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A sojourn in a cashless future – The Good, the Bad & the Unexpected

On a recent holiday to a campsite in France I had the opportunity to experience what a cashless society might look like at some future point. The site had taken the decision to move to an entirely cashless site for all their facilities and in doing so created a look into the realities of the potential experience of a future without cash. As a long-term advocate of a cashless future society, it has given me plenty of food for thought around what a cashless future might look like in a wider / everyday context. Certainly, the trend in the Irish context is towards less and less cash usage as a proportion of overall transactional spending, whilst cash withdrawal values are reasonably static, there is consistent growth in the level of usage of card transactions year on year. But the question is, could we ever get to a situation where there is no cash at all in the real world?

The benefits of moving to a completely cashless society are clear,

  • Less security risk for individuals and businesses in holding handling and transporting cash
  • Greater accuracy on reconciliation of payments to transactions for businesses and productivity gains in counting cash
  • Strangles the lifeblood of petty crime which thrives on cash due to need for those handling non-cash payments to be correctly registered, vetted and their service provider to be the same.

On the downside there are of course the risks of social exclusion, cost of services, lack of infrastructure availability that may serve to make it difficult to access and make a fully cashless scenario a reality.

However, in this instance I had the opportunity to operate in essentially a fully live experiment, without a fallback option. The obvious disclaimers around this are that there were consistent control mechanisms – it was a fully controlled environment with full common infrastructure deployed across the park, the payment service providers were limited, and the transaction values were not significant for the most part.

So, what were the good, the bad and the unexpected outcomes?

Let’s start with the good,

Strangely one of the first impressions was one of safety / security. Bearing in mind a holiday parc / campsite is already a very safe & perhaps even sanitised, environment it did immediately give me the sense that there was less risk of losing cash / something untoward happening in terms of a break-in etc and that in general terms the park was less attractive for petty criminals.

Secondly, I felt confident that I could provide my kids (7 & 8) with an allowance that permitted them to gain some independence and learn how to manage their own money within reason which was a great learning experience for both. Ironically it also gave me a glimpse of their respective attitudes to money – my 8-year-old is of the “I got this” persuasion whereas the 7-year-old was much more prudent. Either way, watching 2 children learning to budget a float of €30 each was an entertaining experience but also gave them some good initial understanding of budgeting.

I don’t need my wallet! As most transactions were low in value, I could go to the shop / bar / takeaway with just my phone and my keys and utilise Apple Pay for contactless transactions. The advantages of travelling light were two-fold. 1. I couldn’t spend more than €30 at a go so there was a built in control mechanism and 2. I wasn’t unnecessarily carrying around my driving licence, and the other junk that lives in my wallet which meant less chance of losing something of value that resides in said junk! The unintended consequences of this was also that I started making greater use of my digital banking app which provided me great real time analytics on where I was spending my money and on what (ice-creams, coffee and beer if you are curious!).

The biggest (and perhaps unintended) result what that that as a result of never having cash within the experiment zone, I never had it outside the experiment zone (i.e. in the markets, boulangerie, supermarket, fairgrounds etc) which lead to less impulse / nonsense purchases and even greater usage of utilities that I already had.

From the vendor / business operational standpoint the benefits were tangible –

  • Quicker digital reconciliation of receipts to transactions at the end of the day
  • Reduced risk of employee petty theft from tills etc
  • Centralisation of cash handling and less small denominations to be counted and managed
  • Lower insurance risk of moving cash around.

 

So, so far so good, but what were the downsides?

Infrastructure needs to be nearly common, always on and ubiquitous

Ubiquity of easy to use and understand technology is critical to make the experiment work. Local EWallet’s with an accompanying bracelet / tile were a necessity in an experiment zone as a means of “carrying” your funds and largely proved convenient for those who normally carry cash, Two things struck me about this, firstly, any wide scale cashless society will be completely dependent on having infrastructure that not only works but is also ubiquitous (as an aside, I found myself completely stranded abroad a couple of years ago when Visa had an outage for a couple of days leaving me unable to pay for anything). Secondly, I almost immediately stopped using my EWallet once I had emptied it the first time due to the clunky mechanic to load it, in deference to my phone and apple pay so it doesn’t necessarily change the behaviours of those that have adopted this way of working already anyway and also it brought into stark reality that early technology adopters and the reluctant laggards preferences might necessitate different infrastructure platforms.

Disenfranchisement is a real risk.

It can be very unerring / unsettling for those that are unaccustomed to budgeting by what they have in their hand in terms of cash. My mother-in-law, who spent some time with us, likes to operate like this, and has done so all her life. The tangibility of cash in hand is important to her (and many more) so this forced adoption of a new way of operating a critical part of your life may be challenging and drive some aspects of social exclusion. It also requires a tacit confidence in your ability to budget without necessarily having visible checks, remembering that those less digital savvy are perhaps also less likely to adopt digital utilities such as emoney / banking apps, and in our case drove increased necessity to use limited human interfaces to check account balances. IE it was significantly more cumbersome for her.

Hidden Costs.

