Is an end to cash really possible and do any of the new payments technologies, mobile apps and high-tech start-ups look like they are leading the way in the future of payments?
It also raises the question whether the new innovative methods of payments, be it via banks, credit card issuers, mobile phone companies, payment service provider start-ups, etc are really bringing us closer to having a new way to pay for our potatoes? In my opinion there are four problems that have to be addressed before we totally abandon cash.
Problem 1: Trust
Do I trust Google, Samsung and some Silicon Valley whiz kids with my money? First of all, amongst all this tech-led frenzy how about something mundane and very human - trust. Recent reports suggest that the public by-and-large isn’t ready to accept new players in the payments market just yet - with only 19.6 per cent of respondents expressing trust for Google, versus 39.6% for Visa.
This is not surprising considering that it took two generations before the wider public were comfortable with credit cards - and many still will not use them online for fear of fraud.
Widescale acceptance of new payment methods takes time, but not as long as it takes for old payment methods to wither and die - as you can see by the delays in the end of cheques - first used in 1659 and forecast to end around 360 years later in 2018 at the earliest!.
Problem 2: Universality
With all the different methods available, paying for a skinny soya-milk latte in Silicon Valley is now probably the most confusing checkout process in the world. If your coffee shop is signed up with Facecash, can you use your Google wallet? Is your NFC phone the right type? Can Square take Diners Club? Or should you just pull out those trusted dollar bills from your pocket?
Even Google Wallet is restricted to people with a specific phone on a specific network paying in certain shops only. These new methods and the businesses behind them are not necessarily interoperable - so pulling together a payments infrastructure with the universal acceptance of cash is probably unrealistic.
Lower tech schemes maybe have an edge. Look at M-pesa in Kenya with over 14 million customers and two million transactions a day - all on the back of basic mobile phones and, importantly, delivered through trusted community-based agents across the country.
Problem 3: Is there a demand for the end of cash?
There is no doubt that more and more people go out shopping without cash - but the queues at the ATMs don’t seem to be getting any shorter. Most of these new methods merely wrap a little high-tech magic around two existing methods; bank transfers and card payments.
Will they deliver enough extra benefits over plastic to push cash out the picture? Or will they provide additional alternatives that extend the number of methods by which we can pay for things, transport and peer-to-peer money transfers?
Furthermore, what is in it for the retailer? If your smartphone tells you that the product you are just buying is cheaper next door, how many will want their customers to be quite that well informed right at the point of purchase!
Problem 4: Bad people will have a field day
Since the days of Archimedes working out how to stop people passing off base metals as gold and silver, nothing brings out the bad guys like new payments technology.
While some of the new methods may indeed offer better levels of protection than cash or straight cards, the sheer volume and frenzy of scams, phishing, hacking and theft stories could throw up an almost insurmountable barrier of fear.
Losing your phone is already a nightmare. How much worse will it feel if it contains payment methods that could clean you out in milli-seconds?
Cashless is the new paperless
Personally I am as convinced by the twenty first century promise of a completely cashless society as I was by the twentieth’s assurance that a paperless society one was imminent. It was never realistically going to happen, but we sure communicate a lot differently nowadays!
That new payment technologies will change how we transfer trillions of pounds worth of payments is certain. But it would take a superhuman effort of joined up thinking, systems integration, innovation and human behavioural and cultural change to remove cash entirely.
And, even if we could, do we really need to?
