Cash v Cashless: Do We Need Coins and Notes Anymore?

Still using cash in 2018? It’s official, cash is no longer king

Cash v Cashless. Two debit cards with Visa and Mastercard logos.
Last updated:

It’s official. Cash is king no longer.

We spent more often with debit cards than coins and paper in 2017, according to figures from the UK financial industry. British consumers and businesses carried out 13.2 billion transactions with cards and 13.1 billion with cash.

Contactless payments, where you only have to waft your plastic near a card machine to commit to a spend, doubled last year too. About ten years after it was launched, two-thirds of Brits now use contactless.

British consumers and businesses carried out 13.2 billion transactions with cards and 13.1 billion with cash.

Over in Sweden, there’s talk of going cashless altogether by 2025. Retailers are allowed by law to refuse it.

You may, like me, have been in a shop where you’ve been looked upon as quaint or a bit odd because you’ve produced a tenner from your pocket or purse instead of a card or a mobile phone.

So all of this leads to the question: do we even need cash any more?

What Are The Potential Problems of Cashless Sending?

The cashless economy has been good for many retailers. The average cashless transaction is quicker and that can mean higher turnover at the tills.

The banking industry certainly approves of the rise of cashless payments because it reduces their costs.

To see how popular contactless has been with consumers, you only have to notice the signs stuck to card terminals informing shoppers that ‘This Machine Is Not Contactless’. The banking industry certainly approves of the rise of cashless payments because it reduces their costs.

One study has found that 2,900 UK bank branches have closed since 2015, as the big name mergers and the rise of mobile and online banking continue to take effect.

The closures are partly a reflection of our national spending habits too, which show that we Britons now spend nearly a fifth of our money online. A twenty-pound note from the cash machine isn’t much good when we’re hurriedly clicking to order that last minute anniversary present for next-day delivery.

One study has found that 2,900 UK bank branches have closed since 2015…

There is, of course, a ‘but’ here. Branches shutting may not be too much of a problem for people in cities and towns well served by alternatives, but it’s often a different story for people in rural areas.

Many consumers have found their closest cash machine is further away as banks close and ATMs are taken out of service. It’s worth remembering that not everyone prefers to plastic over paper and coins, but many feel like they are having that option taken away.

Trusting Technology

The rise of cashless means we are putting more faith in technology too, but that comes with risks.

In the summer of 2018, the failure of Visa Europe’s systems left retailers unable to carry out card transactions for a whole afternoon. Visa serves 95 percent of debit cards in the UK.

And there’s been another obvious downside too: a huge rise in card fraud. Global card fraud reached $22 billion in 2016, according to the payment news site Nilson.

What Do Companies Know About Our Spending Habits?

Critics of the cashless economy point to another concern: the information that companies gather about our spending.

Google says it is able to track 70 percent of debit and credit card spending in the US. As well as being able to follow website spending, it reportedly uses location tracking to work out when people have searched for an item online, then gone to a real shop to buy it.

Other online innovations could have implications for our privacy. Amazon Pay allows people to use their card details stored on Amazon, to spend on other websites. Amazon insists it uses data responsibly, but online services like these are providing the companies involved with a wealth of information about our spending.

It also means we’re moving further away from the traditional system banking and its regulations. Consumers are putting more faith in the companies to look after their data, and governments to keep on top of it.

A Battle for Economic Control

Back in Sweden, the relentless rush to cashless is not without concern. The central bank there is looking at what the flight from cash spending could mean.

…if people aren’t using that money, the central bank has even less control over the economy…

Remember it is a central bank’s job to issue the coins and money in our pockets and regulate the money supply.  So if people aren’t using that money, the central bank has even less control over the economy and the private sector continues to take over.

Sweden’s answer could lie in its development of a new digital currency, the e-krona. If it works, it could help the central bank to better keep tabs on the big picture. If not, there’s more pressure on the government to make sure it has the right laws and regulations to keep the private companies in check.

Cashless Pros and Cons

The rise of cashless spending has been a boost in many ways: not least for consumers who appreciate its speed and convenience.

But as with many other aspects of the information age, there’s a trade-off.

The rise of digital spending has big implications for us all about how much of our lives we are comfortable with other people knowing.

And that might be something to bear in mind, the next time you reach into your wallet.