Is Cash Still King?
by Kate O’Flanagan (Deputy Features)
Technological advancements have changed the way people live their lives, from how we communicate to how we shop. The digitalisation of society is inescapable, and cash may soon go the way of the landline. Sweden is set to become a cashless society this year, with the other Nordic countries close behind. In Ireland ‘cash only’ signs have cropped up in cafés and shops. Where did this change come from, and what could the knock-on effects be?
While the slow, almost inexorable shift towards a card dominated economic system was already underway prior to 2020, the pandemic accelerated the process. When the world still wasn’t sure how COVID-19 was spread, any and all precautions were taken to limit the number of interactions between people. Establishments that stayed open pivoted to card-only systems, while the rest saw their commerce moved entirely online. EU-wide the number of cash payments declined from 86% in 2019 to 73% in 2022, while mobile app payments more than tripled, increasing from 3% to 10%. One-off online payments also increased from 6% to 7% over the same period. By 2020, card payments accounted for 64% of all payments in Ireland, and almost 10% of all payments were made using e-money systems. This increase was aided by the change to the maximum contactless payment made during the first nationwide lockdown, an increase from €30 to €50. While we now know that fomites (pathogen carrying surfaces) do not play a large role in the transmission of COVID-19, the preference of businesses and consumers for card over cash transactions has remained in place. Some businesses no longer accept cash, opting for a card-only model.
In Ireland, individual transactions are governed by contract law; terms of settling credit include payment methods. As long as a business notifies customers in advance that they only accept payments in specified methods, they can legally refuse cash.
For businesses deciding to go cashless, it is the high cost of handling cash that drives the decision. Cash-handling businesses are subject to higher insurance rates. Additional staff time is required for physical trips to the bank, where they are charged for lodging coins. Bank charges on handling cash are currently 1.25% but are set to increase to 2%. Contactless payments, meanwhile, sit at 0.19% per transaction. In addition, card payments are faster for business, taking 1-2 seconds compared to the 7 seconds for cash payments.
A cashless society would also benefit banks. It is estimated that cash operations account for between 5% and 10% of total bank operating costs. No cash eliminates the need for expensive ATM networks and salaried tellers. A cashless society would hand an insidious amount of control over our everyday lives to banks. Not just to banks, but to other corporate entities – tech companies, to name just one example.
Contactless payments are, at present, free to the user – but what if there was no cash alternative? Would banks start charging us to buy the simplest of necessities?
If every transaction is carried out via card, then banks have access to an expansive map of your tastes, interests and actions. What do they do with the unprecedented metadata collected on our spending habits? Facebook’s Cambridge Analytica controversy has already highlighted the insidious lengths political research firms will go to with our data. What are the potential ramifications if we hand even more information to them?
As the Co-operative Society highlighted in their zine, RAT.JPEG, in cashless transactions everything is watched and recorded. And when your data is collected, you become the product.
And what about security risks? There is some evidence in Sweden that the wide scale adoption of cashless transactions has led to a decrease in cash-related crimes like robbery and tax evasion, in addition to a reduction in black market activity. However, there has also been a 38% increase in global cyberattacks from 2021 to 2022. A fully digitised cashless society is at the mercy of the digital infrastructure it is built on; a singular tech glitch could bring it to its knees.
A cashless society doesn’t mean mostly cashless and you can use some cash here and there. It means no cash. At all. No more tips pocketed untaxed. No more spare change for the homeless, or buskers. No more tucked-away funds for those attempting to escape violence.
Going cashless would leave many of society’s most vulnerable behind, namely the elderly and those on a low-income. A level of internet literacy is required to function in a cashless society. A level of internet literacy that elderly people often do not have; half of the 65-74 age group had never used the internet, as reported by Age Action Ireland in 2018.
To have a bank card, you must first have a bank account. 12% of approved housing body Clúid’s social housing tenants don’t have a bank account. In the United States, 30% of people don’t have access to a bank account. Migrant workers and undocumented immigrants account for many of those without bank accounts, cash is an absolute necessity for them.
Tangible currency can be easier to manage and budget with. It is also useful when it comes to teaching children financial literacy. Physical money they can hold and see has more of an impact than the nebulous idea of ‘money in the bank’.
Even with the sustained increases in card and e-commerce transactions, it appears that Irish people as a whole are not in favour of going cashless.
Last summer, Allied Irish Banks (AIB) announced that 70 of its branches would become cashless operations. The data informing this decision was sound. They had 2.9million daily digitals interactions, compared to 35,000 customer branch visits. In the previous five years they had experienced a 36% decline in cash withdrawals from ATMs and a 50% decline in cheque usage. As well as an almost 50% decline in branch over-the-counter teller transactions, coupled with an 85% increase in mobile and online payments in the same timeframe. And yet, they had to U-turn that policy decision due to public backlash and ‘unease.’ A European Central Bank (ECB) report that found a post-COVID increase in card and e-transactions also, paradoxically, noted that people across Europe “overwhelmingly” want to retain the option to pay in cash. In November 2022, a Retail Banking Review published by the Department of Finance stressed the need to legislate to protect cash, in line with the ECB findings.
Cash may no longer be king, but in Ireland, at least, it retains some of its power.
