Cash: Criminals and digital dinosaurs

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“That will do nicely sir!” Some of you are old enough to recall this American Express advertisement from the 1970s & 80s and its approach to marketing financial services, nicely positioning its products at its target market not by function, but by status: what the card says about you.

While some of the sexism of that advert is thankfully no longer relevant today, the question about what our financial choices say about us surely is. Especially for one financial product: cash.

That word will immediately divide you into one of two groups: those who know you have notes in your purse/bag/wallet and coins in your pocket, and those of you who think “when did I last use cash?”

Cash usage as a means of payment in the UK is in freefall: in 2017 debit card transactions overtook cash transactions at 13.2 billion versus 13.1, and the trend continues. On September 19th it was announced that credit card expenditure in the UK has now exceeded that of cash in the UK for the first time. *

Debit cards warriors like me can fall victim to the payment terminal equipped thief

Compared to Sweden and Denmark, this appears pedestrian, although in other parts of the world cash still dominates. Looking at a world map of cash usage it is Scandinavia which dominates the shift away from cash, but elsewhere the trend is yet to take hold.

My own choice of going “cashless” is a result of using – and enjoying using – Monzo, with its easily accessible app, budgeting targets and constant updates. For me the “card only – no cash” signs increasingly seen in cities are welcome. The occasions when actual paper (well technically plastic) notes are required are frustrating – how can my tennis coach not cope with a text containing a link to his mobile phone? The feel of coins in pocket an unnecessary weight to carry around. I ceased using bronze coins ages ago: that’s what charity boxes on shop tills are for.

Not everyone shares my enthusiasm for the digital wallet. Richard Thaler, author of “Nudge” and Nobel Prize winner, has shown that people spend more freely with plastic cards than with cash. This fuels the argument that cash is better for budgeting as you cannot overspend. And do you trust your youngest child to pop to the local shop for a pint of milk with your plastic card, or do you prefer to trust them with a fiver, or for closer control, a one pound coin?

The arguments naturally move into the regulatory arena too – even if not always by the regulator. Digital money is (surely??) far easier to trace and track, and more likely to fall prey to electronic prying eyes – possibly the eyes of government. Governments love regulation, and just as they regulate the amount of cash in circulation, electronic records, combined with Artificial Intelligence and algorithms will surely give someone in power the ability to probe why I purchased a £3.98 cappuccino at Schiphol Airport while I write this article.

But how well is cash regulated? Only around one third of bronze coins in the UK are in active circulation. Some 1 in 30 of the old £1 coin, withdrawn in 2017, were counterfeit. Scottish notes are not always accepted south of the border due to fears about counterfeiting rather than fears of devolution. And when did you last see, let alone use, a £50 note? The answer to that question provides a clue about you. If you have a wad of Fifties, what plans have you got for the evening?

Back in the digital world, the number of phishing and online scams seems to be increasing, although hard data is difficult to come by, due to a lack of accurate recording, often by the victims themselves. Debit cards warriors like me can fall victim to the payment terminal equipped thief, at a carefully primed £29 a time to fall within the (current) £30 contactless limit. There seems to be little resistance to Chip & PIN use for larger amounts and compared to card fraud in pre Chip & PIN years, fraud incidents are increasing only slowly compared to card use.

In terms of using less paper money, we have – in a sense – been here before. The use of cheques has been almost eliminated since the introduction of the plastic card, although the pace of change has not been that quick. If the journey away from cheques starts with the first plastic card – in the UK Barclaycard in 1966 – then around 50 years may provide a timescale for the cash less society.

Or will it? With all the technology we currently have, and that which is no doubt coming our way (Facebook Libra, anyone?) why does anyone need cash in 2020?

I suggest there are 3 broad categories of people who rely on cash.

Firstly, those who like the emotional feel of notes and coin in pockets and purses. Since coins have been around since Roman times, we are clearly culturally wedded to the idea of using physical means of payment.

Secondly, cash remains a great facilitator of the Black Economy, and of crime itself. Around the time Barclays were introducing the first credit card, the headline stories of financial crime were based around bank raids – stocking masks, sawn off shot guns and getaway cars – fueled by the way that most people at that time were still paid in cash. 50 years later how do you pay for your Class A drugs? And how do the criminal wholesalers pay their suppliers?

Thirdly, not everyone likes or trusts technology, especially where it involves their money. There is some suggestion that age is a factor here – mobile payments in the UK are much more common in under 35s than over 55s. My favorite definition of whether someone is “old” – anyone who uses the word “digital” – is a sure way of sorting the natives from the immigrants. (Digital natives and immigrants of course – which now counts me as old)

If you are still using cash, what could it be saying about you?

You’re a criminal or a digital dinosaur. Will that still do nicely in 2020?

* https://www.bbc.co.uk/news/business-49745136

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