At a cash only bar the other day I overheard somebody ask ‘what is this, the year 2000?’ before heading out the door to find the nearest ATM. Although it may have been a bit of an exaggeration on their part, the sentiment is relatively accurate - an establishment that doesn’t offer any kind of electronic payment system is now very much an oddity. You can even go to a popup that’s only around for a week and the majority have electronic payment systems. It is telling that many of the places that don’t offer this kind of facility are the ones who deliberately haven’t to keep the places feeling ‘authentic’ - most often trendy bars and shops.
Much of this has come about thanks to the IoT and FinTech innovations like contactless payments and automated payment systems. It has only been 3 years since contactless payments really started to take off, with 2014 when many of the largest companies began to adopt contactless payments in a meaningful way. This has also seen a huge increase in the number of people using the cards. Reports from the Payments Review show that 66% of Australians have a contactless card, with 53% using it at least once per week. In Canada, 10% of all transactions are now contactless (which is growing at 1% per month). UK contactless payments were also up by 183.5% in November 2016 compared to the same period in 2015.
When we discuss the IoT for everyday people, we often look at elements like smart bulbs and smart thermostats, but the reality is that the single biggest impact the IoT has had on most people is through contactless payment systems.
With these huge increases in the use of the technology though, we need to ask the question of whether we are swiftly moving towards a cashless society.
Interestingly, there is one country who are attempting to do just that, although so far with mixed results - India.
One of the ideas behind this is that corruption is considerably more difficult if there is less cash, as well as better security, ease of transactions, and the ability to track transactions. However, it is not something that has worked out well for the government, with a huge backlash following the announcement that on 8 November 2016, all ₹500 (US$7.40) and ₹1,000 (US$15) notes were not currency and needed to be exchanged. This caused huge queues at banks (these were the two most popular bank notes in India) and has caused a huge number of other issues.
One of these is that in a country of 1.3 billion people, there are fewer bank accounts than people. If people have no money in a bank, how can they use a payment system that debits money from a bank account? They are also not an especially literate country as a whole, with 30% of the population over the age 15 being illiterate in a 2011 census, which means that it is difficult to understand the new system if they can’t read the instructions for it. It is also a country that is highly dependent on cash and does not have a history of adopting new technology. Even when you look at the basic debit card, according to RBI data, 85% of the transactions using debit cards in August 2016 were at ATMs. They are therefore used as means to obtain cash, not an alternative to it.
It is clear that despite the good intentions of making India a cashless society, it simply hasn’t worked as the country is too dependent on cash as a way to function. However, despite not going to the same extreme measures as India, there are a few countries who are approaching it in a more considered and gradual way. Sweden is perhaps the best example, with the amount of cash flowing through Sweden decreasing by 40% since 2009. This has actually forced the hands of the government, with Cecilia Skingsley, deputy governor of the Riksbank, Sweden’s central bank saying ‘The declining use of cash in Sweden means that this is more of a burning issue for us than for most other central banks.’
Today only around 20% of all retail transactions in Sweden are conducted with cash, meaning that it is certainly an economy that is ready to go completely cash free in the near future. It leaves certain challenges with some of the most basic, but still most important elements of the economy, at risk. Chief amongst these is the fate of the millions of homeless people who often rely on the charity of strangers giving them cash to simply survive, but even some innovative thinkers have found the answer to that too, with N=5, a Dutch company based in Amsterdam, having created a jacket that can accept NFC payments, also donating €1 every time somebody taps their jacket, that can then be redeemed at a homeless shelter or food shop.
So are we likely to see a fully cashless society in the near future?
We are certainly likely to see countries go cash free, with the most developed, like Sweden, leading the way. If we were therefore to look at the question ‘Are We On The Verge Of A Cashless Society?’ in terms of a national society going cash free, then it would not be surprising to see it in the next 10 years. However, if we were to look at society as the entire world, then the chances of us seeing us going totally cash free are still perhaps 100 years away at least.
However, thanks to the spread of the IoT and connected payment devices we are closer than we ever have been to the biggest payment revolution in thousands of years and regardless of speed, we are certainly on course to cash free at some point in the future.