Penny dropping on benefits and risks of a cashless society

5:42 pm on 17 January 2020

By David Cohen *

Opinion - The cashless society is coming - you can bet your last physical dollar on it.

Close-up of New Zealand fifty dollar banknotes

Photo: 123RF

The smart money says we may now be in the last decade before the penny finally drops.

Many New Zealanders will have already had the experience, possibly even over the current holiday period, of handing over a $50 bill for a small transaction, only to be told the vendor is unable to make change.

It could now be a matter of years before virtually all local transactions are done by bank transfer, credit and debit cards or Eftpos, with the idea of physical payment relegated alongside rotary-dial telephones and audio cassettes.

International researchers have long said that this country is well placed to go down the cashless route, although possibly not as well as some other developed economies, and even a few developing nations.

Currently, according to the Daily Telegraph the cashless world champ is Sweden, where demand for notes and coins is so faint that notes and coins are literally disappearing. The amount in circulation has halved in the last four years. Only around 60 percent used cash at all on a monthly basis, according to the last survey, a "cashless spiral" whose implications are belatedly the subject of an urgent Swedish government inquiry.

Surprisingly, for a country whose size and technology means it's likely to be an early global starter, there has been relatively little discussion in New Zealand on its implications.

The likely benefits, which tend to be more widely appreciated, include a reduction in crime - at least crime involving simple money theft and certain forms of money laundering. The move would also reduce paper costs, not to mention the bother of physical currency exchanges for international travellers.

Technology shortchanging public

On the other side of the coin (so to speak) are problems.

For the economically disadvantaged, a cashless New Zealand could yet be the worst development since the arrival of the loan shark.

Some may find it harder to control spending. Others without the means to open a bank account may find it harder to receive payments.

For the destitute, the story is even worse: no more begging for "spare change", because there won't be any, and no more staking out ATM machines, because there won't be any of those, either.

But neither circumstance will make the essential problem disappear. How these less fortunate New Zealanders - often with severe addiction or mental health issues - will cope isn't known, but the answer presumably won't be pleasant.

Nor will it be pleasant for fundraisers on the streets who traditionally collect donations in cash.

It isn't just the poor or needy who could feel short-changed.

Risk of being frozen out

Many older people still prefer to use cash, either through force of habit, because they have not mastered online technology, or because they simply dislike the idea of operating in the online shadows rather than in person.

In economic terms, these are consumers who have an emotional relationship with hard cash. But some may also have a relationship based on necessity; it may be that they lack the relevant technology or feel they cannot master it.

And what about those who like to have at least a bit of spare cash on them in case of financial embarrassment or because they've maxed out on their relevant money card?

Even for those who are perfectly comfortable with their apps and smartphones, there is always the outside chance of a massive disruption caused by a natural disaster or some other widespread problem would freeze their ability to make any purchase whatsoever.

New Zealand also has many thousands of workers and citizens whose families in the island nations of the South Pacific rely on remittances they send home to places lacking the technological infrastructure to process electronic payments.

On the other side of the cashless ledger, of course, it's hard to see banks objecting to the shift, which would see most or all transactions incurring a clip on the ticket on behalf of the financial institution.

Most of the workers formerly known as cashiers could also be restructured out of occupational existence as the commercial spaces in which they worked are refurbished into something more closely resembling call centres.

Banks could also save a lot on the costs of those pesky ATMs, which can be expensive to maintain and stock, and already in some places appear to be getting quietly retired.

Interestingly - if not ominously for the IRD - this also leaves open the possibility of the cashless deserts of the New Zealand hinterlands reconstituting themselves as shadowy barter economies.

While others stockpile now before it's too late. "Cash is honest," the British writer Julie Burchill recently wrote of the similar trend in Britain, and vowing to clutch on to her own "with all the life-affirming lustiness of Reg Varney leering at those long-ago dolly-birds, until they prise it out of my hot little hands". But change is a-coming everywhere. You can bank on it.

- David Cohen is a Wellington writer.