In Depth

The pros and cons of ditching cash

Physical currency use has plummeted during the pandemic

The use of coins could drop by one-fifth after the pandemic as the virus speeds up the shift towards contactless payments, according to the chief executive of the Royal Mint.

Anne Jessopp told The Telegraph that the future “will be less cash, but not cashless” after a fall in the use of coins and a move towards online payments over the past year. “Sometimes when times are tough for people financially they go back to cash,” she added. “I think the one thing that the pandemic has told us is we can’t predict the future anymore.”

Cash use nearly halved in three years and the Covid-19 pandemic accelerated its decline, ATM data showed last October. A survey by the consumer group Which? last year found that one in ten people were refused service by shops when trying to purchase essential items with cash during the pandemic.

For many digital natives, the switch to contactless is a painless one, but for vulnerable people, the closure of cash points and a shift to digital currencies could spell disaster.

Pros

“Numerous studies have shown that going cashless reduces crime rates significantly,” says Mark Scott, director of loan company Swift Money. When people handle less physical cash, “the rate of crimes like bank robberies, burglaries, extortion, and corruption decline significantly”, he continues.

In 2019, an Access to Cash review also noted this, saying there is “clear evidence that cash plays a large role in facilitating crime because it’s untraceable”.

Exponents of a cashless society argue that technology offers a much more secure way to store your wealth as well. “It’s very easy to shut down a digital wallet remotely if it falls into the wrong hands”, and “a secure digital system that implements biometrics” would be “very hard to copy”, says finance blog Money Crashers.

Supporters of the move also believe it would result in greater ease in people’s day-to-day interactions with money.

International travel would be easier without paper currency to change, and retailers could benefit too. Businesses currently “need to store the money, get more when they run out, and deposit cash when they have too much on hand”, says The Balance.

By embracing a cashless system, moving physical money around and protecting large sums of cash “could become a thing of the past”, the US personal finance site concludes.

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Cons

Almost one in five Britons would be left adrift if the UK transitioned to a cashless society, according to the Access to Cash review report published in early 2019. 

The groups expected to be most affected include elderly people, residents in rural communities with poor broadband and mobile connectivity, and those struggling with debt for whom cash is easier to manage.

Review chair Ceeney told The Times last year that in Sweden, where just 15% of transactions are made with cash, government regulators admit “they hadn’t predicted that the decline of cash use would prompt so many retailers or service providers to stop accepting cash, including their hospital network”. 

The sudden increase in cashlessness in Sweden saw the government introduce legislation in late November to protect cash supplies. 

The shift away from using cash saw bank branches across the country shut, leading to the formation of a campaign named Kontantupproret (Cash Rebellion or Cash Uprising). The campaign advocated for the protection of physical cash due to the number of people that were cut off from accessing money.

Which? reports that the law passed in late November “will force large banks into opening or reopening cash services in rural parts of the country”. The legislation is based on a report by the Riksbank, which argued that banks should not forgo their responsibility of handling the legal tender.

Martin Lewis, founder of the charity the Money and Mental Health Policy Institute, has also highlighted the risks posed to vulnerable people and communities. He told the i news site: “Many, especially the more affluent and technologically savvy, now live mostly cashless lives. That’s exactly why protecting access to cash is so important.”

Meanwhile, Which? has also reported concerns about the vulnerability of digital banking. Analysis by the consumer group found that British banks were being hit by IT or security failures that prevented customers from making payments at an average rate of more than once a day, reports The Guardian.

Those opposed to a cashless society have also raised fears that using electronic payments rather than cash could increase consumer debt. “With electronic payments, it’s easy to swipe, tap, or click without noticing how much you spend. Consumers will need to renew their efforts to manage spending,” says The Balance.

The increasing spread of ATM fees is also something highlighted by cashless skeptics. Fees for withdrawing cash were introduced at more than 1,700 ATMs in the UK in the first three months of 2019, according to research by Which?.

In March alone, more than 1,250 free-to-use cash machines were converted to charge users at least 95p for each transaction.

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