In East London, the British Caribbean café, Island Social Club, takes ‘card payments only’. Ever since hearing the rapper Loyle Carner (as a guest on the OffMenu podcast) claim that Britain’s best roti can be found gracing its tables, I was keen to pay the restaurant a visit. And it lived up to its praise. Fresh from the oven, the roti was hot, buttery and a perfect companion to my main dish. But it was memorable for another reason – it was the first restaurant I’d been to which was 100% cashless.
For a small eatery with a corrugated iron roof and only about eight tables, this seemed a strikingly modern move. Many other UK restaurants are doing the same. Here at StoreKit, we’ve been tracking their progress. In an earlier blog, we noted the success of salad bar chain Tossed, which moved to card-only in 2017.
Does this mark the beginning of the end of cash payments? And where does the UK come in the world race towards cashless living?
According to the banking body UK Finance, data from last year suggests that many UK adults opt for a ‘pick and mix’ approach when it comes to payments. Contactless and mobile are on the rise, but cash remains valuable for managing our finances day-to-day (as a budgeting tool, for example). However, overall cash payments have fallen by 16% in 2018, with one in ten of us opting to go cash-free. Nearly 70% of UK consumers now use contactless payments. Eliminating cash has its pros and cons. Cards reduce errors as well as waiting time for customers and merchants, but on the other hand, certain card types can mean an additional cost for retailers. The switch to ‘card only’ can alienate some customers. The British Retail Consortium predicts that cash use will fall to just 9% in 2028, with the way things are going right now.
Cash may be in decline, but we still need it
What impact is this contactless trend going to have on the society as a whole? There are factors which are slowing the UK’s movement towards becoming a 100% cash-free nation. For example, rural regions, where mobile connectivity and broadband can be scanty, are going to struggle with the digital shift. If society moves to digital payments too quickly, poorer and homeless communities may be locked out of the payment system. Set up earlier this year, the UK government’s Joint Authorities Cash Strategy Group (JACS) will work with the Bank of England to ensure cash continues to be available to those who need it. Cash is still king for a large sector of society. These measures protect that freedom of choice for UK consumers. So even if cards sweep the population, it’s unlikely that cash will disappear. At least for now.
In Sweden, few people still use cash. It is tipped to become the first cashless society in 2023. The Scandis have always been famous for leading the way in new tech. After all, the Swedes were responsible for the creation of iZettle, those swish-looking card machines. We know lots about them – read Storekit’s guide to iZettle here. Almost all public transport in Sweden is card only. You can forget it if you want to buy a ticket on the Stockholm metro with coins. This change was pushed for several years ago by public transport unions insisting that handling cash had become a “work environment problem”. A string of bank robberies also sped up the banks’ move away from cash. Now, only around half of all Swedish bank branches actually let people to withdraw or deposit cash. As in Sweden’s nordic neighbours – Finland, Norway, Denmark & Iceland – mobile payments allow instant P2P and P2B transfers. As shown by a recent report by Sweden’s central bank, Riksbank, Swedish households are increasingly using digital methods such as bank cards and Swish, at the same rate as the use of cash is declining.
Swish, a wildly popular app developed jointly with the major banks Nordea, Handelsbanken, SEB, Danske Bank and Swedbank, uses phone numbers to allow anyone with a smartphone to move money from one bank account to another in real time. One Stockholm church said last year only 15% of its contributions were in cash; the rest were all by phone. A similar Danish app, MobilePay, is used by over half of Danes.
That’s not to say that there aren’t risks. Fraud cases have more than doubled in the past decade. Some critics – including the inventor of iZettle, Jacob de Greer – ask whether an entirely electronic system in which every single payment is recorded is not a threat to privacy. The good thing about cash is that it’s universal – anyone can use it. Even if you don’t have a smartphone. A cashless world might be a leap too far (and too soon) for the elderly, children, and cash-using tourists.
Some experts in Sweden have raised this concern. ‘Most countries are pushing digital technology, and if you are successful, this will have consequences for cash,’ says Segendorf, an adviser at Riksbank. ‘You have to realize this early, and I think we were too late with that.’
“We pay by WeChat now” say China
Sweden isn’t the only frontrunner in mobile payments. In China, people aren’t even using cards. They’re going all mobile, all the time. Look around in any of the big chinese cities and you’ll see everyone scanning QR codes (if you’re not sure what a QR code is, it looks like this). This is what you use to scan and pay for things. In some places, payment with cash or credit cards is not an option. Two mega apps – Alipay and WeChat – dominate the mobile payment scene. WeChat is a social networking app, which was first created as a messaging app. It’s a bit like Facebook or Whatsapp. The app blew up very fast, and was soon bought by a tech giant Tencent. Today, it serves many other uses besides chatting. From cabs to chocolate bars, ramen to rent, you can pay for goods by WeChat. It’s all done inside the app, which links the WeChat wallet to your credit card. What’s behind this craze? Is it poised to sweep the planet?
