I recently returned from Scandinavia, where I busked my way around for a few weeks. I spend a lot of my time travelling in this way – often around half the year. This time, I’d planned my trip around various Bruce Springsteen gigs that were occurring in the area – a tactic that had worked wonderfully well in other countries.
Scandinavia, though, is now one of the toughest busking destinations in the world. I’ve made easily more money in Peru and Bolivia than I did in Norway. The reason is nothing to do with a lack of generosity (I was last there in 2016 and did very well indeed), but the almost total elimination of cash from their societies.
The UK is not far behind. A recent report suggests that the number of cash transactions amounted to 10% of all payments in 2022, down from 27% in 2019. This is still higher than the 4% in Sweden and Norway, but the downwards trend should give us pause for thought.
Few would suggest that these figures indicate a need to restrict card/contactless payments. To do so would be to inconvenience people for no obvious benefit. But it is vital that politicians act to protect cash before it is too late. In the example of Norway, the law stating that it is illegal to refuse cash as a payment method has been widely flouted, and only very recently have lawmakers stepped in to strengthen it. But this has been done too late. We should act now before we get to a similar point.
It is understandable that many will wonder why this is necessary, or claim that the death of cash is simply an inevitable indicator of progress, and I am aware that as a professional street musician, I have ulterior motives for championing its survival that may not be thought to be particularly important. However, the destruction of busking as a form of work is not the only effect that a cashless society would cause (at this point I should say that I’m aware buskers, including myself, can and do accept contactless payments, but these do not go anywhere close to replacing the amounts earned through cash, for reasons that would take another entire article, so please do take my word for it!).
A recent debate in the House of Commons revealed that 8 million adults in the UK would struggle in a cashless society, and that poverty is the biggest indicator of cash dependency. This is a huge section of our society that is at risk. Cash is generally preferred by the elderly; the economically vulnerable; or those who find budgeting difficult for physical or mental health-related reasons.
Beyond this, the loss of cash makes informal payments so much more difficult. Tipping a waiter, popping a few coins into a charity bucket or a busker’s case, placing some money in a church donation plate – all of these are made more difficult when cash is rarer. Psychologically, people are far more likely to give some spare change than they are to pay a set amount on a card reader in these situations.
In addition to all of this, there is the simple fact that cash is physically and tangibly worth something. Technological replacements, as wonderful as they can be, can always crash. In Norway, the most common method of payment is an app called Vipps – essentially it is similar to PayPal, but linked to your mobile phone number (Sweden has a similar app called Swish). But here is the rub. You can generally only access these apps if you have a bank account in that country, and to do so you need to live in that country for a year or more. I spoke to students and immigrants in Sweden who were unable to access the most commonly used form of payment because of their lack of access to a bank account. This should concern us all. What happens if a well-funded app corners the market in payment systems (in the way that Uber has done in the taxi market), and then suddenly decides to increase their fees? What happens when that app crashes, or the dominant provider of card terminals is temporarily unable to process payments? Well, in 2022, Norway found out. For a few hours on May 17th, virtually all card payments ground to a halt, and the vast majority of people there who carry no cash were stranded. The decline in ATMs compounded the situation.
Ultimately this was a brief blip, but we should heed these warnings and immediately look at ways in which we can mandate cash acceptance by law across the country, as a safeguard against a future in which we could end up excluding the most vulnerable from accessing the most basic of services and needs. The ability of banks to restrict access to money at their own discretion has been in the news rather a lot recently. It is a great shame that the focus has been on whether Nigel Farage should be allowed a luxury bank account – the bigger picture should be of grave concern to everyone.
* David Gray is a musician, actor and writer based in Birmingham. He is a a co-director of Keep Streets Live
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20 Comments
One major impact of the death of cash would be on the Black economy. No more ‘pay in cash and I won’t add VAT’ from self-employed joiners, plumbers etc, trying to pay less income tax by declaring lower earnings. No more buying a small quantity of illegal drugs at a street corner for a nice crisp £20. No more street prostitution where payment is always in cash…
Come to think of it, a cashless society may not be that bad after all.
