As we approach the last few days of Christmas shopping, the majority of us will be using card and contactless payments to purchase gifts for the people we love. We enjoy the convenience of paying by card, phone or even watch, but what if you’re one of the 2.7 million Brits who rely on cash? Or perhaps internet banking is a challenge? Does going cashless discriminate against our most vulnerable?
It was back in May of 2015 when cashless payments first overtook the use of coins and notes. Cash payments continue to decline. The Observer reported in October that a third of us regularly go out with only a debit or credit card, and the Royal Mint halved its coin production this year.
A global drive for convenience
Going cashless is a global trend, with some banks in Australia eliminating cash entirely from their branches and cash transactions in Sweden dropping to just 2% of total transactions. Most of us love the convenience going cashless provides. We can pay without having to dig into our purse or pockets. We don’t even need to remember our wallets! Contactless payments for public transport ensures less hold ups and payment services like PayPal and ApplePay mean we don’t need to enter our card details time and time again.
What’s the real cost?
Surely it’s a win-win situation? Isn’t convenience king? But there are members of society who rely entirely on cash – usually our most poor and vulnerable – who are unable to have a credit or debit card. Embracing a cashless society excludes these individuals from accessing essential services. And what about those individuals who benefit from us carrying cash – the street busker, the homeless, and the hairdresser we want to tip. New research suggests that within the next seven years around 60% of us will become cashless. Have we really considered the implications of this?
Lyme Regis – an unlikely forerunner
Last year, the last remaining bank in Lyme Regis closed its doors. The 3600 residents of the Dorset seaside resort were left with a single ATM and post office as the only means to draw money. With the machine regularly running out of bank notes, ice-cream sellers were forced to invest in card-payment technology. If you didn’t accept card payments, you faced going out of business. Lyme Regis became a forerunner of the cashless society and the community was hit hard.
More than 130 UK communities, many in poor areas now have no ATM. This is unlikely to change unless there is demand from the customer base.
Is there such a thing as an over-reliance on tech?
In June of this year, Visa’s payment systems crashed due to a hardware failure, effecting millions of customers in the UK and Europe. Businesses were unable to accept payments. Long queues formed at ATMs and shopping was left at the tills. Those will cash were unaffected. Although more frequent than we would like, an event like this is unusual. But when it does happen, it suddenly highlights just how reliant we are on electronic payments and the big two who manage them.
It is forecast that by 2026, Visa and Mastercard will control 90% of the total UK electronic payments sector. Both companies receive a cut from every card transaction. That’s a staggering figure when you think about it. Most of us are unaware that our card transactions are costing the retailer service fees, and it’s our small businesses that are hit hardest. Some businesses argue that going cashless is more efficient, and therefore cost effective, whilst others argue that a reliance on technology, broadband speeds etc. means additional costs and processing fees.
There is a cost for our businesses when it comes to relying on technology, but is there a cost for us? Georgie Frost, consumer advocate for GoCompare Money, warns: “While the contactless revolution is being driven by the genuine sense of convenience experienced by shoppers, there is plenty of evidence to suggest that there is also a dangerous disassociation between electronic payment methods and spending ‘real money’. As consumers, we may not be hit by processing fees (unless the businesses increase their prices to cover them) but we may unknowingly be spending more due to quick and easy payment methods. Read how we worked with Debt Free Direct here.
Do we all benefit from cash in our pockets?
At Kaleida we are strong advocates of innovation and new technology. We welcome the new app based banks and new fintech tools, but we also want to remain inclusive. Should we be making the case for cash in our pockets? Here are some of the benefits:
There are some individuals who have a high value for privacy. Using our cards leaves a trace of where and when we shop, and what we buy. Cash eliminates the data trail to some extent.
For many of us, carrying large amounts of cash makes us feel extremely vulnerable, but for others, the threat of identity theft, the cloning of cards, or the theft of our physical cards that allow for contactless payments without ID, is far more worrying.
CAP (Christians Against Poverty) has an effective model that encourages people out of debt through the use of cash. Cash is withdrawn and placed into envelopes, allocating the money to specific areas of spending. The tangible nature of having separate pots of money and using the money in your purse and nothing more is an effective way for people to get a handle on their spending. Mindlessly tapping our card or phone can mean we often don’t acknowledge how much money we’ve spent – whether in one transaction or over the course of the day.
Tips and cash donations
Finally, do we really want to lose an opportunity to be generous and supportive? The ‘shrapnel’ we do carry may not mean much to us, but it could mean a huge amount to someone else.
Ultimately, there are benefits from both cash and cashless systems, that is quite clear. So let’s be intentional; intentional in our spending, intentional in our giving. And if like us, you’re developing bespoke software or new applications, let’s be intentional about how we can be inclusive and consider our most vulnerable.
At Kaleida we work with financial services to provide inclusive and effective bespoke software solutions. To discover more of what we can do, our case study regarding Best International Group is here. Alternatively, get in touch with our team today.