In our previous article, we explored the pros and cons of a cashless society, and what the impacts on bookkeepers and accountants would be. Viewpoints were positive overall, but why is physical money still around?
Alexandra Bond Burnett, MD of Blue Arrow Accounting says says “There is a tradition to cash, and about how it communicates the value of money, that will need to be addressed.”
When credit cards arrived, there were fears that people might spend too much and get into debt as they weren’t seeing the actual money leaving their hands. Is something similar going to happen if we go entirely cashless?
“Actually,” says Bond Burnett, “what the challenger banks like Monzo, Starling and Tide are doing is including the budgeting and expense reporting when you use them.” This applies context to your spending, she says – and it’s having that context that’s essential.
With these modern banks giving you so much more insight and awareness of your spending via card, maybe the biggest challenge to going cashless is the necessary mindset shift.
Cash acts as a visual prompt
But these shifts in how we use – or cease to use – cash mean that it’s important to think about how we see money.
As well as running her own practice, Bond Burnett is a speaker and presentation skills coach at Bond Ambition. “I teach this in financial storytelling. If you deliver a report and say profits are up £5 million last year, it can create blank faces – there isn’t any context. I say, what’s the human transaction?
No one has ever seen five million pounds. But if you say, for every 49p in the pound, our not-for-profit gets another penny – you can understand it, and it becomes tangible information.”
This becomes a real issue in our potentially cashless society; how will we teach children about the value of money? Early maths books routinely use coins as a way of teaching how to count.
Cards are accepted virtually everywhere
“We are almost at the point where there is no longer anything you need to carry cash for,” argues Della Hudson, Director of Hudson Business Advice and author of The Numbers Business: how to grow a successful cloud accountancy practice. “As a result, I don’t think people will even carry a few coins around any more.”
Why do we have cash at all? Hudson asks. “For many years, for many people, it was mainly the pub! But you can buy a meal or a drink on a card now and no one bats an eyelid.”
The drive towards cashless is something that will evolve, Hudson believes; “you don’t have to push people into it, it will just eventually happen.”
Young people “simply do not want cash,” she says, observing from personal experience that “children with a paper round give their parents the cash to pay into their accounts, to buy things with cards online!”
Tightening up cyber security
This leads us to another caution about cashless; is the security around the technology strong enough?
Alexandra Bond Burnett is not so sure. “The amount spent on cyber security is vast, and the personal losses when someone gets caught out can be severe. A lot of business owners I know – intelligent, savvy people – have been caught out.”
It’s common, she says, because the techniques used are so effective – playing on people’s fears of financial security, rushing people into thinking something is urgent, or using fear of authority as a lever to fraud. Bank transfer frauds or ‘push payment’ scams as they are sometimes called, affected some 80,000 victims in the UK last year.
The answer may be better financial education – “this all needs to be taught, and everyone, young and old, needs to be aware of what happens.” For Bond Burnett, “it’s vital to educate end users in terms of their financial safety.”
“Facial recognition and AI payments are becoming more commonplace”, says Bond Burnett; “and as with most technologies, this can be scary to begin with but it’s going to be a boost for local economies.”
“I simply don’t believe there’s any need for cash any more,” concludes Della Hudson. “The only thing keeping it in our pockets is people’s attitudes to it – and those attitudes are changing fast.”
A cashless society is perhaps inevitable; but if it happens we will need…
- Better financial education. It’s essential that young people understand the value of money and it needs to be understood that children currently learn much of this from coins.
- Better security education. Whilst legislation is appearing to help consumers who have been the victims of crime, understanding how scams work and knowing how to be personally financially educated is more important than ever.
- Technology backups. Financial cybercrime could seriously damage businesses and the operation of essential infrastructures if there is no widespread use of cash to overcome a temporary problem, and data breaches potentially cause problems for individuals.
The advantages of cashless are, however, clear…
- It’s easier both for businesses to get paid, and for customers to see what they’ve been paid. Personal finances are therefore clearer because you can manage your budgets and have a much better real-time view of your finances.
- There are significant opportunities for businesses at pop-up shops, “on the move” selling such as festivals, and in areas where there are no ATMs, to sell effectively to people without having to rely on cash.
- Tax evasion and money laundering are likely to be far lower when cash is replaced by electronic transactions, because there is always an electronic trail. Theft is likely to be lower as there is less opportunistic availability.
- It’s easier to exchange currencies and travel safely if you don’t need to carry cash – but it can be a useful ‘belt and braces’ back-up.
Physical cash is tangible and familiar; it’s traditional in our society. Moving on from that is not going to happen over night, but it looks like we largely have the technology and infrastructure in place to transition. Whilst consideration is required for teaching children about money and its value without coins, this could be seen as an opportunity for improving financial education in general, rather than a barrier
People clinging to the familiar, comfortable way may be the main reason we still use cash; is it time to let go?
For more on related topics:
- AAT urges accountants to seek training to prevent money laundering
- Ready, get set, BOOM: further changes to the Anti Money Laundering regulations
- Digital currency: does virtual cash have real risks?
Mark Blayney Stuart is Business Journalist of the Year, Wales Media Awards 2017 and Former Head of Research at the Chartered Institute of Marketing.