Three things to consider as we go cashless

It is predicted1 that we’ll be reaching a UK payments milestone on or about March 8th this year when our use of cash will be overtaken by cashless payment methods.

Research by the Payments Council2 is predicting 18.9 million cash transactions will be made: 400 million fewer than last year. Electronic payments already make up the lion’s share of value, but now even the volumes are comparable.

The change is driven by widespread adoption of debit card, contactless and mobile payments as well as the slow increase in use of online banking and schemes such as Faster Payments.

While we may never see a completely cashless society, we may not be far from  time where cash becomes a niche payment method driven by ease of use and perhaps a desire for anonymity – so in this new world what things do we need to think about?

1. Consumer budgeting and debt

It’s easy to track how much money I have spent when using cash I take out £50 and I can see how much I have left after buying my coffee and cake. Paying by contactless card I just don’t keep track as well. Although online access to bank accounts is available, it is subject to multiple levels of password checking and other security – it’s not convenient. I’m happy to access my bank account on my PC but I’m more worried about the security issues when using my mobile;  and I don’t check my balance constantly. Instant, secure and constantly updated access to account balances will help the consumer adapt to a world with less cash.

2. Social inclusion

Access to most of the cashless methods is reliant on the ownership of a bank account. A study by Ffrees Family Finance in 20143 indicates that 3 million of the 56 million UK adults do not have access to a current account. For people in this situation reliance on cash forces up their costs as they can’t access easier and often cheaper options such as paying by direct debit. The acceleration of schemes to offer appropriate accounts to all will be needed to avoid a two-tier system that excludes some from the cashless society.

3. Cybercrime and fraud

In the world of cash, being the victim of a pickpocket or being robbed are common fears. Criminal activity is direct, easy to spot and react to and relatively limited in the damage it does. The world of electronic payments is different. Malware is on the increase – there are more than 500 app stores selling malware. These can lead to fraud such as man-in-the-browser attacks, where a legitimate transaction is hijacked to the cybercriminals benefit. Cybercrime allows criminals much faster and wider access to money and is harder to spot and react to.

On a positive note it has long been recognised that criminals are the biggest fans of cash – when using cash it’s difficult to trace and stop their activities! Reducing the amount of cash in circulation could limit criminal activity.

So in March when cash stops being king I for one will give thanks for the speed and ease of use the new cashless alternatives offer – I don’t want to go backwards but it is worth bearing the above considerations in mind.

Click here to understand more about fraud using Man-In-The-Middle attacks

1 January 30th 20152 UK Payment Markets – An analysis of recent and emerging developments and forecasts for all forms of payment 20143 April 2014