Cash only really works if everyone involved in a transaction agrees to pretend that some types of bits of paper or metal disc have more intrinsic value than others. Call me old fashioned, but beads, ivory, salt, thimbles, whale teeth, oxen and wampum were
a lot more, well, tangible. I do accept that herding an ox through the shopping mall to pay for a new suit and a burger has its challenges (not least what to do with the change) but cash too seems increasingly anachronistic.
How long then, before paying with cash becomes equally archaic? Already, cash usage is in decline in most developed economies. Bulky, easy to steal, cocaine-impregnated and expensive to accept, cash has many drawbacks. And it is best not to even think about
the hygiene issues associated with that grubby note handed over by the barman.
Fast forward a few years and I believe we will see cash well on its way to becoming the preserve of the elderly, the contrarian and the illicit.Today we have the majority of the components in place to hasten that decline – e-Wallets and prepaid accounts,
contactless transactions, soon-to-be ubiquitous smart-phones, nearly effective regulations and practicable payment rails. Consumers, governments and businesses all stand to benefit.
With an effective infrastructure, consumers will be able to pay quickly and securely using a device they trust. Moreover they will be able to control and track their spend more effectively. This is a critical issue – research by the Fair Banking Foundation
shows that being in control of our money can be as much a contributor to ’financial wellbeing‘ as actual net worth.
So what is slowing us down? We certainly have to tackle the real and perceived threats of fraud and crime; we have to get merchants and consumers to accept the attendant technology; but top of the list has to be social acceptance. Let’s face it, IT and
banking people (like me) are notoriously bad at predicting the pace of consumer adoption.
Take contactless card payments. I have no direct empirical data here, but from observation we seem to be making hard work of the job of getting a consumer to undertake the first three transactions. Once they have tried it and used contactless successfully
a couple of times, experience tells us that there is a good likelihood that the consumer will use it regularly.
However, it is still difficult for customers to find fully functional terminals attended by sales staff who understand how they work. In my own experience, where I find an NFC acceptance device that isn’t broken, or tucked away under the counter, I find
that I am drawn into a long and (probably mutually) unwelcome discussion at the till. My poor family knows that I tend to do this when we go shopping, but I would imagine that less dangerously zealous people are unlikely to go this far. This is great technology
and, when it works properly, it provides a good consumer experience.
On the positive side, we are seeing an explosion in demand for prepaid cards. Strangely, I think the two least important aspects of prepaid cards are the fact that they are prepaid and the fact that they involve cards! The opportunity is in providing an
electronic cash alternative that is (or can be) independent of a bank account. This opens up huge opportunities for government payments, currency exchange, remittances, compensation and so on. Whether the token used is a physical card, a single-use code or
a mobile phone is not important. Equally, whether the e-Wallet is prepaid or operates as a form of decoupled debit is also secondary.
Eventually, a cashless society is probably inevitable, and the physical notes and coins form of cash will seem as extraordinary as their beads and feathers predecessors. But it will likely take many times longer than the most conservative predictions. As
a point of comparison, at FIS, one of our business units provides cheque guarantee services in the UK, Ireland and France. Over the last 12 months, more than 40 million cheques have been called through to our Transax service for cheque warranty or appraisal.
To paraphrase what Mark Twain might have said, rumours of the cheque’s demise are much exaggerated.
The truth is that whether cheque, cash, traveller’s cheque or book token, financial instruments have a very long tail and a capacity to be reinvented. Aside from the obvious advantages of anonymity that cash brings, there is something satisfying about holding
a large wad of notes – and it is an experience that many would not want to give up soon.
But in the meantime, if you are troubled by too much cash and you are looking for someone to take care of it all, you know who to contact...