First and foremost, on behalf of all of us at MasterCard, I wish all your dreams come true in the Year of the Rabbit. During my frequent international travel, I have learned that cash is still king even in some of the most developed markets. In Singapore, I had to let people go in front of me in the line before I found a cab driver that could accept a credit card. In Hong Kong, I was embarrassed to find out that I did not have any Hong Kong Dollars when my cab got to the airport. The driver would not take a credit card, but fortunately he would accept Renminbi, which I had.

It is safe to assume that cash will continue to remain a fact of life for all our markets in Greater China in 2011. Related data shows that cash still accounts for nearly 60-70% of retail spend. In Hong Kong and Taiwan, cash in around 50%. However, the costs of cash to an economy are enormous. First there are the direct handling costs. The bulk of credible research on this subject has been conducted in Europe because of issues raised during the Payment Services Directive initiated by the European Commission. A report for the current year by the European Commission earlier this year estimated that the total cost to society of all payment methods including cash, checks, payment cards and ACH was 2 – 3% of GDP, with cash payments accounting for two-thirds of it. The 2008 McKinsey Budget Report points out that the EU has to spend 60-90 billion Euros in handling cash transactions and for banks the cost is 28 billion Euros. That evens out into per capita household spending of 250 Euros (180 Pound Sterling) according to the report. The "real" cost of cash to a retailer is 1.3% of the purchase price. A detailed cost analysis report published by a retail banking research institute based on consumption behaviors states that the total cost of retail transactions made up 1.17% of GDP and that of cash transactions was 0.6% (about 129.5 Euro per person). Multiple studies consistently suggest a range of 0.6% to 1.5% of GDP as the direct handling costs of cash payments.

Then there are the indirect social costs which are far larger and more serious. The 2010 research report The Shadow Economy in Europe published by A.T. Kearney estimates that at least 2.1 trillion Euros or 20% of European GDP is in grey economy (corporate and personal cash transactions made to evade tax payments). And, among EU countries, grey economies accounted for about 8-30% of their GDP.

For countries where electronic transactions are more frequent, grey economies tend to account for a smaller percentage of their GDP. High cash usage and grey economy breed tax evasion, crime (e.g., money laundering, fraud) and corruption. In 2011, we will continue to grow MasterCard’s business as an electronic payment company that will have a presence in every form of cashless transaction. We hope to join hands with all of our partners to prosper together by growing against cash!