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Could you do without cash? With cards and now electronic and contactless payment methods increasingly commonplace, will we come to see bank notes and coins as old hat?
Some certainly feel that cash is falling out of fashion for a generation obsessed with digital technology. In 2006, more than 60 per cent of all payments were carried out with cash but that is predicted to fall to just 21 per cent by 2026.
So, what does the future hold for money?
The penny dropped?
Chancellor Philip Hammond’s Spring Statement contained plans for a public consultation on the use of cash and appeared to suggest that 1p and 2p coins could be phased out.
It was pointed out at the time that about 60 per cent of 1p and 2p coins were believe to be used just once, with about eight per cent thrown away and the rest squirreled away in piggy banks. That means that the Royal Mint needs to produce about 500 million coins just to replace the ones taken out of circulation.
However, the government backtracked within 24 hours (critics included those who feared charity donations would be hit) and stressed that the humble ‘coppers’ would be spared.
A spokesman said: “There are no proposals to scrap one or two pence coins in the consultation. The call for evidence is simply intended to enable the Government to better understand the role of cash and digital payments in the economy.
“One thing the Treasury were seeking views on was whether the current denominational mix of coins meets the public’s needs. From the early reaction, it looks as if it does.
“The Government welcomes the contribution to the debate and will respond fully when the call for evidence closes.”
A few years earlier, it’s said that David Cameron talked George Osborne out of a similar move. So is this all a sign that the public appetite is firmly against change?
All change for loose change?
A large chunk of the population would, it seems, actually be happy to move on from cash. A poll for Business Insider showed that almost 40% of Brits can see themselves stopping the use of cash altogether. Just 12% of people surveyed said they would ‘definitely not’ give up cash at any point.
Mark Barnett, MasterCard’s UK and Ireland boss, also told Business Insider: “By the time we get to another generation, 30 years down the track, will there be any cash? I very much doubt it. The idea of carrying coins — 2p, 1p, 50p all cluttering up your pocket — it will be an anachronism. It will seem as antediluvian as carrying a pouch full of gold.”
Whether it’s contactless cards or smartphone wallets, there are many threats to the way in which our money changes hands. These methods are perhaps more fitting for a digital age where payments need to be fast, safe and go across international borders.
It’s not as if physical money is the only way of handling payments anyway. Anyone who knows how to trade the forex market, for example, will know that vast sums of money are moved around on the currency market without a coin or bank note ever changing hands. Physical money is just symbolic of a financial transaction and it’s a symbol that could easily be deemed unnecessary.
Is cash really in decline?
But the Bank of England thinks we should avoid jumping to conclusions. Its Chief Cashier Victoria Cleland recently vowed that ‘cash is not in decline’ and argued that the amount of physical money in circulation is actually going up.
Speaking at a Future of Cash Conference in Austria, she said: “Very notable in the UK is the rise in the use of contactless cards, which tripled in 2016 accounting for 7% of payments. The shift in consumer preferences is also evident in online spending, where average weekly online shopping in the UK was £1.1 billion in August 2017.
“But the numbers show a different story. In 2016 the value of Bank of England notes in circulation increased by 10%, reaching over £70 billion in the run-up to Christmas: the fastest growth in a decade.”
She added: “Cash continues to play a key role for many, and a crucial role for some. 2.7 million people in the UK rely almost entirely on cash transactions – a number that has increased by 0.5 million since 2015.”
Bitcoin and cryptocurrencies
The Bank of England’s comments are still consistent with wider trends, however. Its findings show that cash is still an important part of the payment mix – just not as dominant as it once was. We’re quickly moving into a world in which coins and notes are less common and maybe, in time, they will die out (perhaps the 30-year timeframe offered by Mark Barnett is correct?).
Part of the payment mix in the short term will be Bitcoin and cryptocurrencies. These deregulated, decentralized, digital payment forms are increasingly popular as a means of swiftly and safely transferring money.
It’s not yet clear how far this will be used. Twitter CEO Jack Dorsey, for example, believes it has the potential to dominate within a decade – but other critics suggest cryptocurrencies could be enjoying a bubble that is about the burst. The truth probably lies somwehre in the middle.
The way in which we use money is, therefore, evolving. There’s enough resistance to scrapping cash – and demand for it – to ensure it will stay for now, but digital payment forms are increasing. Over time, money might well be solely digital – but not just yet.
