Natalie Ceeney’s recently published UK Access to Cash review asks us to consider the implications of a society where physical cash doesn’t exist. It got me thinking of a video clip I used to open a recent conference presentation.
It’s a scene from one of the more forgettable Star Trek movies. Captain Jean Luc Picard is chatting to his current romantic interest who, for reasons too convoluted to get into, hails from the mid-90s earth.
His companion, who has never seen a spaceship, asks how much it cost to build. She’s told that there is no such thing as money in the 23rd century. “No money?” she says, unbelieving. “Then how do you get paid?” Jean Luc, in his dulcet thespian tones, replies:
“The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.”
There’s still a couple of centuries to go, but the jury’s still out on whether philanthropy and goodwill will be tomorrow’s currency. It’s certainly in keeping with Star Trek’s optimistic outlook and its faith in mankind’s ability to better ourselves. But,
in the meantime, we’re stuck with the grinding wheels of unbridled capitalism, which are greased by cold, hard cash.
But what is cash? Whether it’s a piece of paper (or polymer), or some numbers quietly ticking up or down in a piece of software, when it comes down to it, money represents an exchange of a thing for goods or services.
As it says on a Bank of England note: “I promise to pay the bearer…” After all, money is as much a social construct as it is an economic one; it relies on a collective belief that these promises will, and can be, honoured. Gold standards are a thing of the
past. And don’t get me started on bitcoin.
A banknote is a promise between two parties, upheld by a central bank. Unlike many other payment methods, when you buy loaf of bread a pint of milk with cash, the transaction isn’t going through several intermediaries. This promise, with its historical precedent
and sovereign tradition, is why I would argue cash is never going away, despite the countless articles about its imminent demise.
Forgive me if you’ve heard these arguments before. Cash volumes are going down. People are switching to mobile and contactless payments. You’ve probably noticed yourself you’re carrying less cash about. In the US, UK, Western Europe, and a few other economies
around the world, transactional cash use is going down. This is not disputed. What is argued over is whether this decline is exponential. In other words, are we moving inexorably towards a cashless society? Like a motor reflex, it seems to come up in every
article where cash is mentioned.
But to reference another sci-fi film, this time to paraphrase Jeff Goldblum in Jurassic Park, perhaps people are so preoccupied with whether they could (go cashless), they didn’t stop to think if they should (go cashless).
The problem is that the term ‘cashless society’ is bandied about with such abandon there’s a danger that it becomes a
fait accompli concept without any need for it to. At the end of the day, who is even asking the question? Well, a few people. Card companies (but they would). The landlord of Britain’s first cashless pub. One of the
blokes from ABBA.
Okay perhaps I’m being flippant. You can be sure it’s been mulled over in bank boardrooms. And the Swedes are all over it. After all, cash is not without its flaws, and it will face cost and efficiency challenges as its transactional use decreases. But for
most people? Well they’re fine with cash.
It may be that they like to have it to hand as a back-up. The Federal Reserve of San Francisco argues that “consumers may be demanding cash less as a means to pay, and more as a store of value.” After all, if cash was going away, why have the number of notes
in circulation been steadily increasing in the US and Europe countries – the very places where cash transactions are falling?
For some people, it may be that their preferred method of payment – be that their card, mobile or wearable contactless headband – isn’t available, so they default to cash. And that’s fine. Retailers and consumers were probably pleased that cash was available
during the VISA’s European outage in the summer.
And, if the worst were to happen and there was a cyberattack or a run on the banks…well you can see why central banks are cautious about talk of national digital currencies.
Other people simply need to use cash. The Access to Cash Report suggest eight million Brits rely on cash, and that it’s an “economic necessity” for 25 million. These are big numbers.
It comes back to that idea: I promise to pay the bearer. If we can’t
guarantee to make that promise - because of a dodgy Wi-Fi signal, an IT meltdown or financial exclusion - the system doesn’t work. The socio-economic construct that is money breaks down. Until a currency is invented that replicates cash’s traits, why fight
to get rid of it the payment type that is most universally known, accepted and, until recently, used? A banknote stands for something: in an increasingly intangible world, cash gives us something tangible we can trust.
Besides, in another 200 years, if we are to believe Captain Jean Luc Piccard, maybe we won’t need payments or paychecks full stop.