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Cash is no longer king. One in seven of the UK population never carries cash, and more people in Britain now make payments electronically than use notes and coins. It is a nation ever more reliant on contactless cards, digital wallets and mobile payments. In London, almost half of payments under £30 are now contactless as tube journeys, lunchtime sandwiches and even church donations are routinely performed using “tap-and-go” technology.
But we could be further away than we think from the utopian vision of a truly cashless society. Reports of the death of cash have been heard before: in 1996, for instance, a much-publicised trial in Swindon to encourage use of payment cards to replace coins for small transactions flopped due to minimal take-up by the town’s residents.
Technology: the tipping point?
Today, though, there are 100 million contactless cards in circulation in the UK, enabling faster payments and instantaneous transactions. Add in the growing ubiquity of newer digital payment options, and we may finally be witnessing the slow demise of physical money. Cash is not cheap to maintain either: last year, it cost £70 million to introduce the new plastic £5 note into circulation. There may come a time in the not-too-distant future when this outlay to maintain our banknotes is deemed superfluous.
“Although a cashless society can’t be enforced, it’s becoming unstoppable,” says Amir Nabi, Chief Operating Officer at Dolfin. “I do think we are now at that tipping point.”
Technology is the main driver of this change. People are becoming more comfortable using the array of digital payment solutions available. And the way we spend money is changing, too: “chip and pin” is beginning to look outdated as services like Apple Pay, PayPal and Google Wallet muscle in. Alternative systems – such as the cryptocurrency Bitcoin – are also gaining momentum.
Depending on data
Millennial consumers have grown up with technology around them. This younger generation typically do banking on their mobiles and have no reason to withdraw cash from an ATM. They view currency as data: if it’s in a digital form, it’s safe, cheap and convenient. Older generations, however, still prefer the simplicity of cash. It may be a habit, but it’s also tangible and there is an emotional connection.
“Traditional ways of doing things are dramatically changing,” says Nabi. “Airbnb and Uber prove this. In the next decade, we may almost have a de facto cashless society. Some generational biases won’t be an issue any more. Technology will evolve with more developments in the digital payment space. Right now, it’s e-wallets and mobile, but soon it will be watches and wristbands. And in five years, using fingerprints to make payments may very well be the norm.
“Cash won’t necessarily be finished,” he says. “It will remain as one of these payment options, but will play an increasingly minor part.”
A cashless world
The UK has yet to travel as far down the road towards a cashless economy as some of its near neighbours – or even more distant countries. In Sweden, for instance, cash transactions make up less than 2% of all payments and retailers are legally entitled to refuse notes and coins. Denmark’s central bank has stopped printing fresh notes. In Arnhem in the Netherlands, you can use Bitcoin to pay for a huge range of products and services, from a bunch of roses to a root canal.
Kenya’s successful mobile payment system, M-Pesa, facilitates cashless transactions without the need for a bank – a huge step forward for the 2.5 billion people around the world who currently don’t have access to a bank account.
There are, however, drawbacks to a cashless society. Many people cite concerns about privacy, fearing that Big Brother may be monitoring their spending activity. Databases can be hacked and personal information stolen. Then there is cybercrime.
“Cybercrime is potentially the biggest threat, with a lot of episodes recently,” says Nabi. “With cash, there is a limited amount you can steal and carry away. In this new world, any loss could be unlimited and its impact felt on a massive scale. But a whole industry has been created to tackle the issue. Hopefully, it will be managed in the same way that you stop someone robbing a bank today.”
Despite this, it is not beyond the realms of possibility that Britain could one day soon ditch the banknote. It is 50 years since the first ATM appeared on a UK high street – what are the odds of these machines lasting another half century?