The cashless direction in which the world is moving has both its advantages and shortcomings, as was clear at a recent event hosted by UK challenger bank Monzo, where speakers debated the question, ‘Is cash dead?’

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Is Cash Dead?

2. GET FINANCE SMART
Is cash dead?
For hundreds of years, society has been built on cash. If I were to say the word ‘money’ to
you, your mind will most likely imagine physical notes and coins. And yet in somewhat
lightening speeds, markets around the world seems to be approaching the point where
money no longer relies on cash. Cash is no longer king, for some.
In Sweden, cash equates to just 1% of GDP1
. In China, Alipay and WeChat Pay have driven
a speedy transition straight into mobile payments, with the country bypassing debit or
credit cards for the most part. And it’s not just among the more advanced economies that
a cashless society is close – the mobile money transfer technology MPesa has driven
Kenya to leapfrog the rate at which many more advanced economies are transitioning to
cash; and in Zimbabwe, liquidity and foreign currency shortages meant 96% of total
transactions in the country were electronic in 20172
.
The reasons behind each of these shifts towards a cash-free society are highly varied, with
technology, infrastructure, politics and culture playing crucial, yet varying roles, in
different markets. It follows, therefore, that the move to cashless is not a global trend,
with the factors that drive a society’s relationship with cash interplaying differently in
each market. In Germany, for instance, 80% of payments are in cash3
- economists offer
various reasons for this resolute reliance on physical cash, reasons which include a strong
desire for privacy and relatively low trust in the government4
. These barriers have both
driven and been exacerbated by slow growth in payments infrastructure – even large
businesses, such as supermarket chain Aldi and German branches of Ikea, only began
accepting credit cards as recently as 2015 and 2016, respectively.5
The UK is among those markets that have moved away from cash, at a speed of change
which has been quite remarkable. In 2009, one in six UK payments were cash; today this is
just 34%, with forecasts suggesting cash payments will fall to just 16% by 20276
. However,
how much further we should edge into cashless-ness is by no means a simple question to
answer, as was clear at a recent event at UK challenger bank Monzo where speakers
debated the question, ‘is cash dead?’
The turnout alone was impressive – whether this reflected a societal fascination with the
host challenger bank or the topic is unclear, but the topic is not a simple one, and the
debate was consequently fascinating.
1
https://www.weforum.org/agenda/2018/11/sweden-cashless-society-is-no-longer-a-utopia/
2
Reserve Bank of Zimbabwe https://www.csmonitor.com/World/Africa/2018/0813/A-nearly-cashless-Zimbabwe-tests-the-
limits-of-mobile-money
3
https://www.bloomberg.com/news/features/2018-02-06/germany-is-still-obsessed-with-cash
4
https://www.bloomberg.com/news/features/2018-02-06/germany-is-still-obsessed-with-cash
5
https://www.bloomberg.com/news/features/2018-02-06/germany-is-still-obsessed-with-cash
6
UK Finance

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Is cash dead?
CASH IS DEAD
Monzo’s Simon Vans-Colina pointed out that we are already over the tipping point in the
UK - in June last year, card purchases overtook cash, and from here, cashless payments
only become more convenient and cheaper than the alternative for consumers, businesses
and the government alike.
For Vans-Colina, one of the stronger arguments against cash being that without cash,
crimes such as tax evasion and illegal purchases become much more complex.
“It's somewhat naive to not face up to the fact that this is the
direction of travel.” – Helen Prowse, Square
The second speaker against cash was Helen Prowse, UK Communications Lead at mobile
payment company Square, who approached the debate from the perspective of SME’s.
The environment has never been more challenging for business owners, with “loads of
factors that make it hard to trade, and in particular to trade in cash”. Particularly with UK
bank branches closing, cash creates far more challenges for SME’s than digital
transactions. Time-strapped entrepreneurs and business owners have to ensure they have
floats and a constant supply of change for any cash purchases that may be made; that the
tills balance; then take the time out of their day to go to the bank to safely deposit the
cash they have taken. For small business owners in the UK, it is safer, faster and more
convenient to take card payments than it has ever been in cash.
Small businesses that don’t have the technology to take card payments will lose out on
valuable customers – Prowse explained that 81% of UK citizens say they would shop more
locally if they could pay on card7
. On top of this, it is easier to spend on card – while this
isn’t always positive for consumers looking to budget, it can be a great thing for SMEs.
There are definite benefits to a cashless society, particularly for small businesses. But, as
the speakers for cash made it abundantly clear, there is another side to consider.
CASH IS NOT DEAD
Natalie Ceeney from Innovate Finance, the UK’s industry body for fintech, put forward a
case for why cash is not dead. “Digital does not yet work for everyone”; some of the more
7
Square

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Is cash dead?
vulnerable parts of the population are reliant on cash, with those earning under £10,000 a
year being 10 times more likely to rely on cash, as it helps with budgeting8
- in sharp
contrast to contactless technology, which makes each purchase so easy it becomes
forgettable.
17% of the UK population say they would absolutely not know
how to cope without cash, but almost half of the population
think the complete loss of cash would be problematic9
.
This argument that digital payments don’t work for all of society is so compelling that
even some of the economies that were zooming towards a cash-free society, like Sweden,
have slowed their approach, for fear of leaving people behind.
Ceeney explained that the danger point is when not everyone's ready for cashless, but the
infrastructure is gone. Once cash payments fall below a certain level, the economics of
paying for a cash system come into question – in Britain, cash infrastructure costs around
£5 billion a year to run, with much of this cost fixed in physical cash sorting centres and
ATMs10
. If it falls too low, this model will no longer make sense, but without it, we wouldn’t
be providing for certain parts of the population; a shift that will drive a further divide
between people who started out more vulnerable.
Infrastructure provides other challenges too – outside of the main cities, mobile signals
aren’t expected to offer complete coverage of the UK, and therefore the ability to take an
electronic payment anywhere, until 2030
David Clarke of Positive Money, a non-profit organisation that campaigns for reforms to
the money and banking system, also argued against cash, asking “If [a cashless society is]
the direction of travel, who is driving the car?” His argument was that cash gives us power
and going cashless means we hand over that power to the big banks, who end up with a
huge amount of control alongside a huge amount of our data. On top of this, outages
mean that we can lose access to our money; having some cash in the system remains
crucial for instances like this.
8
UK Access to Cash Review, December 2018
9
UK Access to Cash Review, December 2018
10
UK Access to Cash Review, December 2018

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Is cash dead?
WIDER IMPLICATIONS OF CASHLESS
This potential societal shift undeniably has its challenges; but challenges open up
opportunities, and governments, the payments sector, banks and general businesses need
to consider if there is a role they can or should play. For instance, the advantages of going
cashless may at first seem compelling for many businesses; but the wider implications
may not immediately be clear, with businesses, banks and governments needing to
consider the wider implications of a cashless society on their internal and external policies.
There will be an important role for someone to fill in education.
A huge opportunity exists in improving either cash or cashless options to make them
suitable for all. For instance, Van-Colina explained that Monzo identified that in a world of
contactless options making payments frictionless and forgettable, there is room for a
good kind of friction to help us budget; the bank developed ‘locked pots’ which allow a
user to lock away savings until a date they chose, allowing users to effectively drip-feed
money into their spending pot
While the future is unclear, these opportunities exist; and it will be fascinating to watch
this debate unfold, with different countries and businesses sure to try different strategies
to make the most of this change in coming years. Cash isn’t king anymore, but it’s not
dead either.

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Is cash dead?
If you are interested in learning more about the subject of this article, please contact
Sarah Emmerson, Insights Planner, emmersons@bbdoknows.com,
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