Going Cashless - The Buck Stops Here

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In the wake of digitisation, expanding economies are hurtling at binary speed toward a fully cashless society.

Australia provides a good example. It is now recognised as a world leader in the push for a zero-cash economy.

A new MasterCard global survey reveals that Australia ranks in the top ten of nations dubbed 'nearly cashless'. It sits in sixth place, behind Belgium, France, Canada, UK and Sweden.

Some 86% of all consumer payments nationwide are now made by card. In the US, the ratio is just 45%. Belgium's first place is based on a 93% rate of cashfree payments.

For Australians, the convenience of payment systems like PayPass, which allow transactions via the wave of a card over a scanner, is clear.

Wave-and-pay card systems are now featuring in an increasing variety of service and retail environments, from supermarkets to railway stations.

The 2012 London Olympics was perhaps the first global event to run most of its on-site retail services using such systems.

Cards, of course, represent just one potential medium for wave-and-pay. Arguably it is the smartphone, not the credit card, that may finally sound the death knell for coinage and paper money.

Cloud-connected, multi-faceted mobile phones provide finance companies and retailers with their best opportunity to hook us on digital cash. These devices make bookkeeping infinitely easier for retail, banking and service industries.

Digitisation and mobilisation also makes it possible for companies to build huge databases, which can be analysed to predict future consumer movements. This information is invaluable for corporations and marketers that want to 'nudge' people into changing their buying habits.

The consumer is, of course, complicit in that process. For most of us, digital money is much more convenient than physical currency, especially when we shift it about using phones.

Moving digital currency about at the push of a button reduces our levels of what psychologists call 'time anxiety'. Gone are messy logistical problems such as finding time to visit a hole-in-the-wall machine; or working out which of our ten credit cards to use for a particular transaction.

A complete reliance on wave-and-pay buying might also free up human memory, which is surely one of the most threatened commodities of our time. We might be able to say goodbye to the plethora of PIN-codes, passwords and user names we try to cram into our already overloaded memories.

What’s more, going completely digital may end the need to juggle screeds of monthly statements, receipts and invoices. These could all morph into a single Cloud-based account, conveniently linked to our phone accounts and hosted on our Facebook or Google server.

For all their potential benefits, however, cashless systems also pose significant challenges. Instant gratification technology, digitisation, economic recession and the easy availability of credit have all conspired to make it easier for people to spend beyond their means.

The convenience and weightlessness of digital money make it easier for people to spend more, with less forethought. The instant nature of digital payments makes it easier to make purchasing decisions with the gut rather than the head.

For some people, the pain of buyer-remorse is assuaged only by more spending.

One of cash's advantages is its physicality. Paper money and coins have substance and weight; we can easily see when we are running low on either one. Digital money, on the other hand, is nothing more than a series of 1s and 0s, working together in a way that few of us really understand.

Not having a physical unit to count and dispense disguises how cashed up we really are, making it easier for us to overspend and over-commit. 

This is obviously an attractive prospect for some less scrupulous service providers and retailers. Others, seeking to act ethically, will not set out to increase levels of personal consumer debt, but that is the end result of digitisation for a great many people.

Personal debt is a fast-growing problem in much of the developed world. Figures from the Reserve Bank of Australia (RBA) suggest that Australians have more personal debt than people from any other country.

Together they carry a total of $1 trillion (AUD) in debt, the equivalent of $56,000 (US) for every Australian adult. The average American adult has about $45,000 (US) worth of debt.

The RBA says that most of the debt Australians carry is for mortgages, loans and credit cards. Not all debt is bad debt - mortgages and loans help people to prepare for their future. However, increasing numbers of people owe money for things they either cannot afford or don't need.

In the UK, a leading personal-debt charity, Credit Action, says that average household debt, excluding mortgages, was £7,982 at the end of 2011.

Add a mortgage to that and it’s little wonder so many people use one card to pay off another in a vicious cycle of deferred payments. Many, in desperation, turn to payday loan companies that charge enormous interest rates for short-term loans.

The recently installed Archbishop of Canterbury, Justin Welby pledged to weaken the stranglehold of these companies in the emerging debt economy. He announced his intention to put the less ethical groups out of business, by developing alternative lending schemes based on the local cooperative model.

The fact that this was one of the first social issues he addressed, when there are currently so many alternatives, reflects how pressing a problem it has become.

Another challenge with going cashless involves the loss of funds stored on railway and other RFID cards, which are not in the end used by the consumer.

Public Transport Victoria, which oversees Melbourne's metro train service, admits that its latest profit figures reflect an underuse of its myki smartcards - its version of London's Oyster system. It says that customers often put funds into more than one card and never fully utilise them.

