12 Sep The unfolding personal finance revolution
In South Korea, 80 percent of all transactions are conducted electronically through cards and mobile devices. In less than three years, the Korean central bank intends to kill off coins completely. Similar ambitions are held closer to home. In Sweden, some banks no longer allow cash withdrawals, while businesses are legally entitled to refuse payment in notes and coins.
Human societies have used some form of physical currency for the payment of goods and services for almost all of recorded history, be they metal coins, paper notes, or even jewels, rings and shells. In early medieval Ireland, payment in cattle was the standard means of commercial transaction and judicial restitution. So, why are we now doing away with millennia of established practice?
Simply put: time. Modern life is fast-paced. We put in long hours at the office, and many of us take work home. Juggling professional commitments with domestic duties, family life, study, and leisure time is no easy feat. This always-on, 24/7 lifestyle amplifies inconveniences that we might otherwise have tolerated a few decades ago: hunting for an ATM, sorting cash and rooting through wallets and purses for notes and coins become hassles that test our patience. We want shopping to be quick and painless. According to a survey by market research company Ignite, 57 percent of Irish shoppers don’t like waiting in line when they’re ready to purchase and 25 percent think their time could be better spent elsewhere.
Technology has provided a solution. By simply tapping your card or your mobile device to a terminal at the till, the hassle of queuing and waiting is removed. Transactions are processed in mere seconds, meaning customers are served at a quicker rate. Irish shoppers have already recognised the value of this: 73 percent of us use a form of this contactless payment, two-thirds on a weekly basis. Both these figures are up 20 percent on last year alone.*
Consumers have little tolerance for businesses that lag behind
Consumers have rapidly adjusted to this convenience and have little tolerance for businesses that lag behind. Nearly half of consumers have intentionally avoided a shop without card or contactless payment facilities, while just over a quarter would buy from a competitor if their preferred retailer didn’t offer online shopping.
For businesses and financial institutions, handling cash is expensive and logistically challenging: it must be counted, distributed, transported and stored securely. Theft, accident and even human error add risk. By removing the risk factor of cash, business costs are reduced and operations improved.
Tackling the black market economy
Cashless transactions also greatly diminish the power of the black market. Cash transactions, preferred by criminals, are essentially invisible; conversely, electronic transactions are traceable, leaving behind a digital breadcrumb trail. In a cashless society, this makes conducting, or at least paying for, illegal activities far more difficult. For that very reason, in war-torn Somalia, where banditry, fraud and political instability are rife, card payments are increasingly commonplace, even among street vendors.
Even with government policy, Ireland’s journey towards cashlessness will only advance as quickly as our infrastructure allows. A recent report by M-Lab ranked Ireland’s average broadband speed among the worst in Europe. Challenged by delays to the National Broadband Plan, many rural households and businesses still endure extremely slow download speeds. Some still depend on a dial-up modem for internet access. While card and mobile payments can be processed through phone networks, this is not a viable long-term solution and will ultimately restrict those living outside major urban centres from going cashless.
The transition to cashlessness can be sudden and radical. In late 2016, in an effort to combat corruption and tax evasion, India abolished two of its most used cash notes practically overnight—85 percent of all cash in circulation—forcing millions to adopt new methods of mobile payment.
Ireland’s will be more organic. Though we are enthusiastic users of cashless payment, through contactless card and mobile services, 50 percent of us still prefer cash. However, when split by demographic, the signs are clear: the younger generations simply aren’t as tied to physical money as their older peers. While 58 percent of the over-55s prefer notes and coins for payments, only 39 percent of 25-34-year-olds say the same. The next generation, Generation Z, who have never been without the internet, will likely accelerate the change. When this does occur, our businesses will be able to provide even better service, and individuals will be able to spend more time doing the things that matter to them. We need to make sure our infrastructure catches up in time.
Brian Cleary, Managing Director of BOI Payment Acceptance (BOIPA) UK and Ireland