One of the recommendations for businesses operating during the Covid 19 pandemic, is that they should encourage people to pay by contactless debit card. I say encourage, because whilst we and many other countries are rushing headlong towards, if not a cashless society, at least a much-reduced role for cash and yet there are still some obstacles – hence the reason they were recommendation rather than enforced restrictions. Last weekend, before the lockdown was more strident, my partner and I decided to head for Filey and a walk on the beach where we hoped we could be sufficiently socially-distant. Imagine our shock ar finding that everyone seemed to have had the same idea, the weather being fair if breezy and the seafront was almost as crowded as a summer day. Okay, we could keep reasonably distant from other people and the brisk off-the -sea breeze whisked any miasma emanating from others swiftly away. Besides, at this stage, it was a numbers game and the chance of catching the virus seemed but a small percentage as long as we kept our distance and touched nothing. Nevertheless, we risked ordering a cup of tea, paper cups naturally, from a cafe where I paid with a contactless debit card. I remarked that it was fortunate that they had the facility but the woman behind the counter said that the majority of their customers, local, elderly and not enthusiastic about card payments let alone contactless, prefer to use (filthy)cash still.
So there is the first issue – resistance. But in China, a country also well on the way to a cashless economy, the lag is more of an urban/ rural split though this might also equate to an older generation of peasant society since the youth have often left for the cities. This is not just a resistance issue but an internet access issue since all payment systems depend on internet coverage for universal availability. Wait that’s not quite true – on another continent not hitherto noted for financial innovation, things have taken a different direction altogether – in Africa, they have developed mobile phone apps to make payments. Where China has skipped over the whole Debit card stage and gone straight to the smartphone using 3D barcode scanning, in Africa, they have skipped over the whole banking stage because they don’t have enough banks and like China, they especially don’t have enough banks in rural areas. Also, Africa does not yet have enough smartphones to do QR Codes but it has a thriving market in secondhand mobile phones which together with necessity, the mother of invention, has created a uniquely African solution. Africans also demonstrate the highest rate of peer to peer payment – that is paying another person by text.
Top of the league for a cashless society, closely followed by Canada and then the UK, is Sweden where many people cannot remember using cash in the last month. But here another warning note has been sounded, the government has asked the Swedish people to envisage what would happen if there was a prolonged internet outage due to solar storm or more sinisterly, due to cyber warfare and they have suggested that citizens prepare emergency packs including – yes you guessed it – cash.
What Sweden and indeed most societies that are going quickly cashless demonstrate, is that the adoption is people-led – grassroots up not bank or government down. People like using apps for their convenience and if spending money was easy, perhaps too easy, with a Debit or Credit Card – then waving your phone at a terminal doesn’t seem like spending money at all – at least until the bill arrives…
One of the things that accelerates the adoption of whatever form of cashless purchase, is when the associated charges are reduced to the point where small traders, busses and toilet payments, all small, become viable. But there is a downside when, as in Sweden, even banks no longer want to handle cash either in or out, and the number of branch closures increases. This is also due to online banking, but again, the rural, elderly, internet poor and disadvantaged suffer first and most.
Another reason often put forward by those who wish to encourage the race towards cashless, is the potential reduction in crime – no bank robberies, no safes necessary, no pilfering of cash by staff, no money laundering. However criminality rarely goes away – it just shifts to new opportunities so cybercrime includes identity theft, new forms of fraud based around digital payment methods. Like the fight between humans and viruses, each side tries to stay ahead. For example, a new generation of payment cards will incorporate ultra-thin fingerprint readers which means my partner and I will have to stop paying with whichever card is appropriate to our budgetary arrangements. Once again, poor and older people often use cash to physically allocate spending – the rent jar, the shopping jar etc. and these people are the least likely to have time, means, understanding or inclination to use those natty apps offered by banks to assist you to manage your expenses…
Other aspects of crime might be that those who deal outside the law such as drug dealers can hardly use digital payment systems because they leave a trail (though not a paper trail!) and whilst some might cite this as a way of squeezing such activities out of existence, it would more likely create alternative illegal currencies or barter systems. Even the Bitcoin, a virtual coinage much touted as being impregnably secure, based as it is on blockchain technology, turned out to be hackable if criminals could muster sufficient encryption busting computer power. Interestingly, the method for tracking down these robberies was to trace the extreme power consumption required by such computing power.
