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By Dave Murphy, Managing Partner, Financial Services – EMEA & APAC, Publicis Sapient

As the Bank of England weighs up the introduction of digital banknotes – a way for consumers and businesses to pay electronically without having that information go via a fintech or banking business – the question rears its head once again: are we headed for a cashless society, and would that be a good thing? Notes would not be the same as digital cash such as that stored in digital accounts, which is an electronic representation of physical money, it would be a total replacement for notes and coins – although the two could be interchangeable. Although just a possibility for now, it does throw into sharp relief the declining influence of physical tender versus the ability to spend electronically.

It has been suggested that by 2026, use of cash will be so low across the UK as to essentially end its prominence. Pointing to those without bank accounts and suggesting that digital payments reduce financial access, many now call for regulation to ensure retailers, restaurants and bars must accept cash tender – and across the pond in New York this has become reality. The lawmakers argued that businesses that accept only credit and debit cards are discriminating against New Yorkers who lack bank accounts and credit cards. Consideration too must be given to the community of SMEs, many of whom rely on cash usage, and bank branches to pay it in. Implications for them will be severe.

However, despite this,cash is no longer king – it’s inconvenient and sometimes unsafe. It can be lost and stolen. Consumers are not able to redeem rewards points for cash and cannot automatically track spending habits to help with budgeting. Physical cash is one dimensional and lacks the multi-dimensional attributes of digital payments. What’s more – people increasingly do not want or need physical cash: nine out of every ten payments will be cashless in the UK within the decade. Already, only a third of payments are made in cash. This is even without the additional pressure that Covid-19 has applied to unnecessary germ-swapping, such as through coin and note exchange.

Technology has allowed a chance to escape a cumbersome system developed in the middle ages that is no longer fit for purpose. With many financial applications today bundling spending habit reports, savings, checking, credit card usage, savings loan and credit score all in one easy and secure place, the advent of mainstream fintech has enabled a unique opportunity to develop financial literacy regardless of background, age or current financial circumstances. What’s more, it provides stability sometimes not afforded by physical tender. For example, inflation rates in developing economies like Venezuela are so severe it is impossible to use cash to pay for any daily purchases like groceries or clothes. Introducing digital payments has been critical as a financial resource for a country whose people simply cannot withdraw enough cash to keep up with inflation.

The cost of maintenance of a little-used cash system will become increasingly debilitating over the coming years, with fewer use cases for cash and a therefore cumbersome system of infrastructure to maintain for little obvious benefit. It is therefore crucial that banks and fintechs work to bring those without bank accounts and the elderly into the fintech ecosystem – the Bank of England’s digital notes perhaps being a good starting point here.

The repercussions for organised crime and fraudulent activities are also significant in a digitally managed system, providing both a more secure currency – less liable to loss – and less room to hide huge portions of extra income.

As the world becomes digital-first, our payments system must reflect this. Digital payments are an opportunity for inclusion, for increased financial literacy and for long-term economic stability. Banks and governments alike must embrace this and prepare for a digitally enabled economy accordingly.





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