Contactless technology is paving the way for a cashless society within 15 years
SO YOU walk into your favourite coffee shop.
Immediately, a smart camera scans your irises, connects with your phone and sends your usual order to the barista. A couple of minutes later you waltz out of the door clutching your cappuccino without even touching your purse as the money has automatically been deducted from your bank account.
That kind of shopping experience isn’t as futuristic as we might think and could be with us within 15 years, say experts.
We already use cash for less than half of all our payments. Contactless spending where you touch your card or smartphone to a scanner at the till rose by a third in the first half of last year alone and has recently overtaken cash as the preferred way of paying for purchases of less than £30.
The revolution is fastest in cities and among the young, so it’s no wonder that on a recent trip to a hipster coffee shop in central London I was regarded with incredulity and slight pity by the cashier as I searched through my purse for the correct change to pay for my kale wrap.
Stop any teenager or young adult on the street and most won’t have more than a couple of pounds on them.
A proportion of total spending cash is declining and it will continue to decline
They’ve used their phone to pay for the bus or train, they flash their phone again to buy things and if they get an Uber home, the fare is automatically deducted from their bank account by the app.
In fact, the next generation of children won’t even know what physical money is, Apple boss Tim Cook predicted recently.
So are we moving closer to the death of cash, as some suggest?
“It’s true that as a proportion of total spending cash is declining and it will continue to decline,” says Tim Richards of Consult Hyperion, specialist consultants on payment technology.
But he thinks reports of its death are exaggerated. “Cash will always retain a role,” he predicts.
The convenience of contactless
“But there’s a huge generational gap. Millennials who were brought up with the internet and smartphones just don’t carry cash and don’t like it. When I give my 16-year-old daughter cash I have to take it to the bank myself so she can then spend it on her card. I still carry cash but find I’m increasingly using other payment methods, too. If I take money from the bank it can still be in my wallet two-and-a-half weeks later.”
You only have to look at Scandinavia to see the future. In Sweden, barely 20 per cent of consumer transactions now involve cash and the number of krona in circulation has fallen by nearly half since 2009. It’s not unusual to find hotels, bars and cafés that no longer accept cash and most retailers say they anticipate phasing it out completely by 2030.
So what are people using instead? “Tap and pay” with a debit or credit card is popular in Sweden, as it is here. But it’s also normal for small traders there to carry mobile card readers so you can pay them with a tap of your card.
“I was in Scandinavia a few weeks ago and there was a guy busking,” says Tim. “I indicated I didn’t have any money on me – but then he whipped out an iZettle contactless card reader. Of course, I then felt I had to hand over my card.”
But the method experts predict will one day dwarf even cards is paying by phone.
In Sweden, Apple Pay or Android Pay are popular but they’ve also gone a step further and use phones to make instant payments to friends with an app called Swish.
You can transfer money instantly to anyone you want – all you need is their mobile number (as long as they also have the app on their phone).
More than half the population now uses Swish to pay at school fetes, flea markets, for babysitting or cleaning services and to divvy up restaurant bills with friends.
Not many people know it yet but we already have our own version of Swish.
iPhone - Guided Tour- Apple Pay
Paym allows you to use your mobile to transfer money to people instantly and four million have so far signed up.
Things are about to become even more mind-bending, too, with the launch of conversational payments. That’s when you can pay someone directly when you’re in the middle of a conversation on a messaging app, such as WhatsApp or Facebook Messenger.
Facebook has just started rolling out its new service in the UK. Whenever it senses you’re talking about paying for something during a conversation, it’ll give you a nudge to remind you about the service.
And if you think it sounds a bit Orwellian, then you’re not alone.
“Some of these developments do sound a bit Big Brother-y and scary,” admits Tim. “But if you talk to Millennials about this they are not really bothered about the loss of privacy and anonymity. They like the convenience.”
Governments also prefer cashless transactions, he points out, because cash is the primary source of small-scale tax evasion.
However, it’s the loss of anonymity we should all be thinking about before we surrender to a cashless society, says Jacques Peretti, author of Done: The Secret Deals That Are Changing Our World.
“We are not handing over our cash. What we hand over instead is every last detail of our lives from a preference for Chinese over Indian food to whether you surf or knit or go on holiday to the Caribbean or Canvey Island.”
Lancaster University’s Dr Joe Deville, an expert in consumer behaviour and debt, agrees, “Every digital transaction leaves a trace, which provides an incredibly rich source of data about intimate details of your life – your patterns of behaviour, where you shop, what you buy and when.”
He admits there’s no evidence such data is currently being used – but companies could use it to assess credit ratings or to prove you’re frittering away too much at Costa Coffee to qualify for a mortgage.
Then there’s the marketing potential. If Starbucks could see you were buying a Costa coffee every day, would it target you with a blizzard of special deals? Already the Dunkin’ Donuts app in the US tracks people and if they walk past a branch more than three times without going in, it pings them with special offers.
It’s not the only reason to fear the decline of cash, either. Research shows we spend more with cards than with hard cash. Scientists at the Massachusetts Institute of Technology proved that students bidding on tickets for a sold-out basketball match were prepared to spend twice as much with a card as with cash.
“It suggests the psychological cost of spending a dollar on a credit card is only 50 cents,” said neuro-psychologist Drazen Prelec. His research found a particular neural pathway in the brain lit up when paying with cash – the “flinch” moment that stops us overspending.
It’s not surprising if you think about it, says Dr Deville.
“There’s a variety of moments during a cash transaction when you have to confront your own spending – getting cash out from the cashpoint, putting it in your wallet, getting the money out from your wallet at the till and counting it, handling the change. All those processes remind you that you’re spending money.”
And the fact that you can see the money physically disappearing from your wallet puts a natural brake on your spending. Studies also show people who pay with cards tend to forget they’ve spent that money, he says.
So 3,500 years after the introduction of Britain’s first coins, the wonky and primitive-looking Celtic stater, maybe it’s more than just nostalgia that should stop us embracing the glorious future of a cashless society.