The cost of cash - for business, the environment and society.

Nothing in life is free – certainly not money. You can argue that all forms of payment have a cost associated with them in one way or another but unlike many of the new payment propositions out there, you still know where you stand with cash.

The ever-increasing array of payment technologies on offer can easily lead to confusion for both the consumer and for business’s who need to manage operational costs. In 2015 we saw a wave of new mobile payment innovations, including Apple Pay, Samsung Pay and Google’s Android Pay app. Apple Pay, like debit and credit cards, requires retailers to pay interchange fees of anywhere between 1.5 to 4 percent, which legally can be passed to the consumer in certain geographical areas. Worryingly, a 2014 study by Ofcom suggests that while payments innovations may offer lower transaction costs in the short term, retailers could become locked into expensive fee structures if acceptance of a particular payments innovation becomes a ‘must have’ for consumers. With the inevitable being a reflection of these costs seen within the price of consumer goods, American retailers Wal-Mart, Best Buy, Lowe’s, and Dunkin’ Donuts have formed a coalition and plan to launch their own wireless payment network called CurrentC.  

And what of the environmental cost of payments? 

Mining crypto-currency such as bitcoin is far from free - nor does it seem to be a particularly eco-friendly form of currency generation, when the power consumption of the data centres and mining operations are considered. A report in the Economist in January 2015 estimated that the annual combined global electricity consumption for mining bitcoin could be 1.46 terawatt-hours per year—the consumption of about 135,000 average American homes.

To reduce the environmental costs of physical currency significantly Australia and Canada use polymer-based notes, with the United Kingdom poised to go polymer in September 2016.

CIT vans moving cash between the store, branch and central bank does have a negative impact on the environment. This issue isn't just about cash transportation obviously but by recycling cash in the store or branch - like consuming locally grown foods and goods - we can reduce the carbon footprint of cash.

Cash recycling solutions keep cash moving throughout the bank branch or retail outlet; either to other compatible devices, such as an ATM or other cash tills, or to the back office for further preparation, or to the vault for storage; reducing the need and cost of transfers to and from central cash processing centres.

And the cost to society?

In a recent Finextra blog Bo Harald argues the case for eliminating cash from society all together (Good for society at large, 24 January 2016). He suggests that robbery, counterfeiting, black economy, prostitution, drug dealing, arms dealing, terrorism and money laundering in some way results from society’s continuing use of cash.

It's disingenuous to lay these issues all on cash. Prostitution is described euphemistically as “the world's oldest profession” – the first records suggesting it was happening well before free society’s adoption of cash. Cash is anonymous but so too is Bitcoin, and eliminating cash won't stop these social ills. The Hatton Garden robbery wasn't targeting banknotes and criminals will always find ways of transacting illegally - the web is full of false payment systems and anonymous names. 2014 and 2015 saw a spate of data breaches and electronic fraud that make the counterfeiting of notes look positively amateur. A global study conducted by Ponemon Institute found over half the IT security practitioners surveyed said their companies suffered a breach involving payment data an average of four times in past two years.

However the use of high value notes is linked to criminal behaviour and is one reason the UK has banned the use of the €500 note and two years before that, the similarly high-value Canadian $1,000 bill was destroyed on advice from law enforcement agencies.

In times of crisis; flood, earthquake, mass power outage for example, cash doesn't need charging or a network connection, it remains as simple to use as always: fast, effective, always accepted, low cost and low risk. To quote Telegraph financial columnist Matthew Lynn “No matter how smart our mobiles get, or how much data can be loaded on to a debit card, a banknote is an incredibly efficient way to handle small transactions. It is costless, immediate, flexible, no one ever needs a password, it can’t be hacked, and the system doesn’t ever crash.”