Supermarket scanning by mobile phone
The e-commerce giant Alibaba is reimagining the supermarket experience. Alibaba’s Huma supermarket harnesses China’s QR code-scanning culture. Everything in the shop is scannable. You can add them to your favourites…so later, from home, you can order them for delivery. Your favourite snack? The app knows. This lets it give you personalised recommendations, and it’s all linked to Alipay. A whole datahub about you!
Huma, which plans to open 2000 more of these supermarkets, shows how mobile payment platforms in China are expanding their range of uses to reach every corner of your life. With data from your everyday shopping, WeChat Pay and Alipay can boost their customised marketing. For example, these platforms can alert users when you’re near a store where you’ve recently shopped. Want a scarf to match that coat you just bought? The app will know the right shop for you. Working together with travel planning apps — such as Ctrip, the popular Chinese tourism app — they can suggest shops or eateries near the destination where you’re traveling.
What about data privacy?
It’s effectively a way for big businesses to collect data and target you, sending push marketing notifications that consumers may not want. For many consumers in Chinese cities, the convenience of having your bank account in your pocket appears to outweigh privacy concerns. In 2016, Chinese consumers spent $9 trillion in mobile payments, dwarfing the $112 billion spent in the US. According to Tencent, 75% of fast food purchases in China are made by mobile.
But we must stop and question how the Chinese state can exploit this mass data collection. China’s no. 1 messaging app is also a powerful weapon of social control. This seems to be just another part of the Chinese government’s wider investment into creating a surveillance state. Facial-recognition technology is increasingly widespread in the country, with few limits on how it can be used to track and monitor people (we should be reminded of the government’s surveillance of millions of people from the minority Muslim Uyghur population in Xinjiang, of whom a million have been forced into concentration camps). Around 173 million cameras now watch China’s citizens. In the imminent future, the government has laid out plans to provide CCTV-coverage in all “key public areas.” In May 2014, the Chinese government enlisted a taskforce to reduce ‘malpractice’ on instant messaging apps, focusing on messages that enable “violence, terrorism, and pornography” as well as fraud. WeChat, alongside its rival apps, was required to let the government monitor the activity of its users. Alarming.
The Western imagination and social media has tended to paint China’s social credit system as a nightmare out of Black Mirror. Mike Pence, for instance, spoke out about China’s intrusive surveillance apparatus late last year: ‘by 2020, China’s rulers aim to implement an Orwellian system premised on controlling virtually every facet of human life—the so-called “social credit score”’. However, such worries are often focused on what could happen in the future, and run the risk of downplaying the terrifying aspects of the project as it is in place today. Also, it’s actually a lot more complex than a single ‘social credit score’. The system at the moment exists as regional pilots, with very vague ideas about how it will be rolled out nationally. Chinese cities are experimenting with social credit, but a social credit system remains in development.‘This entire thing is just so massive, and it varies across place to place’ says Xin Dai, a professor and associate dean at China’s Ocean University Law School. ‘It is easy to sort of misinterpret or only catch part of it, without seeing the entire picture.’
Mobile money drives financial inclusion in developing countries
What does this mean for countries where many workers are paid in cash? Will they get left behind? Let’s look at the other end of the scale. According to the Global Findex, over half of people in sub-Saharan Africa are financially excluded. This means that they only use cash to pay for things or save up. Without access to former financial services, these people get locked out of many economic activities, cannot access credit and are at a high risk of being conned. It’s often said that cash creates ‘friction’. And societal progress needs frictionless payments. Or it helps a lot.
Smartphones can be a simple way around the need for banks. Take India, for example. 233 million Indians have never been to a bank, and most accounts have a balance of zero, according to Bloomberg. But 80% of Indians – over 900 million – have access to mobile phones, making them a valuable tool for reaching lots more of the population. This is crucial for improving financial inclusion across the nation. India’s Unified Payments Interface (UPI) is a mobile platform that enables real-time peer-to-peer (P2P) transactions, barcode-based in-store payments, bill payments, and more.
Kenya’s M-Pesa makes payments easy
Set up a decade ago by Vodafone’s Safaricom mobile operator, M-Pesa is an electronic wallet service that lets a person send and receive money at the touch of a button. Mobile exchanges are a lot easier and safer than carrying around wads of cash. This is big news in a country where many workers in cities transport money back home to their families in rural villages. You load money onto your M-Pesa account by going to an agent in a corner shop and handing them cash. Now there are nearly 20 million M-Pesa users in Kenya. That’s two thirds of Kenyan adults. Working with local banks, M-Pesa offers loans & savings, plus merchant payments services. People use it to pay bills and take out loans. Now, more people have access to formal financial services – an advantage which could persuade other African countries to go cashless. That being said, some African nations like Nigeria – Africa’s largest economy – are still uneasy with mobile payments. Some fear that their phones aren’t secure. Cash is valued and preferred by many people. Even in the UK, a third of payments are still in trusty cash.
A 100% cashless Sweden is very much on the cards. Even in the UK, buskers on the London tube are now boasting iZettle machines for people to tap and donate. It’s safe to say that, all across the world, countries are moving towards a cashless economy. Want to learn a bit more about taking card payments? Speak to one of our experts today and we can go through all of the options available to you. We can look at your business and run simulations to see what’s the best combination of EPOS software & payment processing.