Is a cashless society actually desirable?

Travelex's Michael Batley argues that not only is physical cash unlikely to disappear soon, but that people are wary of going 100 per cent cashless

In a recent speech at the 2018 Australian Payment Summit, the governor of the Reserve Bank of Australia, Philip Lowe, painted the picture of a near-future society in which physical cash is a niche payment instrument reserved only for emergencies.

Almost all regular transactions will be cashless, with cash only being made available as a stop-gap measure should electronic infrastructure fail at a large scale (for example, following a natural disaster).

It's no longer just futurists forecasting the death of cash - mainstream financial and banking experts see the cashless society as near-inevitable.

And for some, it's not just inevitable, it's wonderful. By ditching old-fashioned notes and coins, we can better tackle money laundering, robbery, drug crime, and more. Cashless technology delivers an audit trail, which will make things harder for criminals.

But before we get too carried away, it's worth stopping to ask: Is a cashless society desirable?

This is really two equally important questions: Is the cashless society a force for good? And is it something people actually want?

A force for good?
Going cashless isn't without downsides, especially for those who rely on cash most heavily. These tend to be the most vulnerable and marginalised groups in our society - the elderly, for example, or those without bank accounts.

While a great deal of cash management technology may lie behind a retailer's acceptance of cash, there is no barrier to entry to accepting payments. But cashless transactions aren't necessarily so straightforward. For the consumer it requires at the very least a bank account, and this means having the required documentation and access to technology that many bank accounts now need.

You can't sign up online if you don't have access to the internet, and you can't prove your identity without a passport, driving licence, or equivalent form of identification. And, while these are available to most people, they're not available to everyone. Cash is, however, universal - it doesn't require power, an internet connection, or ID checks.

It's telling that the near-future society outlined earlier retains cash for emergencies. Cashless technologies, despite their advantages, have shortcomings that mean they cannot entirely replace cash. Visa's major downtime in mid-2018 is a good insight into the potential risks. Some form of physical currency will always be needed.

However, it may not be necessary to maintain an emergency supply of cash. Attitudes towards cash and cashlessness mean that people are unlikely to wholly and unreservedly adopt cashless technologies, as some predict.

Do people want to go cashless?
The cashless society may not be desirable thanks to its unintended consequences, but it's also not actually desired by the very people who would be required to give up cash. People want to use cashless technologies, but they also want to use cash - they demand a balance of the new and old, rather than one replacing the other.

How do we know? We asked! Travelex surveyed people from around the world, asking them if they could ever see a time when they would leave notes and coins behind and just use cards and mobile wallets¹.

Some could, but their attitude was far from universal. A quarter of people were unwilling to give up cash completely under any circumstances. No matter what new technologies were around the corner that could make paying simpler and more convenient, these consumers wanted cash to remain a part of their daily lives. This was true in every market, with an "immovable 24%" unwilling to stop using cash altogether. Most people wanted to continue to use a mix of cash and cashless technologies.

Reframing the question and asking if it would be desirable to live without cash, and the answers are even more striking. A not-insignificant minority agree that this is the future, but the overwhelming majority want a balance between cash and digital.

Counter-intuitively, cashless technologies were more desirable in parts of the world where they were less common. So if people were forced to use cash, then they wanted to use it less. In the UK, where contactless technology is widely accepted, a quarter of people want to ditch cash. In Brazil, where cashless technologies are far less common, nearly half want to ditch cash altogether.

If people have better access to cashless technologies, they are happy with their use of cash, with far less desire to give it up completely. This suggests that cash and cashlessness have a natural equilibrium, and that while cashless technologies may be more popular, cash will always have a place.

What people want is a balance between cash and cashless technologies, using whatever they find most appropriate for each particular transaction. Given the unintended consequences of a cashless society, this desire to keep using cash is likely good news for the most vulnerable in society.

A future society which exclusively uses cashless technology, as envisaged by some, is therefore unlikely to come to pass any time soon—at least, if those who live in it have their say.

^{1. Source: Do we really want a cashless society?, Travelex, 2018}

Michael Batley is head of strategy at Travelex