Mel – whilst I do agree that a move away from cash would capture some vat evaded by some handymen, I really doubt most would be required to be registered for VAT to begin with, given the high threshold of £85k on vat-able services. That in of itself the party should be prepared to address, and plan to lower, but that’s not really the focus here.
What I’m more interested by is the idea that underground trades these days are undertaken by cash in hand. People aren’t probably buying drugs at only £20 (a small amount of weed maybe?) and the black market is much more than just cash in hand from street dealers. Even street dealers probably take the risk with using PayPal these days or for larger purchases, via crypto, as it also happens via darknet vendors. I would hazard prostitution may also have moved towards those means to avoid being outed. I think a cashless society is probably inevitable and the people impacted in the time it takes to transition probably won’t be large, but let’s not suggest it would tackle black markets much.
If cash was abolished, then a personal and business account would become akin to a utility, there would need to be a statutory entitlement for a bank account for any person, business or other legal entity, regardless of their views, beliefs, etc etc
Currently it is my understanding that there is only an entitlement to a personal bank account.
A cashless society would certainly present problems for anyone who believes in the concept of a ‘money supply’. They’d no longer be able to accuse the government of ‘printing money’ even though most of the money in our wallets is created in this very way.
Money, for most of us, would become entirely an IOU of the issuing commercial banks. It almost is anyway. Nothing will really change but the cashless society will perhaps give some economists cause to have a rethink.
I was in a branch of a major supermarket the other day and the contactless payment system went down – chaos! I have helped people out in shops when the tech has failed and they ‘don’t carry cash anymore’. My local league football club is now a totally cashless stadium and when asked what supporters who only use cash should do and there are many, the response was find someone with a credit/debit card to pay for you and give them the cash!
We have dug this hole for ourselves in the same way as internet shopping has changed local high streets so if we want to save cash then we have to spend cash. I limit my card spending in favour of mainly cash and whilst nobody wants to turn the clock back there is plenty of grumbling out there about the disappearance of cash. There should be a choice!
I grew up with the evolution of card payments, computerisation and online banking. I was quite okay even clever with it but not so much now in my advancing years. I am certainly not alone in that so there’s a campaign there and some potentially popular Lib Dem policies to be written.
I spotted what was unsaid in David’s article – that 17th May is a public holiday in Norway. According to the article he links to, people were unable to shop. On the other hand, any banking nerd knows that internet banking and apps are frequently down for maintenance, usually on public holidays, weekends or during the night. Cash has no down time for face to face transactions. Use of cash and cheques may be diminishing, often pushed by banks and big business, but there will always be a cohort for whom they are the best way of payment.
Japan is a cash based society despite being one of the most technologically advanced counties in the world. Many people still pay utility and other recurring bills in cash by going to bank branches.
China on the other hand is virtually a cashless society where it is often no longer possible to use cash to pay for a taxi, buy groceries or pay a restaurant bill. Fintech platforms like TenCent’s WeChatPay and Alibaba’s Alipay have almost entirely replaces cash outside the more remote rural areas.
It is interesting to see how cultural differences have seen such a divergence in the adoption of card based payments for day to day transactions in these two Asian neighbours.
We are less likely than we were a few years ago to see the Govt move towards abolishing cash. This is one benefit of recent high interest rates.
Go back a few years to a time before Covid and the economies of the EU, including ours, were in the doldrums. According to mainstream neoliberal economic theory the way to stimulate the economy is to cut interest rates. This was a problem as interest rates in the major economies were all close to zero. Some even had slightly negative levels. Some economists pushed the idea of reducing them still further. Ken Rogoff was one who made the case for “deeply negative interest rates”.
This would have meant abolishing cash completely. An economy with significantly negative levels of interest rates would be quite different from what we’re used to. For example, we normally expect to receive some interest on bank bank deposits. Instead we’d have negative interest. We wouldn’t want our creditors to pay us quickly because that would mean the banks would start charging us more on deposited money.
