Has the demise of money been exaggerated?

Physical money has had a decent run with a history stretching back more than 5,000 years to the barley-based shekels of the Mesopotamians. After the shekels came the coins minted first by the Chinese, the Greeks and the Romans who developed currency systems based around precious metals including copper, bronze, silver and gold starting more than 3,000 years ago.

The inventive Chinese were also front and centre when it came to rolling out bank notes – based on promises rather than anything real – 1,000 years ago.

Money endured during the dark ages and flourished in the Renaissance before really coming into its own thanks to the bankers of the Industrial Revolution who dispensed pounds, shillings and pence. It became even more popular with the help of the dollar dealers across the Atlantic.

In the Ireland of the late 1920s, Lady Lavery appeared on our notes and managed to hang on to a position of pre-eminence until the dawn of the physical euro just over 20 years ago.

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But the world is changing at a breakneck pace and questions about how much longer will we have money persist.

With cryptocurrencies now two a penny and fintech start-ups challenging pillar banks and moving people further away from physical money, has money had its day? To be honest it is a question we have been asking on this page for years and the short answer would appear to be maybe, but not for a while yet.

The last time we asked this question was almost exactly three years ago. We know this because days after we asked if cash was still king, Covid forced the country – and pretty much the world – into lockdowns and fundamentally changed our relationship with cash, arguably hastening the end of physical money or at least setting it even more firmly on a road to obsolescence.

[ Elderly GAA fans excluded by cashless policy, TD warns ]

According to data from the European Central Bank (ECB), the proportion of payments made with cash fell from 72 per cent in 2019 to 59 per cent last year while mobile app payments jumped from less than 1 per cent to around 3 per cent with standalone online payments climbing from 6 per cent in 2019 to 17 per cent in 2022.*

The numbers using ATMs fell even more sharply in the first phase of the pandemic as people went into lockdown and thought twice about using the dirty keypads used by other people. In February 2020, more than 10 million ATM transactions were recorded in Ireland compared with just four million three months later and while usage has climbed since then it is a still a long way off the 10 million figure.

That still leaves a lot of cash transactions taking place but momentum does seem to be heading in one direction.

Sweden and Norway can act as signposts as to what that direction is. In 2020, less than 10 per cent of Swedes used cash for payments, a decline from 40 per cent just 10 years earlier while in Norway only 4 per cent of payments were made with cash in the same year.

Banks, service providers and retailers are keen to insure we follow the Swedish and Norwegian models because no physical money makes them more virtual money. Cash operations account for between 5 and 10 per cent of total bank operating costs. An absence of cash means a significantly scaled-back ATM network, far less staff, fewer cash vans, cheaper insurance and less crime.

But while no cash works for banks they don’t always get it their way and occasionally they meet resistance. Like last summer when a bullish AIB announced that it was making 70 of its branches cashless – an idea that makes as much sense as a McDonalds without burgers, really. It eventually had to reverse its decision as the public weren’t buying it.

Despite the setback all banks will continue to push a narrative suggesting a cashless society is inevitable and desirable.

[ AIB reverses plan to make 70 banks cashless following ‘public unease’ ]

Not all the evidence points that way. ECB research suggests most people reckon it is crucial to have the option to pay in cash which it why it has been insisting in recent years that EU member states develop strategies and legal frameworks to protect money. Even in Sweden and Norway there is pushback with regulators in both countries rolling out measures which force banks to ensure the availability of cash services to protect people in rural areas and older consumers who find it difficult to cope without cash.

Last November, in a review of banking published by the Department of Finance, the importance of cash in a digital world was stressed as was the need for a “legislative framework… to manage any further decline in the cash infrastructure”.

That review noted that ATM transactions had fallen by almost 50 per cent since 2015 and use of debit cards at point of sale have soared almost 300 per cent over the same period but despite the trend, only 11 per cent of consumers do not use cash.

“Government policy should support the development and maintenance of a sustainable and resilient cash system for as long as cash is needed,” the report said while also backing the “digitalisation transformation” of our world.

Separate research from the Banking and Payments Federation of Ireland (BPFI) points to further change with contactless transactions climbing from about 16 million at the start of 2016 to 268 million in the third quarter of last year.

In the absence of any laws, it is a bit of a free for all and any business can decide unilaterally to accept or not to accept cash as they see fit.

According to the Competition and Consumer Protection commission, “businesses must accept cash unless it is clear they only accept other ways to pay. This can be as simple as a sign in the shop saying ‘card transactions only’. As long as you decide to continue in the presence of such a sign, this is considered agreement.”

The CCPC adds that if a business “doesn’t clearly state that it only accepts certain methods of payment, it must accept cash (legal tender). A business does not have to accept cash if there are safety concerns. For example, they can’t store the money safely. This also applies if a business runs out of change.”

[ Cantillon: Payments systems failure at Aviva involves estimated €500,000 loss ]

For more than a year, the Aviva stadium has not been taking cash at any of its bars – a policy it paid dearly for last summer when the technology for reading card and digital payments failed for a couple of key hours during an American college football game leading it to give away hundreds of thousands of euro in free beer and food.

The National Driver’s Licence Service (NDLS) has been cashless for almost three years as have countless other businesses and State bodies.

The reluctance to at least give consumers a choice is not down to any class of over-zealous urge to embrace the future and is borne out of a desire to save money and make transactions faster. If you can stop people fiddling with change to pay and waiting for more change once the transaction has been done you will, the logic goes, make your service more efficient.

