Digitising Cash: Creating a level playing field
Mike Bowen - head of strategy, g4s cash solutions uk
That digital payments and other technological advances should be embraced is not up for debate. The question is whether these advances can, and should, exist harmoniously alongside cash in a suite of payment choices, or whether their growth renders cash superfluous to requirements.
As Head of Strategy for G4S Cash Solutions UK, which collects, delivers and processes over £200m of banknotes for retailers and banks every day across the UK, I see first hand the importance of cash in our society.
My firm belief is that cash will not only continue to play a critical role in the future, but that action should be taken to ‘digitise cash’ and create a level playing field to ensure that people continue to have a meaningful choice in their payment options. This means making changes to the cash cycle that allow retailers to realise same day value in their bank accounts for cash payments they receive in-store, as is already widely offered by many banks in the USA. There is also a need to prevent unnecessary costs to commercial banks that encourage them to nudge their customers away from cash use.
Let us turn first to the issue of whether people want, and importantly need, to use cash anymore? The independent Access to Cash Review says yes.
According to the review, published in December 2018 following a call for evidence from Her Majesty’s Treasury, up to 25 million citizens in the UK could be adversely affected if a cashless society emerged tomorrow. This correlates with the findings of our own World Cash Report published in April 2018, which found that the demand for cash continues to increase all around the world, and UK Finance state that cash still accounts for 38% of payments in the UK.
It is accepted that cash use is reducing in the UK. Current forecasts predict that its use will decline to 22% of payment transactions by 2026. However, less cash is not no cash, and despite this reduction in use, cash would remain the second largest payment method. By way of example, cash use in Denmark has already reduced to this level, but in a recent survey by the Danish Central Bank, 50% of Danes believed it would be problematic for them if there was no cash at all in society.
For the 2.7 million people in the UK that are almost entirely reliant on cash, I suspect “problematic” would be putting it lightly.
Why then is there a drive by some to get rid of cash at all?
Advocates and lobbyists have pigeon-holed cash as “expensive” and “inefficient” without truly addressing the questions of ‘expensive to whom?’ and ‘inefficient in comparison to what?’. In the UK cash is not expensive to retailers – it is consistently identified as the cheapest form of payment by the British Retail Consortium whose members supply 75% of all retail purchases. Neither is it expensive to consumers who access it at no cost at the point of dispense and pay no fee to use it at the point of sale.
The distribution of costs between banks, retailers and consumers varies for cash and digital payments. The cost of cash is mostly borne by commercial banks. This is where I feel that changes to the cash cycle could have a significant impact, reduce unnecessary costs and, most importantly, serve the needs of people and retailers who - the evidence clearly shows - still want to use and accept cash.
So what do I mean when I say we should level the playing field and ‘digitise cash’?
In a fast moving world businesses need access to their money quickly. The current state of play for retailers is that there is a delay between them accepting cash at the till and the cash then being collected, processed and a credit showing up in their bank account. Neither the retailer nor the bank can realise its value during this delay. In my opinion this can, and should, be remedied.
Digitising cash involves retailers and banks working together to utilise in-store cash processing technology. In practice, retailers deposit cash into an in-store device which validates the cash as genuine currency, counts it and stores it securely. G4S already provides these devices to retailers as part of our end-to-end cash processing solutions in a number of countries around the world, including some of the biggest stores in the USA, and they are proven to significantly reduce the time and expense of manual cash counting and processing.
At close of business, the value of the day’s deposits would be transferred to the retailer’s bank who then credits the retailer’s account that same day. The cash is securely held in the device at the retailer, indemnified by the device operator, awaiting collection by a cash courier. Consequently the retailer gets value just as quickly as they would do from a card payment: cash is digitised.
It sounds simple, but to offer such a service today would mean that there is a new cost incurred by the bank, as it is holding cash remotely in the retailer that it cannot use until the cash is collected and brought to a cash centre. This new cost would be prevented if the Bank of England opted to treat cash held remotely and safely on behalf of banks in such devices in the same way as it does cash held in cash centres.
There is a real responsibility on everyone who plays a part in the financial system, from the government to banks to regulators to cash processing companies, to ensure financial inclusion for all people and businesses in the UK, irrespective of the payment method they need, or choose, to use. In my experience, what people value above all else is choice, and the importance of a range of options is especially laid bare when things go wrong - like the failure of VISA systems across Europe in June 2018.
People can’t and should not be left without ways to pay, and I would encourage all the relevant parties to recognise the ongoing importance of cash, take action in the interests of people and businesses across the UK, and level the playing field by digitising cash.