Blink and you'll miss it. In the age of increasing cashless payments and "tap and go" transactions, what are the consequences for businesses, consumers and society?
A recent study of 15 first world countries has concluded that one in five Europeans rarely carry cash on their person. 54% of Europeans agree that they use less physical cash than they did 12 months ago. In fact, Sweden could be the first country to go completely cashless.
The rise of the cashless payment
The first general issue credit card in the UK was introduced by Barclaycard in 1966, with debit cards following in 1987. It has now been a decade since the contactless card, and there are now over 108 million contactless cards in circulation within the UK. After the contactless card came the mobile payment, and now spending on all forms of contactless systems (both cards and mobiles) accounts for 35% of all non-cash transactions in the UK.
Non-cash transactions are seen as more practical than carrying cash in your pocket. Contactless transactions are easier still, bypassing the two or three seconds it takes to insert a PIN number. Ultimately, consumers are always looking for ways to improve their spending experience.
The impact on businesses
In 2014, Transport for London banned cash on buses across London. At the time there was outrage, but now the thought of trying to pay the bus driver is ludicrous. Cashless payments are more convenient and efficient, preventing delays. Indeed, since 2014, Transport for London claims to have saved £24m in cash-handling costs alone.
While larger businesses can benefit from greater savings and economies of scale of cashless technology costs, the additional costs of electronic transactions are unaffordable for some smaller businesses. Smaller retail and hospitality outlets are struggling to maintain profits and footfall in a society where cashless technology is expected by consumers who do not want to traipse to find an ATM.
The impact on personal finance
Currently, many banks and card companies offer cashback on purchases made with cards, meaning that consumers effectively receive a discount on their transactions. Arguably, this encourages people to spend more on their cards to receive greater discounts.
Non-cash payments are seen as more secure, with less chance of a consumer losing money in the street or being pickpocketed. Additionally, all payments can be traced, so it is more difficult for a consumer to be the victim of fraud.
However, a big impact on personal finance is that people can easily lose track of how much they are spending. Card-users can go for weeks or longer without checking how much they have spent; when you "tap and go" using your card or mobile, it is easy to become complacent and over-spend.
The Office for National Statistics recently announced that household savings had dropped in the first quarter of 2017 to the lowest rate in 40 years – just 1.7% of overall income compared to 3.3% in the previous quarter. In an economy where household spending is rising to unprecedented heights, consumers cannot afford to neglect their long term savings due to the ease with which they are able to spend.
Some sectors in particular are struggling with the move towards a cashless society; charitable organisations, for example, are finding it increasingly difficult to fill their donation boxes in public areas. Some charities have tried to adapt by fundraising with contactless devices; however, the transaction fees for each donation ultimately decrease the amount the charity receives.
There is also a worry that a cashless society will increase society's wealth divide; there will be no spare change for the homeless, the local busker or the market stall owner. A drastic example is India recently demonetising its economic system by removing the two most widely used bills from circulation overnight. Many of India's working poor relied almost exclusively on cash with no banking facilities; the majority of their money became worthless and they had to rely on a black market of exchange to receive smaller notes at unfavourable rates.
Whilst it remains to be seen what the exact benefits and pitfalls of a cashless economy will be in the UK, the move towards a completely cashless society certainly feels inevitable. Big businesses will likely benefit, whilst smaller, independent traders will be forced to adapt or potentially fall by the wayside. However fast the rate of change, it is entirely possible that before long, seeing Churchill or Austen's face as you pay for your morning coffee will seem like a distant memory.