Cash remains steadfast in face of convenience

19 April 2016, 11:17   By Justin Schamotta

CONTACTLESS payments made using our mobile phones will lead to the death of cash "within the decade", according to the Co-operative Group.

contactless payment

Their prediction is based on research showing a sharp rise in contactless payments - up by over a million in a month, and trebling in the past year.

But even Co-op admit that 65% of all transactions in their stores are still made using cash, a figure that hasn't changed over the past two years and "is predicted to remain" stable for a while yet.

In fact cash remains the preferred method of payment for large numbers of us, for a variety of reasons.

Attached to cash

Victoria Cleland, the Bank of England's chief cashier, says that people "have been predicting the end of cash for the past 20 years".

Each new advancement in non-cash technology - from Square to Bitcoin - has breathed new life into the idea that a cashless society is just round the corner.

Certainly the dominance of cash may seem less pronounced than it once was. Last year, the Payments Council reported that 52% of personal transactions carried out used cash.

But the Bank of England say that paper notes (soon to be replaced with polymer) and coins are "likely to remain resilient" because of their unique qualities, such as the inability to trace it and the fact that it doesn't rely on other technology to work.

We are also more likely to hoard the stuff, with a Bank survey last year revealing that 18% of people hoarded cash "to provide comfort against potential emergencies".

In day-to-day life, cash can give us a greater feeling of control over our finances. Handing over notes - and having to make a withdrawal in the first place - allows us to see just how much we're spending.

By contrast, methods that separate the act of buying from the reality of paying - whether in terms of time taken for us to receive the eventual bill, or simply because contactless payments don't feel like "proper" transactions - can lead us to spend more than we'd really like to.

No choice

Of course, some people simply don't have the option to use such alternative payment methods, including around 1.5 million adults [pdf] in the UK (down from just under two million the previous year) who don't have access to a bank account.

Nevertheless, it's now easier than ever for the majority to make contactless payments - particularly as all major banks now automatically send customers with their standard accounts a contactless debit card when they need their card replaced.

Even those who have a basic bank account are being offered contactless cards, as the providers must offer some form of payment card by September this year - but not everyone will be able to go contactless.

For example, while Nationwide's Flexbasic account comes with a contactless debit card, Santander's Basic current account doesn't - in fact it comes with two cards that make getting cash and paying for items far more complicated than they need to be.

The cash card can only be used when out and about to make withdrawals; the Top-up debit card works like a prepaid card, but is needs to have money transferred on to it before it can be used - and not for contactless payments, or with systems like Apple or Android Pay.

Then there are the cards offered to people who have standard accounts but specifically request that their debit card not allow contactless transactions, usually because of security concerns.

RBS / Natwest admit that their non-contactless cards are "offline" cards - that is, they require the bank's authorisation to process transactions. As such, they cannot be used at self-service locations that process offline transactions such as on planes, trains, or at pay-at-pump petrol stations.

For those determined not to go contactless, these kinds of restrictions could well result in customers turning to cash instead.

Fraud worries

Mobile payments
Who offers them and how they work
Apple Pay's launch in the UK
Who will be able to use Android Pay?

The mistrust of contactless payments partially relates to the perceived potential for fraud.

A study carried out in 2013 found that contactless payment data could be captured by criminals up to 40cm away - and there have been various stories in the press since about potential scammers getting close enough to skim our card's details.

While this type of fraud can literally be foiled by keeping cards tucked inside a foil insert in our wallets, most of us aren't too worried about scanner-carrying thieves.

The advice is to look after our contactless cards just as we would any other. As long as we do that, and report any suspicious transactions, Richard Koch of the UK Cards Association, says that we'll be "fully protected against any fraud losses... and will never be left out of pocket."

The Co-operative also found that at the present time, 65% of people say they would not use mobile payments. Again, security issues - with added worries about viruses - may help to explain why mobile payments have failed to take off as quickly as expected.

And again, there's the problem of availability: not all of our phones are capable of carrying out mobile payments.

For example, anyone wanting to use Apple Pay will need the iPhone 6 or 6 Plus. Similarly, Samsung Pay is only available on the Galaxy S6 - although Android Pay will be available on a much wider range of phones, including some older models.


In some respects, we may still be testing the water with contactless payments: the Co-op found that shoppers tend to use chip and pin for transactions over £10, despite it being possible to make contactless payments of up to £30.

In effect, we may be happy to risk £10, but not anything more than that.

By contrast, cash is tried and tested. The Bank of England have been issuing notes since the 17th century, which makes our few years' experience of contactless payments seem relatively insignificant.

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