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Economists estimate that only eight per cent of the world’s money exists in the form of tangible coins and notes; the rest is floating in the digital ether. According to a survey by Forex Bonuses, Britain is third in the world league table of cashless economies behind Canada and Sweden, respectively. Today in the UK, cash is used in 34% of payments. But banking lobby groups predict this will shrink to just 16% by 2027.
As we edge closer towards becoming a cashless society, its important to appreciate the risks involved being so reliant on technology for our money. Every form of non-cash-based payment instrument is reliant on technology to some extent – even access to cash needs an ATM! It’s clear that smarter technology is the answer for protecting future-proofing payments, and ensuring we’re moving in the right direction when migrating to digital.
Sweden is an interesting (and extreme) case. Like London’s own transport systems, Stockholm’s metro and buses are cashless. But unlike here, Swedish shops and pharmacies can refuse coins and notes, and its expected half of Swedish shops are expected to stop accepting notes and coins by 2025.
But for a country that’s pioneered living without cash, they are now are urging citizens to stockpile coins and banknotes in case the country’s move towards a cashless society leaves them without money in a cyber-crisis. In this modern digital age, power outages, mass computer glitches, cyber-attacks, and even terrorism don’t seem like inconceivable events. And this move will no doubt sound alarm bells in the UK and across the world for other nations to re-evaluate just how significant their reliance on technology really is.
Transitioning away from physical currency in favour of cashless solutions such as contactless cards and mobile payments certainly has palpable benefits; improved security for consumers, less physical cash to handle, and fewer security measures for commerce and banks.
At Somo, we recently conducted research on digital banking in the UK and the future of finance, polling 1000 adults. 63% of UK banking customers prefer to interact with their bank online however when asked about the idea of a cashless society, 43% felt either or somewhat negative.
It’s important we avoid sleepwalking into this cashless world that alienates large sections of society – our older generation and those on low incomes who rely on bank branches and cash. According to Which?, by the end of this year nearly 1,100 UK bank and building society branches will have closed since the start of 2018. They’ve also discovered that free-to-use cash machines are disappearing at a rapid rate, with nearly 1,700 machines starting to charge for withdrawals in the first three months of this year. When communities are stripped of free access to cash, we are hitting the most vulnerable in our society the hardest.
That’s not even taking into consideration how today’s technology also excludes other vulnerable customers; some touchscreen and chip-and-pin pads cannot be used by the blind and visually impaired.
Bank of England figures show that 2.2 million people are almost entirely reliant on cash. But it’s estimated that more than eight million of us would struggle to cope in a cashless British society.
MP Nicky Morgan, put it simply: “Financial inclusion of vulnerable customers…should be of the utmost priority for financial services providers, the government and financial regulators”.
Technology has already transformed banking for millions of people – but it has an even greater potential to empower those who are being left behind. In an increasingly cashless society, we need to ensure there are such adequate financial services for all demographics, both consumers and retailers alike.
When the time comes, and cash is redundant, unbanked individuals will need to have access to useful and affordable financial products and services that meet their needs.
Technological progress should ultimately only ever be measured by efficiency and benefit to the consumer; providing affordably simple, frictionless ways for consumers to pay.