Will cash survive when there are so many easier ways to pay?
Nowadays where time and convenience take priority, being able to just wave a card at a reader rather than carrying cash seems far preferable.
Near-field communication, (NFC) technology, has enabled card transactions to be reduced to a simple, one note ‘beep’, easily eclipsing the convenience of cash for purchases under £30.
Contactless payments are rapidly becoming the norm, for example in Sweden only just over 2% of transactions are conducted in cash today, and it’s estimated that by 2020 this figure could drop even further to 0.5%. It is also claimed of all the purchases made in Swedish shops, barely 20% of the transactions are paid for with cash.
While Sweden is leading the way and innovating alternative payment options, the rest of the world isn’t too far behind. The ‘tap-and-go’ form of payment has been widely accepted throughout London, with Transport for London banning cash payments on buses in 2014 as only one example of physical money being phased out.
Alongside this, Google have recently released their own form of mobile payment for Android phones, rivalling the iPhone’s Apple Pay which has already been available for two years. This means that two of the most widely used mobile operating systems now allow users to use their phones for contactless payment and waive the £30 limit that contactless cards adhere to in the UK.
The benefits of going cashless go far beyond personal convenience bringing wider benefits to the general economy. A study from a Monetary Authority of Singapore study has suggested that the country would save 0.5% of GDP a year in social costs by going cashless, equating to a cool £2 billion a year. In India the cost of cash management is a huge 3% of GDP.
No wonder then that so many banks, businesses and politicians are ardent advocates for electronic payments in the war on cash, with giants VISA in 2017 offering selected retailers in the US $10,000 to upgrade payment systems and stop accepting cash altogether.
A side benefit of eradicating cash would be more effective tax collection, due to the money laundering avenues that cash offers ceasing to exist, and it has been argued by the Institute and Faculty of Actuaries that going cashless would result in an extra tax revenue collection of over £6bn in the UK through plugging the hidden economy loophole.
‘The Macroeconomics of De-Cashing’, an IMF report, explains how significant economic growth resulting from constraining the supply of cash can be achieved. The logic assumes that people will deposit their cash with a financial institution, who in turn will have a larger balance sheet to engage in more lending, thus facilitating economic growth.
The biggest proportion of the average person’s expenditure (travel, rent and food) is easily accessible without hard cash. The introduction of the Payment Service Directive (PSD2), has seen a flourish of payment management and budgeting apps come to market to enable consumers to maintain control of their finances, something that isn’t possible when withdrawing cash, unless done manually.
This all sounds great in an ideal world but what happens when the internet goes down, or as in the recent instances of the difficulties experienced by Visa there is a problem? Then again what about folk living in areas where connectivity is an issue?
Every card transaction will leave a trail and while a boon to law enforcement agencies and marketeers, is this what we want and how can we be sure that our data will be secure?
Another issue comes from the intangible elements of contactless - individuals can be faced with high fees and charges when using cards and accessing overdraft facilities, with bank terms and conditions often misleading. This is not possible with cash – you can’t spend more than what is in your wallet.
Concern points to vulnerable groups such as the elderly who may require digital training to enable them to participate in the cashless society without being anxious or at risk of being scammed, just under 70% of those 16-74 use online banking in the UK.
Homeless people or those with no fixed address would struggle to open a bank account and would have to adapt. Charities would also suffer; whilst the Church of England and Big Issue representatives have recently started to take card donations and payments, smaller, more cash strapped organisations may not be able to afford the tech needed.
Contactless technology itself is not without fault – over the last year, there has been an alarming 51% rise in fraud taking place on lost and stolen cards. The rise of ‘digital pickpockets’ is also concerning, with 80% of card users worried about identity theft. It is also difficult to understand who you paid, given trading names often appear on statements differently. Trying to reconcile what you spent, where, and whether the amount was as it should be can be tricky.
The final factor is trust – payment service providers need the unwavering confidence of their consumer base to operate a cashless society.
While it would seem that card use is one the rise, cash is here to stay, a fact recognised by the bank as it issues the new longer lasting polymer note and the “harder to forge” £1 coins.