Money no matter
Keeping cashpoints holds no currency with me Matthew Lynn
Elderly people will be left stranded without any way of paying for stuff. People without bank accounts will be frozen out of the financial system. Small businesses will suffer and communities will lose a vital resource. As bank branches keep on closing down, and as the remaining ATMS start charging fees, we keep being told the cash economy is close to collapse – and the Chancellor must find ways of saving it in his forthcoming Budget.
But hold on. That is crazy. The reason the cash network is closing down is very simple. Almost all of us find electronic payment easier. It is cheaper and more efficient. If a few people still want to use the folding stuff then they are welcome to, but there is no reason to make the rest of us subsidise them. In truth, there is no more reason why we should try to save cash than we should any other obsolete technology.
Cash has been around for a heck of a long time. The first coins were already in circulation by the 7th century BC and the paper variety emerged in China around the 11th century. It has had a long innings as our main way of exchanging goods and services, and, like the wheel or the knife, it has stuck around because it has always been a very efficient piece of tech. It was relatively cheap, easy to understand, and apart from being vulnerable to fraud and theft, very practical.
Now, however, it is clearly on the way out. First the banks closed their branches. Now the ATMS are shutting as well, with 13pc of the free ones closing in the last year, and the numbers charging fees rising from 7pc to 25pc. A growing number of shops and restaurants have stopped accepting notes and coins as customers switch to paying by card, and cash transactions are plummeting.
In response, there is a growing campaign to “save cash”. The Access To Cash review this week argued for extra safeguards to protect the “cash infrastructure”, and the Chancellor is being urged to find ways of making sure it survives. Such as? The banks might be forced to make sure people can get cash easily? Or there might be subsidies to ATM networks to keep them operating? At the most extreme level, businesses might be forced to keep the cash tills open alongside the card readers.
It is easy to sympathise. Change is often unpopular and a few people will always resist it. But is there really any genuine reason why we should want to preserve cash? Electronic payment is clearly superior. You don’t have to find a cash machine and plan how many notes you might need for the next few days, you don’t have to fumble around in your wallet or purse to find the right amount and you can check your spending a few days later on your statements.
And now contactless and smartphone payment has delivered what may be the final blow. Tap and pay is incredibly easy to use (and, although this hard to prove, my instinct is that its simplicity increases spending and so boosts the economy). Unless I missed something, no one forced us to switch to using cards rather than notes and coins. We have freely chosen to do so because we like them.
Of course, some people still prefer cash, and so do some small businesses, especially if they are not too keen on declaring everything they earn to the taxman. And, true, some people don’t have bank accounts, although that number is falling fast (it is estimated that only 1.2m adults are “unbanked”, roughly half the total a decade ago). But so what? That doesn’t mean they should be subsidised by the rest of us.
After all, if the banks have to keep networks open when they don’t make economic sense any more, someone will have to pay for it, and it will inevitably be the customers or shareholders who foot the bill, and probably both. Anyone who doesn’t have a bank account or a payment card could try getting one. It is not as if they will be turned down. The days when anyone was refused an account are long gone, the app-based accounts can be opened with a couple of swipes on a touch screen, and only an estimated 6pc of us don’t have a smartphone. In fact, the arguments for “saving cash” don’t really stack up.
If people have to travel further to use the banks or ATMS that remain open because they don’t want to use a card then that is up to them, and they can always take out larger sums when they do. And they can hardly complain that it is too complex for the elderly. The contactless card is one of the simplest technologies ever created. It is up there with the light switch in terms of ease of use, and it is a while since anyone argued we need to preserve a network of chandeliers because some people still found it too complex to use electric lights.
Of course, a few loopy central bankers aside, no one would argue we should abolish cash. It should remain in circulation for those people who want to use it. We even have shiny new £20 notes that will last a lot longer. But the market has sent out a very clear message that most of us prefer making payments on our cards.
New technologies come along all the time. We don’t usually force the old one to still be used. If we did, we would have “saved” typewriters, or video rental shops, or stagecoaches. There is no reason why cash should be any different. If it goes, it goes, and no one should mourn its passing.