In Depth

Pros and cons of ditching cash for contactless

Experts predict that coronavirus will speed up society’s shift away from using cash

A survey by the consumer group Which? has found that one in ten people have been refused service by shops when trying to purchase essential items with cash during the pandemic.

Which? has long called on the government to protect cash as a payment choice, and in his 11 March budget Chancellor Rishi Sunak pledged to preserve cash.

But “that was before coronavirus hit and retailers moved to ban cash transactions because of concerns that coins and notes may spread Covid-19”, The Guardian says.

Within days of shops starting to shut for lockdown, UK cash usage halved, the paper reports, while at shops that remained open “signs reading ‘contactless payment only’ became common at tills”. 

“What Covid did was push anyone who could go digital to go digital,” Natalie Ceeney of the Access to Cash Review, an independent body assessing the future of Britain’s cash needs, told the paper. “During lockdown, cash withdrawals from ATMs were down about 60%. That’s a huge drop.”

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

Here and the pros and cons of shifting to a cashless society. 

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.

Last year’s 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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