It can be a fool’s errand trying to accurately predict the future. In 1955 Alex Lewyt, president of the Lewyt Vacuum cleaner company, predicted “Nuclear powered vacuums will probably be a reality within 10 years.” There are many examples of technology predictions that haven’t quite got it right in hindsight – look at computers, cars, the telephone, television and of course the internet.
Having said that, I am going to make a prediction, not so much about the impact of a technology on society, but it’s impact on a form of payment thought to be more than two and a half thousand years old: cash. I don’t believe that a cashless world is a place that I will ever live in. While the growth of contactless and mobile payments is impressive for a new technology, the growth of cash, year on year, since the advent of these technologies, is equally as impressive. I am of course contradicting some of the most important voices in banking. “Cash I think in ten years’ time probably won’t (exist). There is no need for it, it is terribly inefficient and expensive,” said John Cryan, chief executive of Deutsche Bank. Please bear with me as I try to explain why I think cash will remain a fundamental part of society in the future.
There are 74 trillion emails sent worldwide, yet there is still a need for letters. PWC estimates that by the year 2023 there will still be 8.3bn letters sent in the UK alone. Netflix has 83 million subscribers worldwide, and while it has changed the way people consume entertainment the predicted impact on the cinema industry has not materialized. For example, in the UK alone there are still over 170 million admissions every year, and in France there are more than 200 million admissions yearly.
The internet’s impact on retail has been great, however, the predictions that the internet would be the death of high street retailers have been greatly exaggerated (with the notable exception of a few such as Woolworths in the UK). Indeed, in August UK high street footfall rose by 1.1% (BRC).
Let’s compare that with the volumes of cash transactions versus the volume of contactless card transactions. In the UK in 2015, £9.4 billion (UK Cards association) was spent on contactless cards compared to the £188 billion that was withdrawn from ATMs (RBR).
It is worth noting the noise around the “massive growth” of contactless is from those companies who are benefiting from merchant fees as a result of the use of contactless. We live in a world where financial inclusion is becoming a greater political concern for many countries. The unbanked and underbanked rely on cash transactions, and trying to move them to expensive devices, or using cards which they have no access to is only creating a barrier to them joining the financial world. Even the United Kingdom (2.3% unbanked – Financial Inclusion Commission) and United States (7.7% unbanked) have a large number of people who, without cash, would be left struggling to live their daily lives.
The drive to move people towards cashless payments is one which is founded in reducing crime and tax avoidance. These are of course noble and just reasons to move to a cashless society, but what of those concerns about a cashless society? The lack of privacy around an individual’s spending habits, for example. Cash allows for payments to be made with privacy, and a receipt from the merchant can be the proof of the payment if it is ever required. The fact that cash is tangible and something that the owner can touch and examine gives people confidence in the payment method that they are using – there can be little or no dispute over the value of a note or coin.
While cash may not be fashionable, or indeed desirable to many of those who set financial policy, it is still necessary and in general a force for good. The ability to self-regulate the payments industry by virtue of its mere existence, to bring those frozen out of the financial world in from the cold, keep privacy as a part of the buying and selling process and to give individuals confidence in the payment method they are using, and there can be no mistyping of numbers. The future for cash may be one that is under scrutiny, but while it still accounts for 85% of global consumer transactions, the future of cash is one that is sure to last.