Until the personal banking commercial models further adapt to a more cashless type world some otherwise less significant costs started to become apparent in this experiment zone. Over the course of our stay there I encountered numerous people (who like myself had deferred to the trusted card – or digital version of the same) who had incurred significant costs per transaction based on the pricing structure of their bank account. One individual in an extreme case noted to me that they had paid for a baguette (€1.05) only to find that their bank in the UK had charged them an additional £1.25 in fees for a contactless transaction on a non-UK network. Others quickly found that they had exceeded monthly transaction volume caps and were into the punitive pricing zone per transaction and indeed there will be another cohort that will be unaware that they have incurred these costs until the monthly statement lands this month…Undoubtedly this is an issue pertaining to pricing and charging models in the banks that have not necessarily evolved to changing market preferences and clearly they will (and would do at an accelerated rate if forced to by the market) but it does beg the question as to whether the cost benefits of cashless society will be tangible to consumers in the short term to encourage greater usage?

 

What was the unexpected?

Traditional Banks Propositions need to evolve, quickly.

Within the confines of the experiment area it became very apparent very quickly that cost of services could act as a barrier to adoption. The aforementioned extreme cases of significant cost of transacting digitally abroad for UK bank’s customers became common knowledge quickly and lead to two outcomes in terms of behaviour modification. One group opted for the economies of scale approach by withdrawing a large sum of cash from the ATM in the local village and loading the EWallet with large amounts to mitigate usage of costly services provided by their banks and the second group began serious investigation and conversations around alternative banks propositions, which was primarily with the challenger banks (Revolut, Monzo, Starling etc), all of whom provided the benefits of digital cards, quick sign up and low cost transactions. Either way, the awareness of the cost of banking began being more apparent and intent to move was strong for those that felt punitively impacted.

…and UK Banking Propositions Drove Cash centricity

The caveat on the findings here is that that the test group is limited to those in the area covered by the experiment, but those that had traditional GBP denominated banks were essentially disincentivised by the charging mechanics and FX rates applied by their service provider banks.

Single European Currency has more benefit than just common cash

Perhaps the fact that it has been around for about half of my lifetime, means that I had forgotten about the benefits of a single currency bloc. The experiment and my exposure to it impacts of those accustomed to working in Sterling and dealing with FX fluctuations, the costs of those transactions outside of the base currency  levied by their banks and the general level of uncertainty as to exactly how much (in real terms) they were spending made me reflect on the things I take for granted in terms of the simplicity of being part of a single currency bloc. The clearing system is common so transactions are as quick to clear in France as they are at home & there is no FX to do the mental maths on which provides for a much more straightforward adoption process of digital payments (i.e. I can operate exactly the same way as I do at home without a worry on costs etc)

Visibility is key

Being a heavy user of card and contactless, I am accustomed to being able to quickly check my current spending / balances etc. However, the vendor used for the EWallet mechanism on the site we visited did not provide a means by which you could easily self-serve for balances etc which lead to many people abandoning it in favour of their cards / Apple Pay etc as it provided greater visibility and thus control around current position. Even if there had been an app etc available, I am not convinced that it would have been sufficiently attractive for me to add another utility onto my phone (and another password to remember!) So perhaps more integrated solutions and first mover advantage are key here in establishing how we will operate in a cashless society.

 

Overall

Reflecting on the experience with a couple of weeks away from it, I have come to some conclusions on the viability of a truly cashless society and what it might mean for the greater part of society. I have always been a big believer, and advocate of a move to a more cashless society but there are definite considerations that need further thought,

  1. Mandated Change forces widescale adoption, but may have a disenfranchising impact. The guillotine approach has definitely forced the issue in terms of wider scale usage, but it certainly made it difficult for certain cohorts to adopt. For those that budget based on what is in their hand / wallet and take comfort in the tangibility the move to cashless is somewhat disorientating, particularly given the potential overlap with those that are less likely to adopt the tools that might make this transition easier.
  2. eWallets certainly ease the adoption and provide a low risk tool to get up and running but it appears that “subsequent mover advantage” with the providers of NFC technology (i.e. mobile handset providers) linked to real bank accounts / credit cards have already potentially got this market sown up. In my experience in the experiment, the EWallet seemed a little redundant (and clunky even) compared to the ease of Apple pay linked to my bank account and indeed adoption of usage of that as a payment mechanic increased among those in the experiment area as the superior user experience became apparent.
  3. Ubiquity of technology is key. Without consistent, easy to use, easy to understand, interoperable and robust technology infrastructure / frameworks in place cashless society can’t function. You cannot store digital payment tokens for use like cash so if it goes down there is no alternative if you are truly cashless. Similar to the Visa Europe outage on a smaller scale, we had this experience one afternoon when the power went when a transformer beside the site tripped out meant that the fast-melting ice-cream couldn’t be sold as the shop had no facility to accept cash (and indeed the holiday makers didn’t have any to hand anyway!)

Good, Bad and Unexpected outcomes, and indeed some work to do and some changes to make and further trials on a larger scale are necessary but overall a positive experience and tentatively, it appears that a cashless society might indeed be possible, we just need coordinated action to deploy the infrastructure and a will to bring everyone on the journey in a way that sensitively addresses their concerns but without an opt-out.

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