Across Europe, the use of notes and coins is declining. In the UK, cash usage is declining faster than in most places - none of those countries have any robust plans. What does this mean?

In the UK, over two thirds are now made using payment cards, according to Quartz, with cash projected to be used for only 10% of transactions in 15 years’ time. As a result of this shift – and through banks’ commercial priorities – not only are more and more physical bank branches closing down, cash machines are disappearing even faster.  

Europe’s central bank has been vocal in its concerns. Over-reliance on digital payments infrastructure across the entire system opens up the risk of catastrophic failures, in the event of cyberattacks, Politico reported. Similarly, in the event of an energy blackout or a network system failure, the entire economy becomes more vulnerable. According to central banks’ many of whose remits have now taken in cybersecurity threats, cash is still a fundamental part of crisis planning. As TSB and Visa outages illustrated last year: these systems are far from fallible.

The problem is that the system is responding to consumer demand, especially in urban centres. For businesses, card-only arrangements, which are becoming increasingly popular, offer efficiencies. At the shop-level, they reduce the risk of violent theft; at a higher-level, an emphasis on digital payments is aiding efforts to crack down on money laundering and other criminal activity, as reflected by the ECB’s decision to discontinue the production of a €500 bank note.

Fundamentally, cash is an expensive system to sustain. “It has to be printed, stored in secure buildings, transported by security guards in specialist vehicles, counted by shop staff, bank staff – and of course there is also a cost to maintaining the vast network of cash machines that we have in the UK (the majority of which remain free to use)”, the campaign group Fairer Finance notes. The cash system is sustainable if we continue to withdraw and pay with it, but if we don’t the economics begin to break down.

Some voices, like Helen Prowse, a spokesperson for Square, a digital payments firm, argue that “digital payments are the future,” during a Monzo-hosted debate. They clearly are. Digital payments do not yet work for everybody.

The minority of people who still rely on cash for most of their payments tend to belong to already marginalised groups: elderly, poor, or rural. Worst of all, those without homes, and therefore access to bank accounts – let alone digital devices – would be cut out of the system entirely.

But not just those groups. A report from the Access to Cash Review published late last year shows that 25 million people in the UK, nearly half the population, would struggle without access to cash. It will publish its recommendations next month.

Sweden, which is an extremely accelerated example, is expected to become completely cashless by 2023, according to Jonas Hedman, associate professor at the department of digitalization at the Copenhagen Business School.

Reflecting on Sweden’s shift in an interview with Wharton Business School, Hedman weighed up both sides: “It will have different consequences; some are positive, some are negative. An advantage of a cashless society is that it will be easier to trace criminal activities and we might be able to block some of them.”

“The disadvantage is that everyone can be traced. We will be more traced than we are today. We will lose our privacy. But of course, with Apple, Facebook, Google and others, we have already lost our privacy.”

Sweden’s failure, he believes, is to have walked into this situation more or less blind. “The government of Sweden hasn’t done much when it comes to this issue of becoming cashless. This is a pity.” Instead, this should be a key period of reflection for governments.

“Every country needs to take a holistic approach to issues related to money and payments from an organizational, institutional and individual perspective. They must involve economists, anthropologists, historians, psychologists and others and try to get a broad view of what the issues are.”

Sourced from Quartz, Politico, Fairer Finance, Access to Cash, Knowledge @ Wharton; additional content by WARC staff