Cash isn’t dead (just yet)
After a quiet couple of weeks on the media front, I find myself speaking to two national broadcasters and an industry title this week. On three different topics. The first was a chat with Tony Livesey on BBC 5Live about the death of cash, following the discussion in parliament about legislation to ensure its continued support by retailers.
Future Money
I was primarily there to talk about what the future of money might look like, and covered the usual ground. Cards and phones are just a store of information and one of the factors of authentication. There are lots of ways we can do that, and as long as you have a couple of different factors - e.g. something you are, something you know, something you have etc - then there’s no reason we will continue to carry around bits of plastic.
Sure you can stick a chip in yourself if you really want to call yourself a cyborg - or if you’re just less squeamish than me. But that’s really not a mass market solution. More likely I think that we continue to use some aspect of our most common digital devices, perhaps combined with some biometrics. I actually like the idea of facial recognition at the bar, so I just walk up, order, and walk away. But I know that freaks some people out from a privacy perspective.
Keeping Cash
Naturally, all the arguments for keeping cash were shared by both interviewer and callers. Some were good. It’s easier to budget, for example. I have a lot of sympathy with this and have written before about how we’re becoming more detached from our spending as debt is normalised and it all exists in a virtual world. If you want anecdotal evidence for this, just check out Caleb Hammer’s YouTube videos.
Some of the arguments were less good. Like suggesting that card payments suck money out of businesses into financial institutions. Obviously banks and card schemes don’t operate at a loss. But this completely ignores the very high cost of handling cash for retailers, particularly the larger ones. Just think how much risk and investment used to go into moving around the enormous amounts of cash your average supermarket would take in a day. I have strong memories of having to carry a sports bag full of cash to the bank every few days when I used to work in a small hotel. Terrifying, even though the walk was only a couple of hundred metres.
How much do we still use cash?
The biggest reason cash use is falling is not that retailers, banks, or anyone else is forcing us to use alternatives. It’s that alternatives are easier, and we always take the path of least resistance - at least most of us do. That’s why cash is used in somewhere between 12% and 20% of transactions.
Given that use of alternatives skews largely towards the young, it’s easy to see cash transactions falling further, and fast. But I suspect they probably won’t disappear altogether.
The holdouts
Some people are very attached to cash. Take a trip to a seaside town like Whitby and just see how many signs are still in shops saying ‘cash only please’. Try and pay some businesses - still - electronically and watch them frown (yes, there is a lot of tax dodging still going on). Some people still prefer it for managing their budgets or because they don’t like the idea of banks/governments - or for that matter, abusive partners - having insight into all their transactions.
Plus, there is something important about cash to the national or regional identity. I would have been a fan of joining the Euro when we had the chance, but I can see a tourist-trade argument for keeping the pound with a monarch’s head on it (even if I’m pretty agnostic about the monarchy itself).
In short, while cash might drop down to maybe 5% of transactions fairly quickly, I think it will take a lot longer for that last 5% to dwindle to nothing. Especially if parliament gets involved to protect the interests of those who still want or need it.