Cashless tech picks up pace

While the move towards cashless transactions has been under way for many years, the Covid-19 outbreak has seen the speed of change accelerate. Fears over spreading coronavirus through banknotes have led to many small businesses no longer accepting cash. Indeed, just last week Barclaycard announced the limit on contactless payments would be raised to £45 to help facilitate this process.

There is some debate about the impact of money-handling in the current crisis. The World Health Organisation reportedly advised the use of contactless payment to reduce the risk of transmission, while the Bank of England has encouraged shoppers to wash their hands after handling money. China and South Korea’s central banks have gone as far as disinfecting and isolating used banknotes.

In the UK, debit card transactions overtook cash in 2017 following the rise of contactless payments. In 2018, cash accounted for just over a quarter of British transactions, with forecasts predicting that figure will fall to just 10 per cent by 2028. This is made possible by the likes of izettle and Square.

The fintech sector in Scotland continues to grow at a rapid pace, creating ways to reduce the friction in making payments, transferring funds and managing money. Edinburgh’s Modulr recently teamed up with Visa, making it a principal issuing member, granting it access to the global payments network.

The next step to a cashless world is fully digital currencies, whether this be cryptocurrencies such as bitcoin or Central Bank Digital Currencies (CBDCS). Last week, the BOE published its discussion paper on CBDCS, which it defined as an electronic form of central bank money that could be used by households and businesses to make payments and store value. Essentially it is digital cash issued by the BOE. The proposal would see this introduced alongside cash and commercial bank deposits, as opposed to replacing them. CBDCS differ from cryptocurrencies as they would be centrally issued, managed by the BOE and hold an equivalent value to sterling. The possibilities offered by CBDC are endless but could result in new- revenue models used by SMES, for example.

The BOE has also joined forces with the European Central Bank and a number of other central banks to pool CBDC research and experience. This is probably an attempt by various nations to get ahead of Facebook’s proposed digital currency, Libra. China and the US are also progressing with their own initiatives.

Small business should take note. The world is changing as consumers and businesses change the way they operate. We should expect to see increased progression towards a cashless society as all stakeholders, from consumers, to firms to central banks, evaluate the options.

Stuart Gillies, associate at law firm CMS