How long until cash payments aren’t accepted?
I spent my day visiting family – on the way to the gathering, I stopped off for some petrol and paid using my contactless card. I then drove on to the local supermarket, where I picked up some snacks, again, using my contactless card. As I went to leave the car park, I validated my ticket and paid with my contactless card once again.
This got me thinking, at what point is cash going to become obsolete? I can’t even remember the last time I went to a cash machine and with the increase in stores accepting Apple pay and contactless payments, I can only see the gaps between my trips to the ATM getting longer.
Speaking in terms of the UK, I can’t think of very many places that I can’t use some form of cash-free payment anymore – even the local market traders are investing in card machines that integrate with their smartphones, meaning I still don’t need to carry cash with me.
This is not just isolated to myself, in fact there has been a 29% decrease in the number of ATM transactions per day over the last 2 years (source). 29% in two years!!! That’s huge and shows two things: firstly, more and more vendors are accepting more convenient payment methods and secondly, people are shopping online more than they used to.
Cash is going to go the way of cheques and become obsolete, it’s just about when and how this shift happens. In 2007, many stores announced that they were going to stop accepting cheques (source) and I predict that the same will happen to cash, as early as 2025.
Why is cash such a huge overhead?
While I was in university, I used to work in a store that accepted cash (obviously). At the end of each day, I’d balance each of the cash registers to make sure that the amount of money that should be in there (based on the amount of sales) was actually in there – you’d be surprised how many human errors are caused over a day that result in the cash register being over or under.
This variance from the expected output caused me lots of headaches. I’d count the cash several times to make sure that I hadn’t simply miscounted before committing the final figures to the accounting system. Once the cash had been counted and figures had been entered into the system, there was a bit of paperwork to do. Once completed, I arranged for a security van to come and collect the cash.
This process is labour intensive and costly. Let’s assume that as a part time sales person, I was earning £10 per hour and it took me 2 hours per day to complete this process for each and every cash register in the store. That’s £20 per day, which is £140 per week, which is £7,280 per year. Now, consider that the costs for the security company to collect the cash were almost the same and you have £14,000 of cash management costs per store, per year.
Now let’s remember that the company I worked for had 900 stores, all of which had the same process. That’s a massive £12,600,000 per year in cash management activities.
I see that it costs a lot, what is the solution?
The problem with the phase out of cheques is that people were given the option of just one new payment method, which caused some resistance in those people that were set in their ways. Now, we have many options – you can pay with chip and pin, contactless cards, Apple Pay and you can even use a pre-pay credit card if you’re worried about using your contactless payment options everywhere.
In my mind, the plethora of payment options now available to consumers will help speed up the phase-out of cash. There may be a few resistant individuals but if the option is higher in-store and banking prices, I believe that will aid the shift away from cash.