Our colleagues at SRM Europe in London recently shared with us how fewer people are using cash to pay for goods and service and discussed what critics of a cashless society are saying. In Great Britain, and perhaps the rest of the world, cash holds a unique bond with consumers that may be hard to give up.
The use of cash has served the UK for centuries. It has been a staple of commerce in merchant-to-consumer and merchant-to-merchant financial transactions that extends well beyond these shores. It holds sentimental value to many generations of people, and some of these people would miss cash – miss the feel of it, the smell, the pride of handing over money for the purchase of an item saved for over months or years, and receipt of change to continue that saving process.
However, progress throughout the ages has resulted in many changes, and this is no different. The move to digital transactions is already making many facets of our lives easier, and the increase of electronic or digital payments will inevitably continue to reduce the need for cash. Going forward, one key requirement will be a wholesale removal of the ‘minimum spend’ for card payments. In time, people will wonder what the fuss was about as the convenience and speed of payment and personal security ensures card payments continue to grow.
Maybe Cashless Isn’t So Bad
Surprisingly, western societies – often the more technologically advanced – have been slow to adopt technology that supports the move to a cashless environment. The failure of digital wallets to take off in the US is one such example. Meanwhile, newer economies – India being one already mentioned and China another example – are quickly becoming cashless by leapfrogging many of the intermediary stages that other societies have migrated through.
Personal habits may be the most telling when it comes to the move from cash to cards. Long gone are the days when large purchases (even medium-sized ones) were paid for in cash. When was the last time you used cash and for what purpose? Asking that question to anyone you know may yield some of the following answers: newspaper, pint of milk, coffee, a few items for tonight’s dinner – or, at the higher end, a taxi. And, depending on their chosen retailer, most of these could’ve been paid via a loyalty card, app, mobile wallet or debit/credit card, including services by tradesman such as window cleaners, electricians etc. This isn’t just about the consumer; it is also about merchants seeking simple transaction solutions. Options such as iZettle, Square and Payleven offer tailored solutions from POS terminals to mobile phone ‘dongles’.
The opportunity to have a lighter wallet, less change washing about in the bottom of wardrobes and much more detailed analysis of spending patterns are other factors making the use of cards over cash more compelling to many. In addition, progress in financial inclusion is making it much easier for all of society to participate through pre-paid cards, ‘basic’ bank accounts and even specialist providers.
The advantages of cards and digital transactions continue to tip the balance. The introduction of Universal Credit reduces benefit fraud through traceable transactions. The advent of Open Banking and the growth of fintech providers are transforming financial services at all levels, including the introduction of intelligent automation to service customers and reduce the impact of fraud by elimination.
A completely cashless society is not imminent, however. The industry continues to closely monitor payments, especially for communities still seen as vulnerable to the reduction of cash in circulation. Yet, significant change will occur over the next 5-10 years; based on the current rate of change, cash usage is projected to be around 5% of all transactions.
It’s nothing to be frightened of. We must move on for society to progress and our economy to continue to grow, and it won’t be as bad as some fear. By increasing adoption across merchants, banks and payment schemes, the consumer will benefit from the attributes they seek most when conducting their lives – simplicity, security, convenience and ultimately, all-around happiness.