We often see the acceleration towards electronic payments as being driven by contactless, i.e. contactless cards at point of sale that are ‘tap and go’.  And yet, that is not true innovation – you are still touching a device, interacting with a device, ‘tap and go’, it is still contact in some form. True innovation is when we move past the whole concept of ‘tap and go’ and introduce a seamless experience for the customer and the merchant alike.

Let me paint a picture.

What would it be like if you could walk into a merchant, the merchant recognises you from your picture on the till systems, knows what you got last time and spoke to you by name. You’d feel like a real ‘customer’ wouldn’t you?  You would feel special.  What if all you had to do was take the goods you had received, leave the store and your payment was processed directly to your account (bank or card) using zero touch?  You then receive a message confirming payment with an invoice attached?  What if all of this process includes updating your loyalty program with the merchant automatically?  Or applying credits that are due without handing over a loyalty card?

A quiet revolution at the corner of your street? or maybe you are thinking this is a glimpse into the future?

Companies like Droplet (www.dropletpay.com) in the UK are making payments and loyalty work seamlessly through an app, right now.  Droplet offers merchants customer data, behavioural insight, and customer acquisition features that are unavailable anywhere else in the payment or loyalty markets. This isn’t an experiment.  This is real time  with hundreds of merchants and thousands of users experiencing  seamless processing of payments.

The ‘real-world’ mobile sectors are being shaped by platforms that are open to all rather than individual schemes run by different merchants. So are we already there? Emphatically, yes!  The real opportunity is that companies like Droplet are continuing to innovate every single day, so our concept of what the future holds …..?

Well, I have to say, there have been zero problems for me to function without cash.  I have been running this experience for the past 11 days and there has not been a single instance where I have needed cash.  I have been to the local store to pick up a paper, I have been to grocers for veggies, I have been to bakers for bread and on each occasion I have used a card – as you would expect in this day and age!

Mind you – there have been a few Luddites hanging around preaching doom and gloom and the collapse of society as we know it, but … it hasn’t happened!  I know we are only 11 days in but I am guessing that this experience is the standard for the year.  Some have said to me that I will be challenged having a coffee in Europe and yet I really question that supposition.  I have been to many places in Europe and a simple tap and go is the way to pay so I cannot see this as an issue.

The one area in which I am nervous is the visit to the local market.  I went to our local market at Flinders (Victoria, Australia) the other day.  There were stallholders with electronic payment devices to manage POS card payments.  How good is that?  Yes, there were stalls that were cash only but I am guessing this will be the last year for that particular idiosyncracy!

Cash has been with us for thousands of years and yet it has only been in relatively recent times that its usage in the money supply has declined to the extent that it is now such a very small part of the payments system. Electronic payments has been the driver of this change, and the accelerator has been contactless payments.

The role of cash has been reduced to provide for small value payments and to enable the ‘unbanked’ part of the population (those that do not participate in the banking system) to function in the world of commerce.

‘Unbanked’ is a sad reflection on our society.

A Forbes study in 2014 determined that 28% of the US population (88 million people) were unbanked (no use of financial services) or underbanked (minimal use of mainstream financial services, and mainly reliant on payday lenders). Typically, it is the disadvantaged in society that is unbanked or underbanked and these people, according to Forbes, can spend up to 10% of their modest incomes on fees and charges from the likes of payday lenders to provide their source of cash.  This cost does not include the loss of funds through theft, fraud and other risk exposures.

The solution to this reliance on expensive sources of cash will undoubtedly lie in the use of technology and innovation in payment products that enable people to store income and make payments through non-cash and non-bank means such as mobile payments.  We have already seen successful use of mobile payments technologies in Africa (e.g. m-Pesa in Kenya) and elsewhere to facilitate the inclusion of previously unbanked people in a secure payments system.

In developed countries, Sweden is often quoted as a case study in the move towards a cashless society.  In Sweden 70% of bank branches are cashless (contributing to the lowest level of bank robberies in 30 years!).  Currently only 20% of Sweden’s payment transactions are in cash representing less than 3% of the economy.  In the UK, 4% of GDP is cash, Australia 6% and the US, 8%.

The trends in technology provide a very compelling roadmap in the way economies move away from cash to more efficient means of exchange. The experiences in developing and developed countries alike will provide hope for laggard economies, such as the US, that there is a better world ahead.

I am embarking on a year without cash.

This is not a simple proposition that eliminates the day to day dross of using notes and coin but rather a philosophical position that addresses why we, as a society, use cash.  Why do we not use more efficient means of exchange?  Why do we rely on forms of currency that are inherently insecure?  Why are we worried about electronic payments such as contactless and why do we call out on the risks of using electronic transactions?

That is the purpose of this blog and over time I will be addressing some fundamental positions, namely:

• We should be worried about the black economy.  Full stop.  Specifically the use of cash to circumvent the taxation systems across the globe.  We all talk about the way large corporates avoid paying tax.  Have we seriously spent time asking why certain industries are famous for not paying tax and why the principals of those industries use $100 bills to pay for their transactions?  Is there a story here?
• Why don’t the tax authorities focus on these companies?  Who pays the piper?
• We must ask why the Central Banks across the world do not regulate the black economy more effectively?
• We should ask the simple question: why does any person need to have denominations for notes that exceed the simple use of low denomination payments.  In other words what use of payments beyond $10 make any sense … which means of course, why would you have notes of higher denomination, if for no other reason than to hide its purpose?  I challenge any person to seriously state why they need a $20 note in today’s world?
• What technology is driving the way we make payments more efficient and should we be embracing these technologies more substantially?  e.g mobile payments

So this blog will wander through these issues over this year.  I will welcome your additional thoughts but the underlying premise will be related to a judgement that states that the use of cash is anachronistic in today’s world and the use of cash will underscore an underlying problem with people using a currency that is no longer relevant to the way society, as a whole, functions.  QED.