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When cash is king: will we and should we be cashless?
Julian Dixon
September 7, 2020

Cash. The root of all evil or integral to society?

Regardless of how you feel, despite massive digital advances, cash remains firmly rooted in our society. There are currently over 70 billion pounds worth of notes in circulation, which is perhaps surprisingly roughly twice as much as 10 years ago.

Poverty, rather than old age, is said to be the biggest issue in moving away from cash completely. This is because if you earn less than £10,000 a year, you’re 14 times more likely to be dependent on cash than if you earn £30,000 a year.

What’s driving and maintaining this cash dependency?

For many, cash is still the best way of budgeting. You can’t overspend cash.

But there are other reasons too. Cash is fast and convenient, very widely accepted and appeals to some people because it is entirely anonymous. Cash is also the lifeline for the 1.5 million unbanked Brits – of which only about half would like to open a bank account.

That said, the UK has become one of the top 6 cashless society countries in the world.

Just 30% of transactions now involve cash, a rapid fall from 60% a decade ago. Some believe the UK will transition to a predominantly cashless society by the mid-2020s but this comes with big warnings.

A report has found the UK could find itself “sleepwalking” into a cashless society like Sweden, leaving 8 million adults struggling to cope. Sweden’s rapid switch away from cash has caused irreversible damage to its cash infrastructure.

Covid-19 has had a huge impact on how we use cash with ATM use declining 65% at the height of the pandemic. With many shops either closed or refusing to accept cash, an incredible five years of cash decline was accelerated into just five months.

Cashless = cash irrelevant not illegal

In a recent Forbes article about the meaning of cashless, David G.W. Birch made some excellent points:

- When we talk about a cashless society within a decade, we’re not talking about no cash at all. That’s entirely unrealistic.

- A cashless society isn’t one in which cash is illegal, it’s one in which cash is irrelevant

Birch also highlights a fabulous quote from William Gibson’s 1995 futuristic Novel, Count Zero, which happens to be his favourite line in the whole of modern fiction:

“It wasn’t actually illegal to have [cash], it was just that nobody ever did anything legitimate with it.”

Keeping this thought in mind leads us nicely onto the use of cash for illegal purposes – or the so-called shadow economy. The anonymous nature of cash makes it ideal for criminal trading, ranging from purchasing drugs off the street, to laundering dirty cash through legitimate cash intensive businesses.

While there is crime, cash will always be wanted and subsequently laundered.

It’s worth observing that in cashless Sweden, evidence suggests crimes linked to cash, such as robberies aimed at stealing cash, have decreased sharply over the last decade. It’s not all good news though. Electronic payments have created new risks and there’s been a significant increase in fraud as criminals turn their focus elsewhere.

Cash or cashless – money laundering will persist

Perhaps the biggest point I want to make is that while Sweden’s move to a cashless society has proven to be problematic for criminals, where there is a will, there is a way. Money laundering of course continues to persist.

As long as there is crime and crime pays, money laundering will be a battle. Criminals are keen opportunists and fantastic innovators. To assume a cashless society will reduce or even eliminate money laundering is far too simplistic (not to mention optimistic). Money laundering does not necessarily require cash.

The only way to reduce money laundering is to reduce crime and cut access to money laundering options.

While times have changed and regulations now ensure it is no longer possible to buy high value goods or deposit large chunks of cash without so much as a question asked, Markus Forsman summaries the situation perfectly: “Just as we do not expect people to stop committing crimes because we have law enforcement authorities, we cannot expect a regulatory framework to make money laundering and terrorist financing impossible.”

Moving to a cashless society is not a panacea for destroying the ability of criminals to launder their dirty money. And while the UK, and many other societies around the world are making massive gains towards being cashless, the transition is not without its risks and issues.

So will we ever be cashless?

Yes, there probably will be a point in time when we do eventually become cashless but we’re not there yet, both technologically and culturally.

From an AML perspective, it makes little to no difference as to whether transactions are digital or not. The monitoring process is much the same.

What do you think?

We’d love to see your comments. Please share this blog and let us know what you think about a cashless society.

About Napier

We design and build compliance technology to help companies in any sector detect suspicious transactions, screen potential customer & business partners and help analysts predict customer behaviour.

To see our award-winning technology in action, get in touch with our team here.

Julian has more than 20 years of financial services experience gained at major investment banks including Deutsche Bank, JP Morgan and Commerzbank. His roles have ranged from front-office sales leadership to private equity. Julian has extensive knowledge of financial services processes and technology.