Our UX Research Consultant Geoff Evison discusses the pros and cons of cold hard cash and the future of currency.
In 2014, Sweden announced its aim of going cashless, and Denmark has followed suit. The 500€ note is no longer being printed and two of the top Norwegian banks have called for cash to be eliminated. Apple Pay and Android Pay are experiencing spectacular rates of growth. Millennials now go out on a Saturday night with no cash and rely solely on NFC/Tap & Pay for their evening’s entertainment. On the face of it, it appears that cash’s days are numbered - but the facts paint a different story. The truth is nuanced, and serious privacy issues need to be considered.
If cash were to be eliminated, Governments would be able to track every single cent ever spent. This might be great for the tax office and crime fighting departments but civil libertarians have justifiable concerns about Big Brother monitoring your every move. Arguably less of a concern to Norwegians, where every citizen’s tax return is viewable by any other citizen, but there are many amongst us who cherish what few forms of privacy are left to us - our transactions included.
The question then is; are we prepared to forgo our privacy to eliminate tax cheats and cut down on crime? Governments are conflicted in that they would love to collect more tax revenue and to reduce fraud, but cash is one commodity that they can still effectively control. Eliminate cash and watch the digital currencies proliferate. Bitcoin is already the favoured currency of both hardened criminals and opportunistic criminals alike. If you open some malware and infect your computer, most likely you will be asked for a ransom in Bitcoin to free your machine. I have heard of two cocaine dealers recently arrested - their currency of choice? Bitcoin.
Conversely, up until the 1980s, bank robbers might escape with $10 million at the most. Barclays estimates that $22 billion was stolen last year electronically. Digital technology does not mean a reduction in financial crime.
The 500€ note is no longer being printed for two reasons. Firstly, it’s favoured by criminals. Secondly, it is sabotaging European monetary policy that discourages you from saving money by charging you to have savings. In these days of negative interest rates, banks in Europe charge you to hold your cash securely, whereas a large wad of 500€ notes can be stored pretty much wherever you should choose - and for free.
We should also consider whether a digital currency will reduce our propensity to save money. The household savings rate is always closely monitored by Governments and already they are concerned by Millennials lack of savings ethos. Does ‘the youth of today’ not save because they see numbers as purely a digital affectation to which they have no attachment? Is it just those who were brought up using cash on a daily basis, who like the feel of the physical folding stuff who will save?
But it seems that many people still trust cash. According to Euromonitor International, $14.4 trillion of payments were made in cash last year compared to $9.6 trillion on payment cards. It was not until 2014 that non cash transactions overtook cash transactions in the UK.
However, the perceived demise of cash may simply be a first world concept. The numbers paint a picture of cash that is far from dead globally. Imagine the difficulty market shopping in India or Africa without good cold hard cash. Whereas, if you look at developed countries banking habits, the indicators point to a move away from branches and cash. 92% of Barclays’ (UK) transactions are online and 82% of their traffic is via mobile device. 85% of Norwegians rarely or never visit a bank.
It appears the higher the GDP of the country, the greater move away from cash. Internationally there is a large divide. In the USA, 20% of people operate with only cash and no other form of payment. In Norway, 94% operate with no cash and some establishments dont take cash as payment at all. In Greece and Italy, cash is highly preferred as the means of payment.
So, what are the implications for Australia? Our banks need to use the trust and security that customers feel towards them to protect their market share. Is allowing these digital wallets on to their payment platform opening the gates to a Trojan horse? Already in customer testing I have seen some scepticism of digital wallets, such as Android Pay and Apple Pay, and a reluctance to hand over yet more personal information to the digital giants. Participants have expressed a desire to stick to their traditional bank for digital payment methods.