Maybe Rogoff will get back to his argument in a few years time but it looks like we are safe for now.
Mel – I had a feeling someone might make this argument. To which I would say that the idea that tax evasion has decreased as a result of a digitalised economy is clearly fanciful.
Joe – interesting point re China/Japan. The switch to cashless in China is particularly concerning. Anyone with a healthy distrust of authoritarian government should resist a shift towards a system in which every single payment you make can be tracked. It is easy to see a situation developing in China where each transaction is recorded and analysed to determine whether you are being a ‘good citizen’ according to the CCP.
No-one has mentioned the one very positive aspect of cashless. You can’t be forced to handover cash you haven’t got. Credit and debit cards can be happily handed over because they can be cancelled within minutes.
Not sure that’s the way it works Mick. Two muggers take your credit/debit card and if necessary you are tortured or at least threatened with it to get the pin number. One mugger stays with you while the other goes off with the card and pin number to the nearest cash machine. You can imagine what happens if one then rings the other to say the pin number doesn’t work.
“Deeply negative interest rates” would NOT have abolished cash!
The reverse: it would make good sense to cash in a percentage of your bank holdings and hold them under the bed to avoid negative interest rates.
PS Peter, you are attacking straw men. No “orthodox” economist believes the government boosts the money supply by literally printing cash.
PPS MMT is economic orthodoxy. There is nothing new, original or difficult about it. It’s merely considerably wrong.
It is clear from the comments that both cash and cashless payments have advantages and disadvantages. Surely as liberals we should be in favour of giving people the choice to use whatever payment method they prefer.
One advantage of cash is the following. I was involved with a small club which use to rent a room a a pub once a week for which we paid £20. We collected £2 per person to cover this cost. With cash this situation is easy and avoids the need for a bank account to handle small somes of money. With cashless only payments the club would either have to go to the expense and trouble of running an account or the treasurer would have to pay and collect money using their own personal account.
It’s the article’s author problem that he didn’t provide people with a contactless method of donating to him, not the Norwegians!
People like Big Issue sellers etc switched to contactless payment methods years ago in the Nordic countries.
Robert, bit of an extreme and very unlikely scenario you have chosen there. Do you have any figures as to how many people have been mugged and tortured to drain their bank account compared with how many have simply mugged?
“Robert, bit of an extreme and very unlikely scenario you have chosen there. ”
But, David, if cash is removed what choice will muggers have (other than going straight obviously)
Just Google it mindful that ‘torture’ can take different forms.
@mick = they steal your mobile phone…
Cashless doesn’t mean cardless…
With contactless, unless you are excessively careful (and as someone “in the know” as it were, I’ve been caught out…)
It is easy to grab sufficient information to use the card to set up an online shopping account (or two) and do a couple of click-and-collect orders, and collect the orders before the bank (*) and you know what’s happened….
(*’) For-reasons my high st bank were unable to explain, their scam detection systems did not regard setting up multiple online shopping accounts within an hour of each other and proceeding to order £300 of click-and-collect shopping on each as suspicious… fortunately, I had a real transaction which placed the card at a specific garage and so could not have been at the location associated with the click-and-collect orders, so they reimbursed…
@Paul R
Yes Big Issue sellers in the UK also have contactless terminals provided by Big Issue.
I suggest buying a Big Issue is a different class of transaction to one of giving a random busker a tip.
Also a big drawback (could be overcome if governments desired), cashless is dependent upon a few networks and banks; it’s the reason why the demise of the Silicon Valley Bank (now, due to rapid US government intervention, a division of First Citizens Bank) back in march was such a big issue, with ramifications around the world…
However, we will go cashless because it provides yet another opportunity for middlemen (traditional conservative supporters) to make money by doing very little , adding negligible value, and doing nothing to improve the UKs export performance.
Cont.
The recently increased transaction fee on the main cashless payment network used by small businesses is 3%, which will get passed on to consumers and thus be reflected in the inflation rate…