IBS Journal October 2017
25
phone. In these countries, digital alternatives are steadily replacing cash – long a stalwart of those in unbanked regions. Still, despite countriessuch as Sweden and Kenya blazing a trail, the cashless society remains an idea met with scepticism. European Central Bank executive Yves Mersch, in a 2015 speech, said: “We have seen that while the sales of CDs and printed newspapers are declining, they have not disappeared.
“There are people who still use them, like them and pay for them. Likewise, I think it is illusory to expect that cash or traditional cashless payment instruments
End of days for cash? Will digital payments be the end of coins and notes as we know them?
will disappear within the next five to 10 years because of digitalisation. The cashless society, as appealing as it may sound, is probably just as elusive as the much-vaunted paperless office.
Niro Sivanathan, a professor at the London Business School, claimed earlier this year that parting with cash is a psychologically painful experience, while paying via card is far less traumatic. It’s ease of use, he argued, makes it more likely that users will splash out and not think twice about their purchases. Invisible payments apps, such as Uber, double down on this feeling. Users can pay with a fingerprint and with as little friction as possible.
Save time and money
Businesses that embrace new technology are doing so because of its time and money-saving potential. Reducing a reliance on cash frees up employees from counting hard currency. The data provided by electronic payments can also be invaluable to companies looking to streamline their strategies – from inventory management to marketing. So, in a society in which there are inherently more efficient ways to pay, why should cash survive? After all, bartering existed as a system of trade until the invention of coinage.
Coinage only survived bank notes and the printing press by its usefulness to smaller traders, and therein lies the answer. In the UK, many businesses, particularly smaller enterprises, still haven’t adopted even basic Chip and PIN technology. Barclaycard research shows that around half of all UK SMEs do not accept credit and debit cards, even though 70% of shoppers say it’s their preferred way to pay. A further fifth of businesses in the research indicated that they had no plans to introduce electronic payment options any time soon.
In Austrian and Germany, 82% of transactions are still made via cash. The central European powerhouse has been the subject of some studies into its love of hard currency. An inherent aversion to debt – and with it credit and debit cards – is a prominent theory. Others put it down to a collective social memory of hyperinflation in the 1930s.
A cashless future?
Perhaps cash will always prosper due to its ties to wealth and standing, or its intrinsic anonymity. Apart from cryptocurrencies, cash payments are a vital way for people to make payments without worrying that Big Brother is watching them. Growing interest in Bitcoin and its ilk shows that people are still keenly interested in holding tangible assets outside of the traditional financial system – a new-age form of storing cash under the mattress.
For others, it’s about choice. In a market in which you can make payments in five or six different ways, why should one of them be eliminated? Cash solves real-world problems in a way that many non-cash solutions do not. Technology makes its best impact in the lower-end of the market. When the man on the street starts to turn towards Apple Pay instead of his dollar bill or his pound coin, perhaps the writing will be on the wall for cash. But it’s unlikely that will be for some time.
STRAIGHT FROM THE SOURCE
Federal Reserve statistics:
http://bit.ly/2xN4ZN5 European Central Bank statistics:
http://bit.ly/2qmQtYM
www.ibsintelligence.com
Olga DeLawrence @ Unsplash
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