News in Brief

Uncertainty Whether a Cashless Society is Possible

Last month's Cyclone Gabrielle that hit New Zealand led to payment problems when power outages meant ATMs and payment systems didn’t work for several days. The importance of physical cash was shown yet again and the Reserve Bank of New Zealand (RBNZ) is now considering new ways to ensure physical cash is available when power and telecommunication networks aren’t available.

RBNZ is looking at whether non-bank entities such as the supermarkets can offer ‘cash-out services, although how this would be paid for and security issues need thinking through. The closure of bank branches has increased reliance on ATMs and the internet, reducing resilience and increasing vulnerability, according to RBNZ Governor Adrian Orr.

RBNZ’s Assistant Governor Karen Silk said ‘cash becomes incredibly important as the primary form of payment’ and that the cyclone has shown ‘the importance of physical cash still in society today.’

She was unsure if a cashless society is possible, ‘There’d have to be some quite significant changes from a technology perspective.’

French Banks Head Towards an ATM Utility Model

Three leading French banks have announced a plan to share ATM services, similar to what has happened in the Netherlands and Belgium.

BNP Paribas, Credit Mutuel Alliance Federale (CMAF) and Societe Generale have announced the launch of a jointly owned company, ‘Cash Services’, which will modernise and mutualise the banks’ ATMs in France to improve cost efficiency and increase revenues through additional services.

Cash Services will be based on the banks’ ATMs by the end of 2025, with the rollout starting in the fourth quarter of 2023, managed by a company jointly owned by the banks. The three groups, which cover four banking networks as they also include CIC, a part of CMAF, operate about 15,000 of the 48,000 ATMs in France. A McKinsey study estimates that mutualising ATMs could reduce costs by 20%-35%.

French banks have been relatively slow to reduce the number of bank branches. Between 2015 and 2021 the reduction was 5%, compared with 24% in the eurozone, accompanied by a 7% decrease in staff (11% in the eurozone).

Cash-Like Experience for Cryptocurrencies

A leading US cryptocurrency cash exchange company, Coinme™, is looking to address the usability challenge of cryptocurrencies through ATMs. It has partnered to give users of its app-based services the ability to exchange cryptocurrency for cash at 22,000 ATMs in the US.

The flat rate fee for crypto sales is $2.50 plus an exchange fee, if applicable. Up to $400 per transaction and $2,000 per day can be exchanged. No bank card is needed, making this accessible to all who have a phone able to work with the app.

Cash is Preferred but Digital Knowledge Increases in India

PayNearby is India’s leading branchless banking and digital network. It has issued a report which has highlighted that 48% of women preferred to pay using cash in 2021/22. India’s Aadhaar-led transactions and UPI QR codes are gaining ground while cards are not much used. 76% of women who use its basic banking services preferred biometric authentication for withdrawing cash.

The PayNearby Women Financial Index is based on a survey of more than 5,000 retail stores using data on the financial transactions of women. The survey takes place every other year in association with the Reserve Bank Innovation Hub.

75% of retailers found women 18-30 years old were digitally adept, although only 60% owned a smartphone. 78% of women said withdrawing cash was the primary reason for visiting a retail store, withdrawing between R1,000 and 2,500. 74% of women operated their bank accounts themselves, primarily for cash withdrawals and deposits. For 20% of women, their husbands operated their bank accounts.

Saving priorities were for children’s education (68%), medical and other emergencies (30%), and buying household electronic items. Only 15% used formal savings instruments.

Risks of Going Cashless

The Wall Street Journal published an article warning Sweden to watch out for the fallout from going cashless. Sweden is almost there, with cash used for only 8% of business payments, down from 18% five years before. At this level, cash is unprofitable to handle.

Cash-related crimes, tax evasion and black-market activities are down, but new risks have emerged. While the homeless may accept cards, pensioners and refugees can end up digitally excluded. There is also the ‘computer says no’ problem, ie. when the system fails, it really fails.

Digital crime is also making people vulnerable, with new types of fraud and crime growing.

The article ends by asking whether cashless payments can, or even should, be stopped. It argues private companies want it too much, and consumers love the convenience.

Arguments for Cash, and for Cashless

A website called ‘Go Banking Rates’ recently ran articles on consecutive days about why going cashless could be a mistake, or not.

Reasons it could be a mistake include:

Inaccessibility. The reliance on digital technology may be a challenge, whether due to access to phones or other devices, infrastructure or familiarity.
Expensive fees. Some cashless banking systems charge transaction fees.
Digital wallet limitations. Not all merchants accept digital banking and tap-and-pay options.
Risk of fraud. Cyber security and data breaches are a real risk.
Difficulty establishing trust. Cashless banking is impersonal, removing the important human connection consumers are used to.

On the other hand, going cashless gives you:

Opportunities. To build your credit, which is important if you need to borrow for a car, home etc.
Earning points and rewards. Given that it has been estimated 1% of retail prices are there to cover the cost of points and rewards, you need to collect them.
Do business faster. Visa claim a contactless payment takes one or two seconds, a cash payment six or seven. Apps mean that splitting bills is now easier without cash.
Added protection and security. Credit cards come with fraud protection. Card companies scan your transactions looking for unusual activity.
Convenience. No more trips to the ATM or branch. No more looking for change.
There is also the question of budgeting. Cash is the ultimate budgeting tool but the cashless community point to checking balances on the app being a part of life.

Not a bad summary of each and food for thought for those wanting to reinvent cash to compete with digital payments.