Plastic more popular than cash?

So, it’s official, for the first time plastic is more popular than cash.

It’s been on the cards for a while - the inexhaustible rise in the use of debit and credit cards to pay for goods and services at the expense of cash.

There is no doubt faster payments have helped facilitate this alongside the fact that consumers no longer feel awkward about producing a debit card to pay for some bread, milk and the local paper. Years ago, there would have been a collective groan if you’d have produced a plastic card at the checkout for such purchases, but today, it’s a common sight.

So what are the figures?

Spending on debit cards reached £272bn in the 12 months to October 2010, figures from the UK Payments Council show. Spending on cash stood at £269bn over the same period.

Spending on credit cards remained steady, but there was a further decline in the number of cheques written.

There were 1.6 million more transactions on debit cards every day between July and September compared with the same three months a year earlier. The amount spent rose by 11%.

Technology is bound is play a further role in the demise of cash. Whilst some people find carrying cash a hassle, the increasing use of contactless payments utilising ‘tap and go’ technology, is generally recognised as the future of payments, further accelerating non-cash payments. According to the UK Cards Association, in the UK approximately 9.6 million credit and debit cards have been issued with contactless functionality (July 2010) and there are 27,000 contactless payment terminals (July 2010), so this technology is gaining momentum.

We also have the prospect of contactless technology being placed in everyday items such as mobile phones. This convergence of applications will happen because it’s convenient and consumers generally like anything that makes their lives easier.

If like me, you also object to paying £1.50 to get your own cash out of an ATM, you’ll be quite happy to embrace this new technology and the demise of cash.

Is there a downside of only using plastic to pay for goods and services? Well, it makes us more reliant on one form of payment and if we lose or have our cards stolen, we could be left without any access to cash. Failure to cancel any lost or stolen credit card or debit cards could also see fraudsters hijack and empty our accounts.

Some people are also concerned that contactless card payment leaves us open to ‘tap and go’ fraud as Chip and PIN verification is not required on items under £15, although a PIN will be needed to reset the contactless card once a £50 limit is reached.

Whatever the pros and cons of such technology, it’s clear consumers today feel comfortable using plastic to pay for everyday transactions. The question we have to ask ourselves is whether cash will ever be completely phased out, or whether it will always have a place in society?

My bet is on cash going the same way as the soon-to-be retired cheque; well eventually that is!