Access to payment systems is an important matter of public policy. Some regulators have done a great job in bringing forward innovative payment solutions that keep their countries at the forefront of financial services; others appear to lag behind. What is becoming clear is that the traditional view that sustainability should be left to market forces may not be appropriate, as our increasingly developing payment landscape is leaving millions of people behind. With COVID-19 accelerating this divide, many continue to be concerned about the impacts of a cashless society. Research from YouGov has highlighted that in many countries where cash is still a popular payment method, the population is happier about moving away from cash. But in the absence of a clear plan communicated to the public, as cash use falls, concerns about the impacts of becoming cashless grow and the transition stalls.
Why this is a problem for consumers (and regulators)
For many, cash use will remain strong for years to come. No country has yet to go fully cashless; in order for that to happen, it would have to remove a significant number of barriers. It is expected that many consumers will use and rely on traditional payment methods long into the future. However, it is true that all countries are going through a period of transition as digital payments become more prevalent in daily life. The challenge for regulators is greater during a transition period because we automatically categorise and generalise to help structure our thoughts. This approach often distorts our views, as we have a strong dramatic instinct towards binary thinking (the basic urge to divide things into two groups with nothing but an empty gap in the middle). Storytellers know this and set up their narratives as conflicts between two opposing views.
The absurd consequences of focusing frantically on a single idea are obvious if you stop and think. In any other area of our lives, when this approach gets completely out of hand (which it is with talk of a cashless society), we usually call it stereotyping. We will never solve important policy issues, such as financial inclusion, if we continue to employ binary thinking.
The time has come to stop dividing consumers into two groups (analogue users and digital users) becauseeverything works much better when we focus on broader typologies.
Why regulators need to take more notice of consumers as cash use falls
A recent global study from YouGov1 endorses the view that no country has a clear and effective plan to resolve challenges around financial inclusion or manage cash transition. More worryingly, the survey highlighted the surprising view that people who live in cash-light countries, such as Sweden and Denmark, are more worried about the broadest challenges associated with becoming cashless, with more than 25 percent believing it would be problematic; by contrast, in countries such as India, where cash use is high, more than 75 percent of the population think it would be positive. Even after the prolonged impacts of COVID-19, the majority of people clearly feel that moving to a cashless society would be a negative step. But, as the survey demonstrates, even with these views, most of us are now less likely to use cash daily.
This highlights the challenge of how best to maintain access in a declining market; the absence of plans is keeping infrastructure costs high and issues of inclusion and access at the top of the agenda. The United Kingdom’s “Access to Cash Review” (which I co-authored) made several recommendations to the government and regulators on how to resolve this challenge. Two years after its publication we are still expressing concern that the lack of progress means that the UK remains on a cliff edge.
In reality, as cash use falls, without a clear plan, people become more and more concerned about the impacts, and the transition stalls because people are opposed to becoming completely cashless.
What is the best way forward?
The lack of collaboration and innovation between cash and digital payments is holding consumers and countries back. With countries at different points in their transitions, they need to find ways to work together to support each other and develop roadmaps to deliver universal access to payments. The mission should be to ensure that nobody gets left behind.
We need to recognise the rapidly changing methods of making and receiving payments and the changing nature of the payment market more generally. The core purpose of regulators should be to support the development of well-informed payment-transition strategies that bring together payment and cash communities to share a common passion for ensuring universal access to payments. This approach doesn’t seek to fix things that are broken but sets out to create an environment that works with communities and service providers to identify the positive outcomes they need to implement.
It’s been two years since the “Access to Cash Report” was published in the United Kingdom. The logical progression is that we work together to deliver universal access to payments by reflecting on international progress and widening the debate on how to ensure we collectively meet one of society’s shared challenges. The main challenge we are seeking to help solve is: How do we provide a fair payment and financial system accessible to everyone?
I do not doubt that anyone reading this article could deliver a compelling account of why any country—and, in fact, the whole world—isn’t ready to go cashless. But that shouldn’t be our purpose, as the likelihood of countries going completely cashless anytime soon is, in reality, very slim. Policymakers and industries need support to develop, communicate and execute plans to manage their transitions whilst ensuring universal access to payments and improving financial inclusion.
Not having that plan in place implies that, on some level, we believe that payment systems are separate from the societies they serve. I understand that it is an ambitious goal, but our capabilities must meet the outcomes we want. The assumption that if every unit in the system is working, the overall system works is no longer true. Competition and market integrity are no longer adequate proxies for desired outcomes.
Organisations such as OneBanks (which I co-founded with Duncan Cockburn) were created on the premise that rather than trying to compete with alternative payment systems, we should be looking for innovation that complements cash by providing, amongst other things, greater levels of inclusion, better access to financial products and improved advice for the vulnerable and excluded.
1 YouGov fieldwork: June 9-July 13, 2020, based on a sample of 25,823 adults in 21 countries across 4 continents to understand more about people’s attitudes to payments and their potential impacts on transitions to cashless societies.