Ignoring the hype in the move towards a cashless society

There’s been a lot of talk recently about the idea of ‘cashless society’ and numerous journalists seem to be jumping on the bandwagon in a bid to write a colourful story. This usually involves testing out the concept by living without cash for a week or so, throwing in a few humorous anecdotes along the way – no money for the tooth fairy, no money for a trolley at Sainsbury’s – and then all too quickly concluding that it’s a bit of a harebrained idea and won’t fly with the British public.

However, what these features don’t take into account is: firstly, there are already many developments that have been made in the area of e-money that show we’re actually already getting there (look at Barclays contactless and London’s Oyster cards); secondly, no one is advocating the removal of cash from society overnight and finally, cash is expensive and moving towards card and other forms of payment makes more economic sense.

For the consumer, it’s win-win. Coins and notes won’t disappear overnight, but for those who are increasingly keen to use alternative ways of paying and managing their money because they judge them to be equally - if not more - convenient than cash, and also safer, there are now plenty of new technologies, especially coming through devices such as the mobile phone.
Recent developments by Alcatel Lucent, for example, show that there is demand among mobile operators to be able to offer their customers e-money services through their mobile. And why not? Over six million people in Africa are already paying for goods on their mobiles, proving that electronic payment systems can be more reliable and secure than cash. In addition, it is technological developments such as these on which the Payments Council has based its predictions about decreasing cash usage over the next five years.

And what about the cost of cash? A report by the European Commission earlier this year estimated that the total cost to society of all payment methods including cash, cheques and payment cards was 2 – 3 per cent of GDP. To put that figure into context, the entire EU agricultural sector accounts for 2.1 per cent of GDP, which essentially means we spend more on payments than we produce on food.
When broken down, the EC estimates that cash accounts for more than two-thirds of that figure and McKinsey, the consultants, have gone as far as putting a number on it. They have estimated that society spends about £180 a year per person to cover the cost of cash and the ‘real’ cost of cash to a retailer is 1.3 per cent of the purchase price.

The move towards a cashless society is just that. A move. It won’t happen overnight and we’ll still need pounds and pence for the tooth fairy, but the ball is already rolling and millions of people are already benefitting from the added security and convenience these new payment methods can bring.