The great debate: Executives discuss the pro and cons of a cashless society
It wasn’t Hillary Clinton vs. Donald Trump.
But when six payments executives took the stage last week in Chicago at Networld Media Group’s Bank Customer Experience Summit to engage in a friendly debate, the topic at hand seemed just as important as the next president of the U.S.: The pros and cons of a cashless society.
The pro-cashless side of the stage included Ingo Money’s Dickson Chu, Darren Easton from the Center for Financial Services Innovation and Alyssa Arredondo from Entrust Datacard.
Their competitors on the pro-cash side included David Dove from Cardtronics, Mike Lee from the ATMIA and Dan Littman from the Federal Reserve Bank of Cleveland.
While the debate moderator, the EFTA’s Kurt Helwig, was never in a position to pick a “winner,” the general consensus from the panelists was that consumers will continue to use a mix of emerging payments and cash. But while cash use will decline in the future, it is still a stable form factor as a payment tool.
How we arrived at this discussion in the first place comes from years of banks and fintech companies investing billions in emerging payments technology.
Even whole countries are getting into the act.
Nine months ago, the New York Times published an A1 story about Sweden’s transformation into a cashless society.
The story noted that physical money represented just 2 percent of the country’s economy at the time. That was a stark difference compared with 7.7 percent in the U.S. and 10 percent in the Euro countries.
But while the majority of Swedes happily swapped bills and coins for plastic payment cards and smartphones, a portion of the population worried that a move to a cashless society could have dire consequences on citizens’ right to privacy and make them more vulnerable to cybercrime.
These concerns, among others, reached a crescendo in March when the Swedish central bank hit the brakes on a cashless society and asked the country’s ministry of finance to require financial institutions to offer cash access as a basic feature of payment accounts.
The central bank argued that banks across the nation had been too quick to reduce cash access for citizens and that demand for paper money was outpacing supply.
Representatives from both sides of this particular debate each made strong arguments in favor of their position.
Chu noted that banks and fintech companies have invested billions in payment innovation; that millennials have grown up as digital natives; and that M-Pesa changed how Kenyans conduct their financial lives.
But Cardtronics’ Dove had some solid responses to Dickson’s opening salvo.
“When we think about innovation and payments, there has been a lot of innovation since 1950,” Dove said. “That was not an attack on cash. It was an opportunity for businessmen to make payments. It was not solving a card vs. cash problem. The banking and retail sectors have spent trillions without having an aim to kill cash. Innovation in payments doesn’t mean you’re attacking cash, or that it’s going to be reduced.”
Dove also noted that cash in circulation in Kenya has actually increased as a result of M-Pesa because more citizens are banked.
“Innovation in payments doesn’t mean cash goes away, particularly in emerging countries,” he said.
But can such innovation help consumers better manage their finances?
The CFSI’s Easton, who was on the pro side of a cashless society, thinks so and argued that card- and digital-based products such as Direct Express in the U.S. have helped make that idea a reality. The U.S. Treasury Department’s Direct Express prepaid debit card program is for federal benefit recipients who are unbanked.
“I think there is a benefit to the ancillary products [that come along with such initiatives],” he said.
By the end of the debate, it became clear that the participants did not believe cash was going away any time soon, especially as it relates to giving consumers a choice.
“There is no business case for restricting freedom of choice when it comes to payments,” the ATMIA’s Lee said. “If you want to restrict freedom of choice, you have to have a darn good reason for doing that.”
Some other notable quotes from the debate:
- Arredondo from Entrust Datacard on the demise of cash: “I think it will die its own death in different parts of the world, but I don’t know if there is an accurate timeline for that.”
- Littman from the Cleveland Fed about “end of cash” headlines: “It’s Mastercard and Visa [driving that narrative]. The headline is about the end of cash, but if you look at the data, that’s not the case.”