The best-yet argument for a cashless society was delivered by Dave Birch, global ambassador, Consult Hyperion at Money 20/20 Europe, in which he outlined clearly the reasons to fight for a cashless society, a clear process of implementation, including who should do this and how exactly, and by what time. Essentially, a Who, what, why, when, where and How argument that leaves little room for naysayers. Anna Milne reports
A manifesto for cashlessness- as Birch said it
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The question is why do central banks keep producing cash?
The Bundesbank say that only 10-15% of cash in Germany is used to support the needs of commerce and this tallies with BoE estimates, at most 25% cash in the UK is used for transactional purposes.
So in two of world’s largest economies, at most the cash is used as a medium of exchange. And this fraction is steadily falling as cash is replaced at point of sale. In Europe, the use of cash for legitimate purposes is going down, yet the overall amount of cash in circulation is going up. Why support this?
We should aim to make the cost of cash higher, therefore raising the cost of criminal activity.
In Europe we should aim to be effectively cashless within a decade. It won’t disappear altogether but it won’t matter.
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By GlobalData#1 manifesto commitment- ask politicians to halve the total social cost of payment systems in the next decade, starting by allowing retailers to surcharge for all types of payment- including cash- except card present and cardholder present debit.
The ECB published detailed analysis of the cost of retail payments. In Eurozone area, the cost of provision of retail payments are substantial- about 1% European GDP is burnt up in providing euro. Cross-subsiding cash is not a welfare-maximising strategy. Effectively, the people who don’t use the cash are cross-subsidising the people who do: gangsters. This doesn’t seem to be a reasonable way to run an economy.
Belgian and Dutch (high card usage countries) central banks say the total costs of cash are 0.75% and 0.65% GDP respectively. In both countries, cash account for three quarters of the social costs: in NL every family pays ???300 a year just to use cash.
Quoting Dr Laura Rinaldi from the Centre for Economic Studies at Leuven University, Birch suggested that if the cost-based pricing was replaced, usage would shift from cash to debit which would add 19 basis points to the European economy.
High value notes no longer support trade, so high value notes should be removed.
In 2011 the ECB survey found that only one third of 500 bank notes issued were in circulation and used for transactional purposes. BoE figures are similar. Dr Renaldi’s research stated that the European economy could grow another nine basis points just by removing some of the underground economy.
#3 Payment accounts should be free (NB this does not mean bank accounts).Regulate for on-demand electronic payment accounts capable of holding a maximum of 1,000 with no further KYC.
In the UK, families who use cash are £100 worse off than those who don’t due to the cost of cash acquisition, the inability to pay utilities through debit systems, exclusion from online offers, etc.
#4 Privacy enhancing infrastructure for transactions, and for the sharing of transaction data beginning with a law preventing payment cards from displaying the cardholder name physically or electronically.
Most of the concerns that reasonable people have about moving away from cash are to do with privacy and security and since we’ll have to have security in order to have privacy, we should set our goals around privacy as the central narrative to address these concerns because in order to deliver privacy goals we will have to have security goals made as well.
