The Netherlands could be cash free within five years as the Dutch migrate to cards and mobile payments, says consumer association Consumentenbond.
Cash has been around for 5 000 years and will also survive the chip cards and mobile payments hype since it has many advantages of account based payments. Among these the ability to fuel tha black and grey sectors in the economy. In most countries there
is a legal requirement to acept legal tender, i.e. the country central bank issued cash, thus making it difficult for merchants and others to officially stop accepting cash.
I don't understand how this would be possible. Every country will have to print currency based on the Gold reserve. Now as per this report how is
country's economy will be measured.
An interesting development, that has some major implications. Whilst major retailers and suppliers are quite capable of removing cash transactions from their outlets, it is not going to be popular with those on low incomes who like to keep track of their
funds by physically having them in their hands. Also, what mechanism will replace cash for small/ microtransactions? Are we going to give kids bank accounts so they can buy an ice-cream? The banks will not support these costly transactions, and no-one will
be happy to have fees applied to the accounts of children.
The payment mechanism will need to be chosen and managed very carefully. It will need to be ubiquitous and non-reliant upon a power source.
Mobile Telco's can already handle small transactions, but, it needs everyone (not just traders) to be able to receive money quickly and easily, and without risk of loss should the funds holding institution go bankrupt.
Some of these issues have already been answered in the (failed) launch of Simpay in the UK.
Of course, there is a value in getting rid of cash because it can impact upon the grey and black markets, thus increasing income for the nation's treasury. However, they will certainally be able to find an alternative payment mechanism (if I recall the
Hitch-hikers guide to the Galaxy correctly, Leaves are a possible solution, albeit one that is subject to inflationary pressures and occassional shortages).
I think the word "could" is key in their statement.
I think it would be very hard to achieve a cashless society by 2015 - especially if the prime reason in the Business Case is "to reduce the risk of robbery".
I think it will be another 20 to 30 years before Cash is displaced in Europe - first we need to bank the un-banked and make regulatory and legal changes to mandate citizens to hold a bank or card account of some sort.
Cash is a brilliant invention. Instantly transferable, convertible and fungible and the only instrument really capable of real-time settlement. It would be terribly sad to see its usefulness threatened. Rather like books, Scalextric, freshly-cooked food,
face-to-face conversation, the high street, live music, seduction, theatre, oratory and countless other wonders, it is technically becoming unnecessary - but that makes it no less wonderful and worthwhile.
Let's keep it - not because we need it, but because we can.
According to Retail Banking Research in the same report, cash accounted for 78% of Europe retail transactions in 2008 and their predictions are that the use of cash in retail will decline by 2.3% annually going forward. So I would question how this consumer
association contemplates its demise in the Netherlands in five years. Moreover the initial statistics from 2009 show that the use of cash has increased since the economic downturn - one of the main reasons being consumer confidence in cash.
Previous attempts to create cashless societies, for example in Singapore in 2002, have failed. Despite launching the Singapore Electronic Legal Tender (SELT) concept to create a cashless society, cash in circulation there grew by 28% between 2002-2006. And
finally, the global giant Wal-Mart is currently seeing more cash sales as a percentage of total sales at its tills.
An old friend of mine at the Bank of England once said to me "there will always be a need for cash, so long as society needs drugs, sex and taxes". So tell me, how is this going to work in Amsterdam of all places??
I believe this prediction must have come from the same place that predicted the paperless office. There are fundamental reasons that cash will always exist just as paper has not disappeared in the office. Predictions such as this are marketing fluff and
fail to see the real way people use payment instruments. I'm not saying that electronic payment mechanisms won't grow in populatiry but a shift in payment instrument preference is as much a behavioural/sociological shift as it is a technological one.
I won't start listing the thousands of reasons this predictions is fluff but simply think about the 50p I tossed into the buskers hat this morning and let you draw your own conclusions.
As the lead author of the RBR report The Future of Cash and Payments mentioned in the article, I agree with the comments that it is unrealistic to predict that the Netherlands will be cash free by 2015; I also agree with many of the stated reasons for this.
A study for the Dutch Central Bank found that cash accounted for 67% of payments in the Netherlands in 2002, and our calculations show that this had reduced to around 55% in 2008. Our forecasts are for a substantial fall in this proportion in the Netherlands
by 2014, but even in the most aggressive scenario the country will be a long way from being cash-free at that point.
I think this is cobblers. Not only is it not going to happen for all sorts of practical and political reasons, neither SHOULD it happen because there is no robust, economical and compelling alternative for ALL cash payments - and neither is there likely
to be for the far forseeable future.
So let's not give so much airtime to such predictions - though maybe it does give those of us in the real world something to laugh at from time to time...
I suppose it brings new meaning to the term, "Going Dutch".
But I also think it's cobblers!
© Finextra Research 2013