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A Case for Cash

Cash is dead. The introduction of Apple Pay in the UK means that consumers can soon leave their wallets at home. At least that's what some are predicting. But perhaps we should take a moment before we consign cash to the transactional trash.

Over the last fifty years, various payment methods have been introduced: cheques in 60s, credit cards in 70s, debit cards in the 80s - all the way to the contactless payment systems of today. Yet today cash remains the single most popular consumer payment method, accounting for 52% of payments.

Now there's a new contender. Apple Pay is a powerful tool that offers some people a simple, convenient and secure way of paying for goods.

But there are caveats. Firstly you need an iPhone 6 or 6 Plus to use the service (or an iPad Air 2 or iPad mini 3 for online only purchases). Transactions are also limited to £20, expected to rise to £30 in September.

Apple Pay was introduced in the US last year. About half of the top 100 US merchants are expected to use the service in 2015. According to a Reuters survey, the top reasons cited by US retailers for not adopting Apple Pay were insufficient customer demand, lack of access to data and the cost of implementing contactless technology.

In other words, while Apple Pay is an exciting technology, there are a number of limiting factors. Cash, meanwhile, is a known quality supported by an established and universal payment infrastructure.

In total, over 18 billion cash payments were made in the UK in 2014, the equivalent to almost 50 million payments a day. Over £189bn in cash was withdrawn from UK ATMs during 2014, compared to £2.32bn spent using contactless cards.

Meanwhile the Bank of England is gearing up for the release of new polymer notes, starting with the Winston Churchill £5 next year. It's an investment that shows confidence in cash.

So why has cash remained so resilient, despite the introduction of new payment methods? Consumer behaviour can be hard to model. There are numerous factors economists can take into account but social factors are harder predict; such as people's shopping habits and when and where they switch to and from cash.

Undoubtedly, more low value transactions will be made via services like Apple Pay in the future. More options can only be a good thing. But tried, tested and trusted cash can be depended upon for years to come.



Comments: (3)

Graham Seel
Graham Seel - BankTech Consulting - Concord 28 July, 2015, 16:47Be the first to give this comment the thumbs up 0 likes

Absolutely! There will be segments of certain societies that go almost entirely cashless within a few years, but cash will be a significant means of exchange for decades to come. We may be surprised by some of the places cash refuses to go away too. I'm reminded of the struggle to get rid of cheques (which aren't as old as cash, but date back in some form or other several hundred years). Who would expect some of the biggest remnants of cheque usage to be Americans, French, British and Canadians? (India and Russia are perhaps less surprising). Cash will surprise us at least as much.

A Finextra member
A Finextra member 29 July, 2015, 07:56Be the first to give this comment the thumbs up 0 likes

When will cash finally be gone?  As each country has their own governance and interests, when they will eliminate cash is up to each of them to decide in their own good time. In the end, nobody can answer the question at the start of this paragraph for any particular nation-state.  

The final death of cash will be a long drawn-out affair. Cash will die a slow and lingering death of a thousand cuts. The death of cash will be a process involving many factors. Technological research, startup companies, software designers, smartphones, computers, the internet, governance, law, regulation and consumer choice, will all play an important part. The pickup of habits by the young of today will pretty much determine the outcome of where cash is headed to tomorrow.  

New consumer habits such as using virtual wallets, contactless debit & credit cards, wearable technology as well as implants under one’s skin; suffice to say that the other killer will be generational change through the uptake of new, efficient, reliable, convenient, safe, and more enjoyable methods of spending your money that are based on financial integrity.

If you were to ask me what would be the harbinger of the end of physical money as we know it, I would point to Denmark’s legislation making the acceptance of cash optional in businesses in specific sectors of their economy from 2016. This was lobbied for by the Danish Chamber of Commerce on behalf of the businesses that they represent nationally.

The Danish Chamber of Commerce cannot possibly be characterised as a radical organisation. Sweden, Denmark and other countries around the world including several African countries, have an advanced or very progressive culture of cashless payments in their own states. This Danish policy of optional cash acceptance by businesses within certain sectors could not possibly have even been suggested, if that country did not have an advanced culture of cashless habits and practices that an overwhelming majority of people have freely taken to by choice.

There is no question in my mind that the Danish initiative is the harbinger of the end of cash, alongside a multitude of commercial, legal, regulatory, political, sociological, criminological, technological, economic, and consumer factors. The combined effect of all of these matters will play an important part of reducing cash use the more that we move towards the future.

Sometime in future cash will be reduced to such an extent that it will engender a plethora of national debate about whether it should be removed by an act of a democratic society. Part of that debate will be a consideration of privacy issues and whether or not the poorer parts of any society will be taken care of without their ready access to cash. In my opinion the end of cash is inevitable and only a matter of time as to when it will happen.      


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 July, 2015, 15:56Be the first to give this comment the thumbs up 0 likes

According to this BBC article from BBC, cash is growing, not dying:

  1. In the seven countries ... — Australia, Austria, Canada, France, Germany, the Netherlands and the United States, 46-82% of all transactions in 2012 were conducted using cash.
  2. In the United States, cash in circulation grew 42% between 2007 and 2012, and the amount of American money floating around in bills and coins is expected to grow by about 5% each year. The average growth globally is 7% per year.
  3. ...card payments in the Netherlands have been growing by about 8% annually over the past few years. And yet, cash is still king. In 2012, there were 2.7 billion card payments, but an estimated 3.5 to four billion payments were made with cash.

So much for the death of cash - it's not only not dying but it's actually growing. All over the world. Even in Sweden and Denmark - "leaders of cashless crusade".