Contactless payments are taking the world by storm
Jonas Leupe on Unsplash
Once upon a time cash was king, but technology is making it obsolete. In the UK, over half of Britons carry less than £10 in cash on them at any one time. Less than a quarter of retail payments are made in cash; cashpoints are disappearing from the high street; and a wave of small businesses are turning against handling cash.
Some businesses don’t accept cards to avoid declaring it for tax purposes, but they are struggling and aren’t long for this world. With the ease of contactless payment, consumers are choosing to avoid the hassle of carrying cash altogether – they don’t want to carry around unsafe, unclean, and unwieldy cash. In contrast, cashless businesses are burgeoning.
Why would any business owner want to turn away any form of payment? For similar reasons to why consumers are shunning it. Handling cash costs British businesses over £3,000 per year on average, due to the need for insurance from robberies, theft from employees, higher labour costs due to longer hours, and the purchasing of security like safes.
However, an increasing number of local governments aren’t on board with the cashless trend. San Francisco and Philadelphia have announced a ban on card-only retail businesses. Lawmakers in New Jersey have passed a similar bill, and attempts to do the same are underway in New York City, Washington, DC and Chicago. In the UK, senior British politicians have called for the abolition of cashless businesses.
Their goal is an admirable one: helping the most vulnerable. In the UK, there are around 1.23 million people who don’t have a bank account, many of whom exist on the poor, precarious margins of society.
However, in Cashing Out, a report for The Entrepreneurs Network, author Fred de Fossard argues that technology offers the solution: “In trying to support the unbanked and those at the fringes of society, the UK government should embrace the opportunities of Open Banking instead of introducing retrograde measures which will harm businesses and consumers, and do little to support those in need.“
The report argues that innovations like Open Banking – the use of open APIs that enable third-party developers to build applications and services around the financial institution – is overcoming many of the challenges of financial inclusion. Many of the long-term unbanked have little to no credit history, or formal record of their financial existence – Open Banking can use previously unused data to build a credit profile.
The government had a role to play as the enabler behind Open Banking, and schemes like the government-backed Rent Recognition Challenge, a £2 million competition to develop applications that help renters boost their credit scores, access credit and get on the housing ladder, are in the right spirit. The private sector is also stepping up to the plate. For example, challenger bank Monzo lets new customers open accounts without a fixed address, allowing them to use a friend’s house or a shelter instead.
Since the government began reporting on financial inclusion in 2003, there has been a huge decline in the number of unbanked people – from around 4.5 million to 1.23 million people. But there is a way to go. And while the report echoes the concerns expressed by politicians for those who remain unbanked, it argues that banning cashless businesses is a distraction from the public policy failure that is best solved in partnership with entrepreneurs, not by banning their payment preferences.