Another huge area in the debate over the pro’s and cons of cashless is the aspect of control. There are no bank charges for keeping your money under the mattress and at the other end of the scale, once you are totally digital banked, you are at the mercy of bank charges, interest rate changes – once there is no physical cash, the banks don’t need to work so hard to incentivize you to choose their bank to keep it in. Furthermore, it is easier for the government to keep track of citizen spending and indeed the citizen themselves with digital. China’s government are rumoured to be entering the market, currently dominated by two large phone payment apps, with their own offering and where will citizens hide from the police or the taxman then? Of course, the answer given to that one, is if you have nothing to hide…
So. the current virus crisis might push a few more people to finally adopt payment by card and contactless but as a society, we perhaps need to question our unconscious slide towards cashless, be it for fear of solar storms, cyber crime or overweaning government control. Remember, its not for nothing that the rich have always placed their trust in gold and land…
So there is the first issue – resistance. But in China, a country also well on the way to a cashless economy, the lag is more of an urban/ rural split though this might also equate to an older generation of peasant society since the youth have often left for the cities. This is not just a resistance issue but an internet access issue since all payment systems depend on internet coverage for universal availability. Wait that’s not quite true – on another continent not hitherto noted for financial innovation, things have taken a different direction altogether – in Africa, they have developed mobile phone apps to make payments. Where China has skipped over the whole Debit card stage and gone straight to the smartphone using 3D barcode scanning, in Africa, they have skipped over the whole banking stage because they don’t have enough banks and like China, they especially don’t have enough banks in rural areas. Also, Africa does not yet have enough smartphones to do QR Codes but it has a thriving market in secondhand mobile phones which together with necessity, the mother of invention, has created a uniquely African solution. Africans also demonstrate the highest rate of peer to peer payment – that is paying another person by text.
Top of the league for a cashless society, closely followed by Canada and then the UK, is Sweden where many people cannot remember using cash in the last month. But here another warning note has been sounded, the government has asked the Swedish people to envisage what would happen if there was a prolonged internet outage due to solar storm or more sinisterly, due to cyber warfare and they have suggested that citizens prepare emergency packs including – yes you guessed it – cash.
What Sweden and indeed most societies that are going quickly cashless demonstrate, is that the adoption is people-led – grassroots up not bank or government down. People like using apps for their convenience and if spending money was easy, perhaps too easy, with a Debit or Credit Card – then waving your phone at a terminal doesn’t seem like spending money at all – at least until the bill arrives…
One of the things that accelerates the adoption of whatever form of cashless purchase, is when the associated charges are reduced to the point where small traders, busses and toilet payments, all small, become viable. But there is a downside when, as in Sweden, even banks no longer want to handle cash either in or out, and the number of branch closures increases. This is also due to online banking, but again, the rural, elderly, internet poor and disadvantaged suffer first and most.
Another reason often put forward by those who wish to encourage the race towards cashless, is the potential reduction in crime – no bank robberies, no safes necessary, no pilfering of cash by staff, no money laundering. However criminality rarely goes away – it just shifts to new opportunities so cybercrime includes identity theft, new forms of fraud based around digital payment methods. Like the fight between humans and viruses, each side tries to stay ahead. For example, a new generation of payment cards will incorporate ultra-thin fingerprint readers which means my partner and I will have to stop paying with whichever card is appropriate to our budgetary arrangements. Once again, poor and older people often use cash to physically allocate spending – the rent jar, the shopping jar etc. and these people are the least likely to have time, means, understanding or inclination to use those natty apps offered by banks to assist you to manage your expenses…
Other aspects of crime might be that those who deal outside the law such as drug dealers can hardly use digital payment systems because they leave a trail (though not a paper trail!) and whilst some might cite this as a way of squeezing such activities out of existence, it would more likely create alternative illegal currencies or barter systems. Even the Bitcoin, a virtual coinage much touted as being impregnably secure, based as it is on blockchain technology, turned out to be hackable if criminals could muster sufficient encryption busting computer power. Interestingly, the method for tracking down these robberies was to trace the extreme power consumption required by such computing power.
Another huge area in the debate over the pro’s and cons of cashless is the aspect of control. There are no bank charges for keeping your money under the mattress and at the other end of the scale, once you are totally digital banked, you are at the mercy of bank charges, interest rate changes – once there is no physical cash, the banks don’t need to work so hard to incentivize you to choose their bank to keep it in. Furthermore, it is easier for the government to keep track of citizen spending and indeed the citizen themselves with digital. China’s government are rumoured to be entering the market, currently dominated by two large phone payment apps, with their own offering and where will citizens hide from the police or the taxman then? Of course, the answer given to that one, is if you have nothing to hide…
So. the current virus crisis might push a few more people to finally adopt payment by card and contactless but as a society, we perhaps need to question our unconscious slide towards cashless, be it for fear of solar storms, cyber crime or overweaning government control. Remember, its not for nothing that the rich have always placed their trust in gold and land…
