without traditional bank accounts.
  • Fintech Innovations: Brazilian fintech companies constantly innovate to offer accessible and practical payment solutions. These innovations include mobile apps and QR code payment solutions, widely adopted by small businesses and consumers​ (McKinsey & Company)​.


Mexico 🇲🇽

A market in transition to digital payment


Current state of payments in Mexico

Mexico is a mixed market with high cash usage but growing digital payment adoption. In 2023, cash payments still accounted for about 70% of consumer transactions​ (Global Payments Report 2024 | Worldpay)​.


Specific challenges in digital payment adoption

  • Large Unbanked Population: A significant portion of the Mexican population lacks access to traditional banking services. This limits the adoption of digital payments.
  • Limited Access to Digital Technologies: Digital infrastructure is uneven, with significant differences between urban and rural areas​.

Opportunities and solutions for digital payments

  • Financial Inclusion Initiatives: The Mexican government and private companies are working together to improve access to financial services. Solutions include mobile wallets and microfinance programs.
  • Expansion of Digital Payment Networks: Payment companies are developing networks to expand access to digital payments. This includes initiatives to improve connectivity in rural and marginalized communities.



The transition from cash to digital payments varies by country, influenced by cultural, economic, and technological factors. Japan and Germany show how deeply rooted traditions can slow adoption, while Brazil and Mexico illustrate the impact of technological innovations and government initiatives. Understanding and adapting strategies to local contexts are crucial for successful transitions. Ultimately, moving towards digital payments offers significant benefits in terms of convenience, security, and financial inclusion.

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