People have been using cash for thousands of years. Cash made it easier to trade because rather than having to carry commodities such as bags of wheat, you could carry a bag of coins instead. But you still had to carry coins.
That changed in the 20th century thanks to the introduction of credit and debit cards. These cards could be used instead of cash to pay for things, and if a retailer didn’t accept cards you could use your card to take cash out of a cashpoint machine.
Until recently, there were still some barriers. You still had to make sure you had your card with you. Often a minimum transaction amount applied if you wanted to pay by card so you still had to use cash for small transactions. It was also difficult for some retailers to take card payments.
Those barriers are now falling. You don’t actually need a card any more. Modern smartphones enable you to pay by simply waving your phone near a contactless terminal. Low-cost portable card terminals are widely available and these, combined mobile data, mean that most retailers can accept cashless payments if they want. The banks no longer charge a minimum fee per transaction, so you can pay for something as cheap as a newspaper by card if you want.
The upshot is that according to the Capgemini and BNP Paribas World Payments Report there are now over half a billion cashless transactions being conducted worldwide each year, and the number of transactions is growing quickly. We are rapidly becoming a cashless society.
The Benefits for the Public
The main benefit from the public’s point of view is the fact that in a cashless society, you no longer need to worry about carrying cash. You don’t need to worry about running out of cash, either, as long as you have enough money in your bank account. If you want one last drink at the end of an evening you don’t have to check your wallet to work out whether you can afford it.
A cashless society is good from a security point of view because you don’t have to worry about losing a large amount of money if you lose your wallet or have your wallet stolen. Unlike cash, you can cancel your card as soon as you realise that it’s missing and there are limits on how much can be spent on a contactless basis before your PIN needs to be typed into the terminal.
Foreign holidays become easier as well. You no longer need to change money into the local currency before you go abroad because you simply pay by card each time you buy something. This also means that you don’t get back home with pockets full of foreign coins which are unusable as they can’t be changed back into your own currency.
Of course, if you have money sat in your wallet, that money’s doing nothing. If that money is in your bank instead it’s earning you interest, or if you are running an overdraft, it’s reducing the amount of interest you have to pay on that overdraft. In a cashless society your money is working harder for you.
The Benefits for Retailers
Anything that makes it easier for customers to spend money is going to benefit retailers, and the cashless society makes it easier for those customers to spend money with retailers that can accept cashless transactions. Cashless transactions also make impulse purchases more likely.
Security is another benefit. Retailers no longer have large amounts of cash on their premises. This can reduce their insurance costs, and it may also mean that they no longer need to use a security company to help them with their end-of-day banking. It also means that there is less risk of employees stealing money from the till.
Often the card terminals can be integrated with the retailer’s accounting software. This makes reconciling the accounts considerably easier, and this can cut costs. It also means that there are fewer accounting errors.
The Charity Sector
A cashless society might not be quite as good from the charity sector’s point of view. In cash-based society many of us will put small amounts of change into a charity box rather than having to carry it around with us. Once we transition to a cashless society that change will no longer exist and so those donations will dry up.
There are a number of initiatives that aim to address this. Some card issuers and retailers are offering to round up payments and pass the surplus on to a charity, for instance. Whether this will catch on has yet to be shown. Even if it does, it could mean that smaller charities lose out to the bigger charities that are better placed to negotiate such schemes.
The days of, “give me a tenner for cash!” may well be gone. Once every single transaction is recorded, the opportunities to avoid paying tax on those transactions by keeping them off the books will be behind us. That’s not such a big issue because most people agree that paying your fair share of tax is something you should do anyway if you want to be part of society, but that traceability means that some people have privacy concerns.
Of course, many of us are happy to give away this data when we use our store loyalty cards. Those loyalty cards track our purchases. The use of store loyalty cards is voluntary, though. And that data is used to send us special offers to reward our loyalty so that’s a good use of that data.
The problem is the fact that some people are concerned that if there’s a large, central pool of data, that data could be used against them. It could be something as simple as suddenly finding that it isn’t quite so easy to get life insurance or private medical insurance because you bought too many bottles of wine last year. Some people worry that it could be more sinister and you could find that you end up on a terrorist watch-list if you make the “wrong” purchases.