FinTechs to Heal the Rift Between Consumers and Cash

Fintechs to heal the rift between consumers and cash

Written by J S

September 22, 2022

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Fintechs to heal the rift between consumers and cash

Since the death of Queen Elizabeth II, King Charles III has been tasked with incorporating many new and practical changes. One of which is His Majesty’s portrait, due to appear on existing designs of all four polymer banknotes (£5, £10, £20 and £50) and expected to co-circulate with the Queen’s currency by mid-2024.

However, research suggests that Britain will become almost cashless by 2024 and in an increasingly digital world, Forbes is now referring to him as King Charles The Cashless. As such, it seems a certainty that the UK will become a cashless society under his reign. A recent report from UK Finance, the banking trade body, estimates that just one in every 20 transactions will be made in cash by 2031. This follows reports that nearly three-quarters of people prefer to use cards or digital wallets. With only 14 per cent of people opting for notes and coins.

Electronic Transactions: Top Choice

The rift between consumers and cash is so great, that more than half of people think that notes and coins will be out of circulation by 2030. Forty-seven per cent of people who rarely carry cash, say it’s for security reasons. While 82 per cent said it is easier to pay by plastic or digital wallet.

Electronic transactions are also becoming the top choice for retailers and other consumer-facing businesses who prefer the convenience, time and cost savings and security of digital payments.

A New Banking Landscape

Naturally, the banking landscape has also changed to accommodate Cashless payments and digital wallets. John Howells, chief executive at Link—the UK’s largest ATM network, has warned of a cashless catch 22 effect, meaning fewer ATMs, leading to even less cash. In an interview with The Telegraph,  Mr Howells said:  “Since the beginning of the pandemic, cash use is down by 40 per cent – and is still falling.” He went on to add:  “We have five to ten years to fix digital payments before cash becomes unworkable, and need to start planning how to get the new system working for all.”

A Convenient Cashless World

Digital currency requires considerable consideration in order to minimise disruption and any negative impacts on those most hesitant to adopt it. However, as many people agree, a cashless world is not only more convenient, but has the potential for a significant impact on crime reduction, as well as having a positive impact on government economic policy. As The Bank of England and the European Central Bank are preparing their own trials, China, Japan and Sweden have already begun trialling central bank digital currency. The Bahamas has already rolled out the world’s first official digital currency. In a guest post for the New York Times,  the professor of trade policy at Cornell University, Dr Prasad explains:  “Central-bank digital currency can also be a useful policy tool. Typically, if the Federal Reserve wants to stimulate consumption and investment, it can cut interest rates and make cheap credit available. But if the economy is cratering and the Fed has already cut the short-term interest rate it controls to near zero, its options are limited. If cash were replaced with a digital dollar, however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest.”

FinTechs: Delivering Solutions

One of the means of transitioning to the digital world is for FinTech leaders to innovate in order to deliver user-friendly and cost-effective solutions. Nabeel Irshad, VP, government & public sector, FinTech ESG UK & Ireland, Mastercard UK and Ireland said:  “Banks and other providers must improve the digital skills of those who lack them by providing better, more inclusive access to information on financial services.” Much like telecommunications modernisation, cash digitisation is happening at a rapid rate and brings significant benefits for both consumers and businesses. Ensuring maximum benefits and minimal disruption requires the type of creative and innovative solutions that FinTech’s are renowned for. This, in collaboration with governments and regulators.

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