Nicholas Mazzei is a former Army Officer who now works for BT.
The other morning, whilst getting my post-gym coffee in Stratford, I noticed an innocuous but important sign on the till. “We no longer accept cash, only cards”. Now I’ve seen a few signs relating to payments on the tills of coffee shops, but usually it relates to some sort of minimum spend via cards (usually in breach of the terms and conditions of whichever payment processor the shop is signed up to), and on occasion saying “cash only”. But I’ve never before seen one that says “No cash”.
We shouldn’t be surprised by this. If anything, we should have been asking why is this not more widespread? Cards now account for 42.6 per cent of all transactions, ahead of notes and coins, which fell almost five percentage points to 42.3 per cent.
We also know the Downing Street Policy Unit submitted a proposal to lay down an ambition to end all cash transactions by 2020, as a way to drive up productivity and disrupt some forms of criminal activity. The introduction of the Oyster card in London brought about a revolution in payments, helping to energise the transition from cash to contactless card payments (if you’ve ever gone to New York recently, you’ll be shocked that they’re still using paper, as are most major metropolitan transport systems). Year-on-year growth in contactless has been around 240 per cent for the last two years and it’s likely you won’t have missed the explosive growth of digital “crypto-currencies”. Bitcoin has taken the financial world by storm, growing from $1,000 at the start of the year, to $6,000 by mid-October, to $11,000 by the end of November.
It’s time the Conservative Party realised the opportunity in a cashless, all-digital currency to take us truly into the 21st Century. Theresa May has disappointingly said there are no plans to go cashless, but looking closely at the capability of Bitcoin and the preference for using cards over cash in the UK, it is time we turned sterling from an analogue currency into a fully digital currency, and grabbed a potential £35 billion just from missing taxes back into the Government’s pockets to deliver much needed services.
Digital currency and card payments have huge advantages over cash. First and foremost, it’s significantly more secure and safe. The two baristas at the café in Stratford said they were glad there was no more cash on the premises. “It’s safer for us here without cash,” they told me. And what a hassle cash is, as well: counting it, transporting it, banking it, losing it, people stealing it and inflation losses from fraudulent notes and coins. Cash is expensive to get from the person buying from you, to your bank account (some estimates place the “cost of cash” to be around four per cent). Rates of fraud on contactless is very low, around one per cent, and it goes straight into your bank account.
Second, cash is filthy – and I don’t just mean the horrors which exist on its material surface (you really, really don’t want to know what they find on this stuff). Going from criminal to criminal, dodgy backhand deal to backhand deal, eventually into your pocket, having been laundered to make it legal. Criminals love cash. It’s extraordinarily hard to track, especially in large volumes. Card payments are easy to initially track, but after the money has gone from one person to the next, any tracing of it is gone, hence why launderers will move money from place to place to place. Now Bitcoin is fully traceable. It can be tracked from the day it was mined to the day it enters your bank account, routed through an amazing technology called the Blockchain, an online ledger which tracks every Bitcoin through every exchange and purchase.
It’s by combining a new, digital pound with the Blockchain that the potential for the UK economy really gets exciting.
It would be almost impossible to evade paying tax; each digital bit of coin can be associated with a purchase, income or tax allowance. The days of the black market would be over, as we would be able to trace every transaction. No more cash-in-hand deals without being taxed. In 2012, the expected missed tax from cash-in-hand payments was up to £8 billion. The overall expected UK tax gap in 2017 is expected to be around £35 billion; a fully digital currency will help close that gap completely. The Blockchain can also protect against fraud, theft and onward selling of items that have been stolen. Items bought by digital currency can be registered at the time of purchase with the currency, meaning my expensive headphones, if stolen, will be tracked down the moment someone tried to sell them on. Stealing items would quickly become pointless as no thief would ever be able to sell them.
There are other opportunities, too. The UK has the perfect balance of tech know-how, connectivity and financial weight to make us the leaders in this technology, allowing us to sell services of it around the world.
Concerns that older people won’t like the shift aren’t really held up by the statistics, and those worried about moving to card-only payments would likely enjoy the safety and security from not needing to carry cash. It’s time to revisit the findings of the Policy Unit and think again about a digital pound. The benefits are vast and there really aren’t many down sides.