17 September 2014

Eric Smith

Eric Smith - Dynamic Partners

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A post relating to this item from Finextra:

Cash use in the UK on the rise

10 June 2013  |  8279 views  |  1
Cash use in the UK increased last year, breaking the longer-term trend of falling cash volumes year-on-year seen over most of the last decade.

Are we losing the war on cash?

10 June 2013  |  3296 views  |  6

The latest news from the UK Payments Council, especially on the back of the recent study by Market Platform Dynamics shows that the use of cash is greater than ever, despite the plethora of electronic and mobile alternatives.

For those outside the payments industry, the true cost of cash is invisible – they think it’s ‘free’, But actually, physical currency costs the economy quite a lot. After all, it needs to be minted or printed, counted, transported and secured wherever it goes.

It was estimated in 2010 that cash payments actually cost every single person in Europe €130 (£110) a year. Of course, these figures may have altered in the last three years, but the point still remains: the true cost of cash seems to be overlooked. Furthermore, cash can also cost us in the long-term, with it funding criminal activities or tax evasion. With there being little trail left with payments, cash is still very much the first port-of-call for criminals and gangs - although we are hearing of some moving towards mobile payments, or even mobile POS to take payments!

This research shows that even though the financial services industry is encouraging electronic, mobile or online payments, and we see news stories every day about the latest card or app, there is still a long way to go to get rid of cash

So what is the answer? Perhaps the financial services industry needs to work together to try to encourage consumers to move away from cash, instead of doing its best to compete with who can launch the ‘latest and greatest’ mobile or electronic payment solution – which just makes consumers more confused about all the different technologies, from different suppliers, which all work in slightly different ways.

If we want to move away from cash, the alternative has to be something that the public will understand and embrace. Instead of suppliers constantly trying to compete with one another, perhaps they should work together. The UK Payments Council’s mobile payments project  is an example of how the industry can work together towards one goal. As one single service that consumers can enjoy, it is simple and straightforward. But this is just one step, to solve one small problem - we need more projects like it.

To move people away from cash I believe that, as an industry, it will be collaboration, not competition, that is needed. How that actually works in practice, especially across borders, remains to be seen…



Comments: (9)

A Finextra member | 10 June, 2013, 12:41

Of course if we were being cynical we could assume that the increase in cash would be as a result of economic conditions stimulating an increase in undisclosed cash-in-hand income from person-to-person payments.


Eric Smith - Dynamic Partners - London | 10 June, 2013, 12:50

I agree that "economic conditions" may be an influencing factor. Perhaps not so much due to "undisclosed cash-in-hand income" (though that may be part of it) and more to do with people simply budgeting.

When you have £50 cash you can't spend more than £50. That's your budget. When you have a card in your hand, be it a credit card or debit card with linked overdraft - you can spend beyond your budget.

Of course people could go with a prepaid card. They are popular to a point, but also tend to have fees and are certainly less well established than cash.

A Finextra member | 10 June, 2013, 12:55

There are plenty of decent prepaid cards out there that are mostly fee free (as long as you are happy transacting with the card rather than taking Cash out at ATM's).  O2 Money and Kalixa both come to mind.

Alexander Peschkoff - TEDIPAY - London | 10 June, 2013, 12:58 It's not about the medium (carrier of value), it's about "what's in it for me". If I knew I can pay ANYWHERE with my card, why would I need cash? Why don't all merchants accept cards for all the payments? The answer is in the stats - over 80% of cash payments are below £10.00 (where cards are still expensive). Offer merchants a corresponding deal (e.g. http://www.finextra.com/community/fullblog.aspx?blogid=7666) and they are in.
Eric Smith - Dynamic Partners - London | 10 June, 2013, 13:03

You make a valid point. That said, I still think people like to have a fallback. If your card doesn't work or the merchant has a problem with their terminal and cannot take card payments - it's still good to have some cash in your pocket.

Technology may have advanced a long way, but it's still not 100% reliable. Cash always is.


A Finextra member | 11 June, 2013, 09:45

There is no war on cash. At least from the consumer point of view there isn't. Other organisations have an interest in getting rid of cash - either because it costs them money to handle it, or they can get a margin from use of an alternative payment system.
But as a consumer, I resent paying an extra 2% or whatever for using an alternative to cash. As Alexander correctly puts it "what's in it for me"?

Eric Smith - Dynamic Partners - London | 11 June, 2013, 09:55

I agree that from a consumer perspective they are unaware of any "war". The banking and payments sector, however, wants to replace expensive cash. The problem is, as you rightly highlight, unless there's an advantage to the consumer... and to the merchants to do so - why would they change? If banks and card schemes charge for card and mobile payments and don't charge for cash - why would either consumers and merchants want to embrace this? Purely to have less cash in the till at the end of the day? I don't think so.

People may be prepared to pay a little more for convenience, but in hard economic times that's a harder thing to sell.

Also the "coolness" of waving your mobile or touching your card has already lost its novelty factor. In the end there needs to be a real and tangible benefit beyond avoiding a run to the ATM to withdraw cash.

A Finextra member | 11 June, 2013, 12:54

er.. consumers and businesses "made 20.8 billion cash payments in 2012, compared with 20.6 billion in 2011." That looks static to me.

Neil Burton - Earthport - London | 11 June, 2013, 13:48

Maybe we can learn something from others....

Governments Can Save Up to 75% with Electronic Payment Programs

The world leader in mobile money is Kenya, where mobile network operator Safaricom launched M--‐Pesa in 2007. Four and a half years after launch there are approximately 16 million users of mobile money in Kenya, conducting over 2 million transactions every day.

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Eric Smith

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Dynamic Partners

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