Should MNCs support the growing resistance to getting rid of cash? Increasing numbers of people and organisations across the world are to worrying about the consequences of getting rid of cash completely.
RSA Report on the UK
In the RSA* Report by Tony Greenham and Fionn Travers-Smith, Cashing Out - The hidden costs and consequences of moving to a cashless society, the key findings from their research were that:
- Substantial numbers still rely heavily on cash: 3.4 million people in the UK rarely use cash, but 2.2 million people rely almost wholly on cash, up from only 1.6 million people in 2014.
- Branches are not just about older people: Over one in three of 18 to 34-year-olds are regular branch users and 25 to 44-year-olds are more likely to deposit cheques or cash face to face in a branch (28 per cent) than those over 65 (24 per cent).
- SMEs rely on branches for credit as well as cash: Branch closures appear to reduce SME lending and hence are likely to damage employment, productivity and growth.
Conclusions: Greenham and Travers-Smith concluded that there are four reasons to protect cash and bank branches:
- Supporting local economies and SMEs. Bank branches have a positive impact on local economies, high streets and small businesses, including being important for customer services and SME lending.
- Providing choice and competition. There are legitimate reasons for cash usage such as free universal access, simplicity, transparency, privacy and lack of digital access. It is the only way that citizens can directly access central bank money without intermediation by banks. Cash provides a restraint on fees and charges from the Visa/Mastercard duopoly.
- Promoting financial inclusion. Cash is the only free means of payments available to the consumer with universal coverage. Phasing it out risks excluding vulnerable individuals and smaller businesses, especially in rural locations.
- Boosting economic resilience. Cash insures against cyber risks and other network failures.
Recommendations: The report recommended that the government, in various ways, takes control to maintain “a payment and savings system that is universal, free at the point of use and which protects personal privacy.”
Privatisation of money
Thierry Lebeaux, Secretary-General, ESTA** writes in the May issue of RBR's Banking Automation BULLETIN that “cash is like no other type of money. Each type of electronic money has its advantages, but none has all the features that cash offers. One of these aspects is that it is a public good – which means that the substitution of cash by electronic money is, in fact, a ‘privatisation by stealth’ of money.” He argues that we have arrived at a perfect vicious circle where the cost of cash is going up because there is less being used, yet:
- Cash is the most efficient means of payment with the lowest social cost.
- Cash pays for itself through seigniorage; fees charged by banks to their customers include cash services as part of basic banking as provided by EU law.
Banks could substantially reduce their costs related to cash services by investing in up-to-date technology.
What should MNCs do about cash?
MNCs don’t just have a duty to their shareholders/owners they also have a responsibility to society. Indeed, in non-functioning societies, it is more difficult to do business and make money. But if you forget about the social contribution, remember that cash:
- provides choice and competition: a restraint on fees and charges from the Visa/Mastercard duopoly
- is the only free means of payments available to the consumer with universal coverage. Phasing it out risks MNCs being able to generate business from vulnerable individuals and smaller businesses
- insure against cyber risks and other network failures.
* Since 1754 the RSA in the UK has sought to unleash the human potential for enterprise and creativity. Today its mission is for ‘21st century enlightenment; enriching society through ideas and action.’
** ESTA: The cash management companies association
CTMfile take: Aiming for less cash, not cashless makes sense. Does cashless really make sense? MNCs and governments need to think again.
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- Cash Payments at POS