Our colleagues at SRM Europe in London recently shared with us how fewer people are using cash to pay for goods and services. In the United Kingdom the thought of a cashless society is not necessarily a welcomed development for some.
As noted in the previous blog, cards in the UK are continuing to be adopted by more and more consumers because they are more convenient and, in many cases, safer than carrying cash. Due to these benefits the use of payment cards to purchase goods and services will continue to climb, However, some feel that this progression toward a cashless society is everything but harmless. Here are their reasons why.
Reason 1: Card payments infrastructure is not wholly reliable and often breaks down:
This is true up to a point – but it is rare. This can be because of internet/telephone line connectivity, or problems at the merchant, acquirer, banks or processor. Card payment networks in the UK, however, are highly available, as are the intermediaries within the payments value chain. However, on rare occasions, there are network glitches, e.g. the recent issue with the VISA network.
It is clear that the global economy depends on the payments infrastructure to facilitate the interaction between consumers and merchants. This dependency is growing and though there is no guarantee to ensure 100 percent availability of the payments system, technology does exist that can take payments ‘offline’ and upload transactions in batches later, as happens in some of our larger retailers today. Nonetheless, for smaller retailers, this may create more risk than they are willing to take. Given the number of retailers in this segment, this is something that requires a workable solution soon as cash reliance reduces.
Reason 2: Paying by cash retains the consumer’s anonymity:
Some say that cash allows the consumer to be anonymous, providing a sense of security and protecting their personal details, e.g., their preferences, etc. Let’s think about this logic for a moment. What are consumers buying that requires this anonymity? Typically, most cash transactions are less than £10, usually groceries, papers and magazines. Is privacy really needed in these cases? After all, consider how many shops track customers through other means, such as CCTV and store loyalty cards.
Conversely, when banks utilise the data they acquire properly, consumers stand to benefit through improved fraud protection and offers that are more accurately tailored to the consumer – for example, Starling Bank’s deal with Flux. In addition, reducing cash dependency means that the proceeds of crime and tax evasion are significantly reduced. The black economy could be largely neutered in a cashless society, perhaps delivering increased revenue for the exchequer, leading to a positive impact for the economy and taxpayers.
Reason 3: Card and contactless payments make it difficult for people to track spending:
Once upon a time, this would be very true. By starting the week with cash in your wallet, it is possible to track spending by saving receipts. With our busy lives today, this has become a chore. Besides, today’s technology has made this process easier and much more valuable to consumers.
For example, Monzo’s banking infrastructure immediately reports each transaction and updates the user’s app. Santander’s recent update to its app now shows ‘pending’ transactions for credit card spend. The clarity and depth from many of these apps make them powerful tools for consumers to track and fully analyse their spending by providing information that can change behaviour and enable greater opportunity for better control of one’s finances.
Reason 4: Reducing access to cash excludes groups of society:
Here we are focusing on the impact less cash in circulation has on rural villages, small towns and the unbanked and underbanked. Let’s take each one at a time. It is a well-known fact that the ATM infrastructure in rural villages is limited. If there’s no ATM in a rural village, then consumers and retailers will need to rely more heavily on card payments because it is unlikely customers will be prepared with enough cash for all eventualities.
In addition, with banks vacating villages, retailers have fewer options for easily depositing cash takings. Card payments are one way to address this challenge and some merchants are using services such as PayPoint to offer cashback to customers in the absence of free-to-use ATMs. Could this be a wider solution to falling numbers of ATMs, perhaps through partnership with the LINK Scheme?
Now that we have identified the potential benefits and possible harm done to some by a cashless society, in the next blog we will step back and consider whether which side is most likely to the standard in the future.