Is it time to abandon cash?
Two thirds of Britons believe Britain will be cashless by 2036 according to one YouGov survey. Meanwhile, Sweden is close to becoming entirely cashless already, with notes and coins only accounting for 2% of all transactions made in the country last year.
Abandoning cash is touted by many as being safer – no more worrying about ATM skimmers when you get money out – and an easier way to manage your finances. The App Store abounds with software designed to take your transaction data and turn it into tangible strategies for saving.
There are downsides, of course – digital fraud not least among them – but when even top Bank of England economists recommend the move to a cashless society, the question needs to be asked: is it time to abandon cash?
Fighting crime or feeding it?
The jingling of coins in your pocket. Extracting a sheaf of notes from your wallet. Flashing cash is the easiest way to make yourself a target for a mugging. Would switching exclusively to inconspicuous cards help reduce crime?
Yes, as it turns out. A large-scale study in America found that having switched to electronic payment for benefits in the 1990s, the overall crime rate dropped by a whopping 9.8%. Why? Simply put, cash is easy to steal, money in a bank is harder. By removing cash, you also remove the most tell-tale sign that you’re worth stealing from.
The flip-side, of course, is everything we all worried about when contactless cards appeared. As Sweden has weaned itself off physical money, fraud – usually involving identity theft – has more than doubled. It’s nearly impossible to rob a bank (many Swedish banks no longer carry cash, even in the vaults) so phishing is the prime crime to indulge in.
But given the choice – would you rather be held up at knife-point for your wallet, or have money digitally siphoned from your account? Sure, you’d have to cancel all your cards and launch a fraud claim with you credit card company, but to put it more succinctly: would you rather trauma or a logistical headache?
The case for cash
Cashless is safer. And conducting every transaction digitally makes it easier to harvest data – and therefore easier to manage your money. So why keep cash at all?
The most obvious answer is there is still a generation among us who are less comfortable with technology. Many older people are still to get to grips with smartphones, the internet, computers even, and may never do so. To remove cash entirely would be to alienate a large segment of the population from the economy altogether.
But it’s not just retirees who benefit from keeping cash. 15% of respondents to a Gocompare survey were concerned digital payments encouraged them to spend more than they should, while 7% didn’t connect this way of spending with ‘real’ money. And while 18-24 year olds are more likely to engage with online money management, they’re also twice as likely to not to equate digital payments with the money they have. Money leaving your account just doesn’t feel as real as handing someone a note.
And cash could still come in handy in these economically uncertain times. As events like Brexit repeatedly shock our financial infrastructure, and negative interest rates are seriously considered – a previously unthinkable policy – holding on to cash may become the wisest thing to do with your money.
The privacy problem
Cash is almost the only way to transact with absolute anonymity. If we ditched it, our electronic records would provide financial institutions with a highly detailed breakdown of our lives. We already know how companies like Google and Facebook monetise user data, and there are serious concerns about how transaction information could be used by financial institutions.
Don’t throw your wallet away just yet
So is it time to abandon cash? Certainly not yet. Possibly not until the privacy issue has been solved. There may be some traction in cryptocurrencies like BitCoin, although the supposed anonymity of these has already been compromised. But a technological solution could certainly be in the works.
What do you think? How often do you still use cash? Would you be comfortable not having access to physical money? Tell us your views in the comments.