By Olivia Groom
Cash is a nuisance; there is frankly nothing more infuriating than receiving pennies after buying a psychologically priced good or service. Thankfully, a rise in contactless payments has reduced the amount of irritating loose change jingling in our pockets. Such is the infrequency of using anything but contactless that consumers often woefully discover they have forgotten their card pin at the till. Although developed countries were already sidelining cash out of their economies, fears over spreading the virus have stimulated many smaller, independent shops, cafés, and businesses to encourage contactless. A Mastercard study in May 2020 revealed 66% of U.K. transactions were contactless, a figure propelled by raising the limit from £30 to £45. This is unsurprising considering the clear benefits of living without cash. Online banking is becoming increasingly straightforward; it permits accurate exchanges that ensure consumers look after their pennies. Unsubstantiated arguments stressing the complexity of contactless payments for the elderly dissipate to all but a memory when one realizes how incredibly quick and easy it is to tap a card against a machine. Undoubtedly, we should become a cash-free country. One may scornfully think we have a great amount of more pressing issues to debate over than a ban on cash. However, we are experiencing an unmissable opportunity to go cashless, which can only be fulfilled by banning cash.
Realistically, a cashless society is not imminent. The pragmatic transformation of paper to polymer notes demonstrates the Bank of England’s belief that cash is here to stay. Polymer notes are harder to counterfeit and far more resistant to the wear and tear than their paper predecessors.
To that end, we could let cash naturally diminish. Whilst there may have been severe prohibitions on our lives and established customs this year, undoubtedly many would denounce it ludicrous to bother banning cash. All the drug dealers and black marketeers would surely go bust, those with cash-in-hand jobs might even pay tax, and one cannot even imagine the uproar from five-year-olds deprived of their one pound from the tooth fairy. However, it would be a long process to allow cash to die on its own accord: creating decades of wasted time senselessly exchanging polymer between hands. Cash will last for as long as it is permitted to last – it needs to be banned now.
A cashless future presents a glaring opportunity to reduce crime and destroy the Black Economy, which dodges £40 billion worth of tax each year. It is difficult to hide income and evade taxes when there is a record of every transaction one has made. Money laundering is also far harder if there is a clear data trail of payments from financial institutions. Offenders who money launder gain an unfair advantage as they can lower their prices far below market value. Hence, it can lead to criminal organizations dominating the private sector as authorities are unable to trace their illegal activities. Banning cash would directly solve this and reduce the damage of crime against the individuals. For example, cash-paid migrants (especially females) are at greater risk of abuse and exploitation compared to those on payrolls. Moreover, stolen cash can also never be retrieved, unlike money taken through card fraud. Credit cards offer Section 75 cover for purchases over £100 and banks can easily trace transactions. Thus, our nation should strive for a cashless society to decrease damaging illegalities and their impact on society.
Furthermore, there are huge costs associated with cash. A survey last year estimated that the costs to retailers of handling and protecting cash amount to £3,638 each – a total of £17.8 billion across the UK. Backward arguments that cash is vital in ‘rural’ and poorer areas should only be valid in far less developed countries where online access is limited. The unbanked pay on average a ‘banking poverty premium’ of an extra £485 each year for bills and basic services due to missing out on preferential deals and discounts. Those attempting to cope without a bank account also pay four times more to access their money than the banked. There are 1.23 million unbanked individuals in the U.K., including those such as migrants and the homeless who are unable to provide an address. The easy solution: increase access to basic bank accounts, promote awareness of local credit unions, and reduce the number of unbanked to zero. In one decisive swoop we can completely digitalize payments and reap the benefits, rather than permitting cash usage to falter at Swedish levels. As potentially damaging and inefficient government intervention can be, in this instance a bold ban offers the country a real opportunity to progress. The future is online: it is easier, cheaper, and safer.
The opinions expressed in this article are the author’s own and may not represent the views of The St Andrews Economist.