Handling cash also costs businesses money – up to 2 per cent – and is cumbersome compared to contactless transactions which cost about 0.2 per cent of a transaction.

Even the most traditional of enterprises is turning its back on money with the buying of tickets for many in GAA venues using cash completely impossible.

[ Denis Walsh: To leave anybody behind is against everything the GAA stands for ]

Independent TD Mattie McGrath has described that as “a very despicable policy” while Age Action has previously called on the GAA to reconsider its cashless ticket system in order to assist older supporters.

Speaking in the Dáil recently, McGrath said the State had become a cashless society and he was “shocked and appalled at the GAA and I have been writing to them for nearly 12 months now asking them about the situation whereby elderly people who played and gave their life to the GAA and worked in the clubs and did everything in support of the GAA and they can’t get into a match if they haven’t pre-booked a ticket”.

He noted that “Some of these people are in their late 70s and 80s and older, in their 90s, and they haven’t the wherewithal, many of them are men of the cloth, many of them are bachelors, people like that, who don’t have any family around them who can do it for them and it’s embarrassing that they can’t have one stall open or one place open.”

In response, Taoiseach Leo Varadkar said ticketing systems were a matter for the GAA rather than the Government. He pointed to the report on retail banking and said the Government believed there should be a place for cash.

“We want to encourage electronic payments and lots of older people and lots of bachelors use cards, use phones, use Revolut, and are well capable of doing so,” he said.

“But I appreciate there are some people who want to continue to use cash. Cash remains legal tender in this State and we want to make sure that that is facilitated where it can be.”

Rough poll: A penny for your thoughts

Last week we carried out a very unscientific poll on Twitter. We asked users how often did they use physical cash? Just under 16 per cent of the more than 3,500 users who voted said they used real money every day while almost one in four said they used it at least once a week. A further 26.5 per cent said they used money only a couple of times a month while one-third answered “almost never”.

Despite the fact that a majority of those who took part use real money only very occasionally, most people were firmly of the view that it still has a role to play in society. In fact the poll attracted dozens of comments and not one person was in favour of a world without cash.

“While I use card 90 per cent of the time, I think a cashless society is dangerous for multiple reasons. Just today I had to refuse the homeless a couple of euro because I’m constantly using my phone to pay for things and never bring my purse out.” – Eleanor Sweeney

“I only use cash to tip or if there’s no choice. But I had to leave all my shopping at the till one day when the machines went down so I always carry a little bit now.” – Kathy Troy

“Use my cards a lot but wouldn’t want a cashless society. Systems can go wrong, older people and some others find the whole automated process difficult. Nice to have a couple of quid to tip, give to young children, birthday gifts etc.” – Paula Courntey

“For some things cash is still king. Also if you want to give a tip you know that with cash it’ll go to the waiting staff. But I go weeks without cash.” – Michele Neylon

“Imagine every single cent that you own just being a number on a screen, that terrifies me.” – Rachael Byrne

“No way have a cashless society, the charges that the credit card processing companies charge small businesses is ridiculous. If we have US guests, it’s nearly 3 per cent on every bill. If cash is gone, it will just get higher! Cash is King and should stay that way!” –Paul Mernagh

“Definitely would not want a cashless society. Cash is KING!!” – Philmomena Harding

“Never use cash but ironically don’t want to see a fully cashless society.” – Eric Hennelly Flanagan

“Using less cash because that’s the way it’s going. We have no choice. Obviously a good thing for businesses… security etc… But I think it’s not a great idea overall.” – John O’Grady

“A cashless society is another attempt to take away personal control of how we use our money. As it is, how many people tap away and haven’t a clue how much they have in their account?” – Karen McDonnell

Expert opinion: ‘Cash is essential for the inclusion of socially vulnerable citizens’

Dr Olive McCarthy is a senior lecturer at the Centre for Co-Operative Studies at UCC’s business school and an advocate of cash.

She warns that we will abandon it at our peril and says a cashless society will exclude a significant percentage of society particularly those on lower income and some older people who rely more on physical money.

In the UK, a 2019 report found that 17 per cent of the population there would struggle in a world without cash and would be at risk of being “left behind” with people on low income more vulnerable than older cohorts.

[ Sharp increase in number of older people at risk of poverty, CSO finds ]

About one-third of Irish social welfare recipients are paid in cash with UCC research suggesting that lower-income cohorts often manage their finances – both spending and saving – using cash, because it helps them to feel more in control or because they have had negative experiences with missed direct debits and bank charges.

McCarthy points to the NDLS policy of not accepting cash payments and says it immediately cuts off anyone without a debit or credit card off from a vital service. “I’ve heard cases of people who needed to get a driver’s licence who have had to phone a friend or a relation and ask them to come down with their debit card to make the payments on their behalf.”

She accepts that a cashless society has advantages but says using cash is “much simpler [and gives people] much more freedom” while also protecting their privacy.

She welcomes the ECB’s strategy around ensuring that cash remains accessible because of the potential for excluding certain cohorts of citizens.

The ECB has identified the functions and benefits of cash with most promoting financial inclusion. She notes how the ECB recognises that cash is the only form of payment that doesn’t involve a third party and ensures consumers’ rights to privacy. It is also fast, secure and can be relied on.

She notes how the ECB makes it clear that cash is “essential for the inclusion of socially vulnerable citizens, such as the elderly or lower-income groups”.

“If we want to keep it if it’s something we think we need in society and I do think it is, then we need to use it a bit more,” she says.

*Article amended at 10am on March 6th, 2023