#AskAFuturist: When will we see the end of cash?

"What year doth dosh disappear forever?" This was the precise question asked by Sandy Lindsay MBE on Twitter in response to my call for questions to #AskAFuturist. So, when will we see the end of cash? Or will we always keep a little wonga in our pockets?The decline of cash as a form of payment has been precipitous. At the end of the 2000s, cash still represented around 60% of all payments made. By the end of the 2010s it was down to around 40%. The Access to Cash Review run by former financial ombudsman Natalie Ceeney suggested that at the current rate of decline, cash use would end as soon as 2026.This is unlikely. As the report notes, the people making the shift from cash to card today are those who can. Those with the financial stability, confidence in technology, and access to banking to do so. This represents maybe 80% of the population, so cash use will continue its steep decline. But moving to cards is either impractical or impossible for the last 20% or so. For a variety of reasons - poverty, disability, financial insecurity - this group can't or won't access digital banking.Eventually most of these people will make the switch, supported through a combination of education, better infrastructure (e.g. the last remaining all cash shops taking cards or ending their excess charges and minimum payment limits), and new services designed specifically to support them. But the rate of decline of cash will naturally slow down as we reach the point where more work is required to help people to transition.

End of cash: Difficult transition

The transition away from cash won't be smooth or clean. As we use less and less cash, so there is less reason for shops and banks to support it. Bank branches and cash points are closing. More and more shops and cafes are card only, having recognised the real costs of handling cash. Those people who don't have access to alternatives are increasingly marginalised. Eventually the banks are likely to be allowed to co-operate to maintain some form of basic service while cash usage drops to just a few percent of transactions.But I don't believe it will go away altogether. Back in 2011 when trialling a watch with integrated contactless payment technology, I questioned whether I would still be carrying coins in my pocket in five years. I was right. It has been a few years since I have regularly carried cash, except for maybe a single note for emergencies.Cash will remain, albeit in limited usage and in very small volumes, for the foreseeable future. It has too much power as a token, or an icon, for it to be eliminated altogether. My prediction is that we get down to 20% of transactions by the middle of this decade, and down to maybe 5% by the middle of the next. But there or thereabouts cash remains for at least a couple of decades after that. 

Future Payments: Informed implicit consent

I spent a couple of hours in the studio this week talking to the BBC about the future of cash, on the 50th anniversary of decimalisation. It’s not a very bright future for our plastic notes and shiny coins. Usage is declining at an incredible rate, from almost two thirds of transactions 12 years ago to less than 40% now. The prediction is that by the early 2020s, it will be used for fewer than one in five transactions.This shouldn’t surprise anyone. Cash is an explicitly high-friction technology that becomes ever less convenient the less it is used. If there’s been one thing clear about shifts in consumer behaviour over the last few years, it is that we will do anything to minimise friction. Hence the popularity of contactless payments and pay-by-phone, and the even lower friction of automated payments for services like Uber.The result is that we have taken out less cash, which means more bank branches and ATMs close. This makes it even harder to take out cash, further increasing the friction and accelerating the cycle. Once we get down to the point that cash is used for just 20% of payments, I think the rate of decline will accelerate further. Cash won’t disappear altogether though, it will just be an occasional item rather than permanent pocket contents.

Business support

Apparently some cafes and shops have already stopped taking cash, having woken up to the fact that handling it is expensive — probably more so than taking cards. Which makes the refusal to take cards, or arbitrary card payment charges, look even more absurd. This cannot last for long.Rather, consumers and businesses alike will look for increasingly low-friction forms of payment, and business models that support that. Paypal’s experiments with ‘pay by face’ is one interesting example: buy a round of beers on your phone and collect them at the bar where the server recognises your face from a screen. Amazon’s Go store is another.The risk here is that it becomes too easy to spend money without awareness of how you’re spending it. But the Open Banking arrangements seem to have addressed that. Apps can now give you a richer than ever analysis of your spending, and trigger alerts when you’re spending too much. But only if you use your card of course. Cash in your pocket may give you a feeling of control, but in my experience, it generally just burns a hole.

Informed implicit consent

The default model for payments in the future will be characterised by this ‘informed, implicit consent’. We will choose to buy something and we will be billed for it, with the minimum possible interaction to achieve a secure transaction. And our technology will ensure we are well informed about both our ability to pay, and retrospectively, what we have spent. Whether this works to improve our financial literacy and reliance on credit remains to be seen.