It looks as if the days of cash are numbered. Last year card payments accounted for over . Contactless payments are booming as people opt to wave a piece a plastic rather than fumbling around for change. The slow slide towards a cashless society looks inevitable.
But if cash is on the way out, why is the Bank of England bothering to replace paper 拢10 notes with new polymer ones this week? They might just be delaying the inevitable, but there are reasons to think the path to a cashless future will be more complicated than it appears.
Cash is here to stay, says Duncan McCann at the , a think tank in London. Indeed, the value of banknotes in circulation in the UK grew more than 8 per cent last year, to 拢73 billion. 鈥淐ash is actually increasing faster than the economy is growing,鈥� he says. That the Bank of England is issuing new versions of the UK鈥檚 most used notes and coins shows it has no intention of turning its back on cash any time soon, he says.
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Politicians don鈥檛 have much of an incentive to crusade against cash either, says at Copenhagen Business School in Denmark. 鈥淵ou won鈥檛 win any votes on this issue,鈥� he says.
The UK government鈥檚 policy unit floated the idea of a cashless society back in 2015, but , fearing it would play badly with voters.
Cameron was right. Scrapping cash would inevitably hit the poorest people hardest, says at Bangor University in the UK. In 2014 there were . People who are paid in cash for their work and charities that rely on cash donations would also find their income adversely affected.
Making cash peculiar
On the other side of the debate are the payment companies, like Visa and Mastercard. Since they get a share of every transaction made using their platform, they are already enjoying the spoils of a shift to cashless payments and have clear incentives to push for more. In the UK, Visa鈥檚 long-term ploy is to 鈥溾��.
But putting more power into the hands of the payment companies might not be a good idea, says McCann. If people had no alternative payment methods, these companies could sneakily raise their transaction fees, squeezing customers and businesses alike.
Going cashless also raises privacy concerns. Digital payments are much easier to trace and if the UK went entirely cashless, then the government or a bank could potentially stop someone accessing their money. Every time you make a payment on a card, McCann says, you鈥檙e effectively asking your bank for permission to do it. Cash, however, has no gatekeepers. 鈥淐ash is a great equaliser,鈥� says McCann. 鈥淚t鈥檚 really a simple public utility.鈥�
But there could be a better way of going cashless than relying on payment firms, says Hedman. Central banks could issue their own digital currency, based on bitcoin technology, and ask citizens to trade in cash for digital tokens. This would move society away from cash without increasing our dependence on payment companies, but it would mean a massive shift in how central banks work.
It might happen sooner thank you think. In Sweden, the most cashless country in the world, cash accounted for just 2 per cent of the total value of all transactions in 2015. Now Sweden鈥檚 central bank is , the e-krona, in 2019. It could be the only alternative to a future where a handful of global companies oversee our every financial move, says Hedman. 鈥淚f we don鈥檛 do anything, we are heading to that future.鈥�
