For ease, efficiency and convenience, people are moving away from using the traditional cash method to make quick payments through contactless technology. But does this upsurge in ‘tap and go’ payments make cash obsolete?
UnSUBURBIA has looked at whether a cashless society is a feasible concept, offering a case for either side of the debate.
Contactless is the new king
Since its inception in 2007, contactless technology has revolutionised the way we make our everyday payments, heralding the biggest change in our monetary behaviour since Decimal Day in 1971.
Before contactless, cash was king. A little over 60 per cent of all the UK’s transactions were made using cash in 2007 – 10 years later this had fallen by 34 per cent, according to figures in 2017.
In December 2018, there were 691 million contactless card transactions in the UK, a 27.5 per cent increase from 542 million in the same month the previous year – that’s 43.1 per cent of all debit and credit card transaction of that month (1.6 billion). Taking into account the maximum spend on contactless payments is £30, it’s a huge proportion of our everyday payments.
The British Retail Consortium believes that this is due to a shift in habits, with consumers now using contactless payments for much smaller value costs. The days of scraping together loose change for a pint of milk or a loaf of bread are behind us – we’re happy to tap and go for our essentials.
Think about it though – for ease, convenience and efficiency, contactless absolutely trumps using cash. The stress of searching high and low across the house or turning every pocket out of every pair of trousers or every bag you own to find that extra 50p is gone. All that’s required is a simple tap of a card and your payment is done. No hassle.
But could this move towards contactless call time on some of the coins in circulation? Discussions have already taken place with the Treasury and the Bank of England, questioning whether the smaller value coins and higher value notes have a place in modern society. Figures suggest that 60 per cent of UK’s 1p and 2p coins are used once before being put into a savings jar or discarded altogether, whilst the validity of £50 notes has been questioned due to money laundering and tax evasion.
The use of cash isn’t being supported either by the closure of cash machines. Recent figures suggested that these ‘holes in the wall’ are disappearing at a rate of 300 a month due to lack of demand. And though there are still approximately 70,000 cash machines in operation, expect to see this closure rate increase further as more people buy into the contactless concept.
Innovation leading the charge for cashless payments
As we adopt a contactless mindset, technology is also taking steps to become more efficient for cashless payments. If tapping your card has become too arduous and time consuming (the banes of first-world problems, as we’d politely call it), the smartphone and smartwatch industries are developing ways to enable even speedier payments.
The most prominent of these is Apple Pay, which allows users to simply save their bank card details onto their iPhone or iWatch and tap it against the contactless section on any chip and pin pad. Within the first three days of its release, Apple announced over 1 million cards had been registered, and latest figures found that Apple Pay has 253 million registered users.
But it isn’t just Apple Pay that’s giving us even quicker payments. PayPal, the original cashless payment giant, and Google Pay also allow users to simply tap their smartphone for a payment.
The first cashless economy
One of the leaders in promoting a cashless society is Sweden – ironically, the Swedes were the first country in Europe to introduce banknotes back in 1661, and now look set to be the first in the world to remove them from circulation. A renowned early adopter of new technologies, the country’s aim is to become a cashless nation by 2023, but this move won’t be a culture shock to its natives.
Sweden has begun to heavily discourage the use of cash payments, placing an emphasis on a ‘card-only’ approach. The country feels this method can help improve efficiencies, reduce the risk of robberies and make civilians feel safer. Cash now only accounts for one per cent of transactions in the country, and over 99 per cent of vendors and retailers accept debit cards, whilst stores are hanging “no cash payment” signs in their windows. Last figures show that only 13 per cent of Swedes are reliant on using cash.
Sweden’s banks are supporting this move too. In 2012, the six largest banks collaborated to create Swish – an instantaneous mobile payment platform to help customers make electronic payments easier. Rather than handing over cash to a vendor, you simply send the money through an application on your smartphone.
Reports also suggest that 80 percent of all Sweden’s retail transactions have been conducted electronically – a figure similar in Finland, Denmark, Norway and Iceland. This move towards cashless payments is part of a wider Nordic trend.
Steps towards a cashless economy has been further accelerated by Sweden’s Central Bank, which plans to introduce its own digital currency. A pilot scheme for the e-Krona is underway, and the bank hopes for the currency to be country-wide by 2021. The idea of having an economy completely dependant of digital technology seems an almost-utopian concept, yet it’s closer than we think.
This movement towards cashless transactions isn’t being embraced by all countries. Contrasting the Nordic mindset of not using cash, countries in the south of Europe, such as Greece and Italy, are still heavily reliant on a cash economy, with some establishments having a ‘cash only’ policy.
The appetite for a cashless society in the United States appears to be desisting too. New York City has recently introduced legislation that would prohibit retail establishments from turning away cash payments, following Chicago, San Francisco and Washington D.C. (to name a few) in doing so. Those NYC-based business who operate with card only payments could face a $500 fine for every violation.
How going cashless could leave society in red
Yet with the benefits of cashless transactions, the impact it could have on society has to be explored. Not everyone and every company will be bought into the idea – some perhaps out stubbornness, favouring a varied option of payments, but for others the need for cash may be a necessity.
A report by the Access To Cash Review looked into the impact of the UK adopting a cashless economy and the potential damage it could cause to society. According to the findings, eight million people (17 per cent of the population) said cash is a necessity, whilst other reports indicate that over half the population would find living without cash ‘problematic’.
The main reason for not adopting a cashless society is the potential vulnerability it could bring to large amounts of people. For some, the dependence on cash is massive. Whether it’s from using cash to help budget and keep them out of debt, or older generations who could run the risk of being scammed if their finances were digitalised, a cashless economy could damage our society. For those who use cash payments to keep their accounts in the black, a cashless society discriminates against their practice – this is one of the main reasons why New York City introduce its legislation to fine non-cash taking establishments.
Rural areas too could be at risk from having no cash in circulation, especially when connectivity is poor. Without mobile data or broadband, how will residents in these areas pay for everyday items? It isn’t a feasible concept.
The idea of all money being digital almost gamifies the economy. Without the prospect of having a ‘physical’ wage, the numbers on a bank balance could become fictional to some and debt levels within the UK could hastily rise. People would spend what they haven’t got, as they wouldn’t know what they had in the first place.
The subject of a cashless society is one of great interest and intrigue, however it must be tackled in a pragmatic way to meet the needs of everyone in the UK.
On the one hand, think how many tasks we can now undertake that require payment, yet we never physically pass over any money. We order our taxis through an app which takes the money out of our bank accounts, our takeaway food is pre-paid for by the time it gets to our front doors and even sending others money is done through a few simple clicks of a banking app. And that’s without mentioning our widespread use of contactless – as a society, we’re only using cash when we absolutely have to, it’s just not our preferred choice.
But a cashless society wouldn’t work for everyone. We have a duty of care to protect people, and the risk to vulnerable people, including those with financial problems, increases massively if their money just becomes a number on a screen. With the right innovation and regulations in place, a cashless economy works on paper, but in terms of practicality, the introduction of a cashless concept in Sweden acts as the perfect concept.