In addition, more than 160,000 Victorians will soon need to buy new myki cards as the initial run of cards, issued at the system's launch, expires in 2014. How much unused money will remain on defunct cards? And how many other RFID-operated card systems around the world are currently holding customer funds that are unlikely ever to be used?

There is no place for a reactionary Luddite approach when it comes to our growing reliance on digital tools. The benefits are real in many areas and even if one could turn back the technological clock, who would want to?

At the same time, though, there's little value in heedlessly buying into the hype about 'going cashless'. There are good reasons why cash has stuck around for as long as it has.

Cash may not seem as sexy as the money we shift about on our shiny smart-gadgets, but another of its advantages is that it carries no personal information. 

Someone may, if they’re so inclined, decide to steal my cash, but they won't get access to my personal data as a bonus. My cash won’t tell them anything that would help them steal the rest of my funds, or worse, my identity.

According to the Australian Bureau of Statistics Personal Fraud Survey 2010-11, Australians lost $1.4 billion due to personal fraud in that period.

The survey estimated that 1.2 million Australians aged 15 years and fell victim to at least one incident of identity fraud in the 12 months prior to the survey. This represents a five percent increase on victims since 2007.

Notwithstanding these clear benefits of retaining cash for some transactions, it may soon become a museum piece, exhibited in glass cases alongside credit cards. Both may become anachronisms with all the usefulness of a manual typewriter.

There are implications here for more than our bank balances.

What will the shift from physical money to the digital variety mean for human cognitive functions? We teach young children to count not with abstract arithmetical symbols, but by using physical objects such as pieces of fruit. 

In doing so, we allow them to associate numbers with substantial objects, showing them that numerical icons have meaning in the physical world.

What use will most of us have for our few basic mental arithmetic skills when the physicality of cash is totally replaced by binary code?

Many of us already rely so heavily on smartphones for arithmetic that we prefer to let them calculate even the simplest sums, such as the 10% tip we'd like to leave in a restaurant. As we call upon our skills less and less, what will happen to the parts of the brain responsible for them?

Arguably, this is just one part of a much wider challenge for the human brain as we move more of our life experiences into the digital arena.

The results of a ten-year research project, released late in 2011, suggest that people as young as 45 are beginning to experience the onset of dementia.

Given the increasing number of thought-activities we relegate to gadgets, isn't it feasible that within another decade things we currently associate with dementia might have become something like normal cognitive function?

We've already ceded many of our spelling skills to predictive text - despite the frustrations it often inspires - and our navigation skills to the satnav.

At the same time, we're moving into the age of the micro-brand, in which individuals are able to replace the 'real me' with a constantly reinvented avatar-self, which can represent them in all their cyberworld interactions.

We see the beginnings of this in the way many people use social media, often developing personas that hide difficulties beneath a positive facade.

A 2013 study showed that Facebook use can increase levels of depression, even in mild users. Some experts believe that this is the result of unreal expectations, created when people measure themselves against the seemingly trouble-free lives of others as depicted in the social media space.

Given our increasing engagement with this alternative digital universe, isn’t it possible that, within a decade, removing access to gadgets might leave us feeling as confused, troubled by language and withdrawn from other people as dementia sufferers often do today?

Michael Saling, a neuropsychologist at Melbourne University, has reported that increasing numbers of people are consulting medics about problems with memory. They’re afraid that they might be showing the early signs of dementia.

Many of these people, he says, are suffering from nothing more than ‘security protection code overload’. They’re simply feeling overwhelmed by all the numbers, codes and procedures they must remember in order to function in a computer-driven age.

Along with the stress of remembering PIN numbers and storing virtual computer manuals in our heads, there is the pressure to multi-task in an age of digital media overload.

It sounds desirable, yet studies reveal that multi-tasking is only helpful in very short bursts. Over longer periods, it increases mistakes and lowers productivity.

Meanwhile, as we depend upon Siri-driven, wave-and-pay machines to sort through everything from our diaries to our transactions, what will happen to our sense of self-reliance?

Perhaps most importantly, what will our growing reliance on digital technologies do to our ability in interpersonal relationships? Will our skills in reading subtle facial signals, for example, atrophy if we rely ever more heavily on human interaction via screens?

Again, there is no suggestion here that we should meet the ongoing digital revolution with panic or blind anxiety. Yet there are important, as yet unanswered questions about the impact of digitizing everything from the books we read to the cars we drive.

And there are largely unspoken challenges ahead as we come closer to replacing cash and coinage with a binary equivalent.

In a sense, cash has been under threat since Diners Club introduced the first universal credit card in 1950.

Yet for all the success of ubiquitous credit and debit cards and mobile digital gadgets, cash has clung on, for good reasons. We shouldn't surrender them lightly.



Mal Fletcher is in Australia for a lecture tour until October 20.

Mal Fletcher's ABC Radio interview on this subject

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