Canada took the bold step in 2012 of phasing out the penny as a unit of currency, but when you look at the reasons why it made a lot of sense. Pennies cost more to produce than they are worth, and at that point alone the state is losing money. They’re also the most worthless unit of currency, in a world where very, very little requires pennies to pay with.
Some believe that we should take heed of the Canadian approach here in Britain. I’d go further, I’d eliminate physical currency altogether.
We already exist in a more or less digital world when it comes to money. Debit cards and credit cards are our way of life, and the number of people who get their money by going to the bank and withdrawing cash rather than using an ATM is vanishingly small at this point. With the advent of new mobile technologies, things like contactless payment and Apple Pay, we have all the ability we need in our pockets already to make the switchover to digital currency.
In 2015, digital payments overtook cash payments for the first time. Figures from Halifax show that 85% of their customers’ payments are now electronic rather than by cash. The digital revolution is changing our money system, and it’s time to get in front of it rather than lagging behind.
The benefits of a cashless economy are vast and exist equally for Government, business and the public.
For Governments, a cashless economy means a more rounded view of the state of the country’s money supply which is vital for macro-economic decisions. It also means that tax collection can be more efficient, as less cash-in-hand payments can go undetected and free of the tax that should be paid on them. In the same vein, crime is more traceable too with a much more accessible paper trail to the proceeds of crime making it easier for police to do their job. And then there’s also the savings on not having a Royal Mint pump out coins all year long and spending precious metals on them.
For businesses, it means more efficient payment systems which can save time and make it easier for people to buy from them. It also means that pricing of products can change to be more reflective of their worth, rather than the change people have to pay for them.
For people, there’s simply the saving of not having to go to the ATM all the time and not having coins and notes piling up in your wallet and in your house. Think of the money you have just lying around you right now in loose change and how much better it would be if it was in your bank account rather than sitting idle.
Switching to digital payments overnight, like the way chip and pin was introduced way back in 2006, isn’t really going to be an option – as the change is far more drastic and needs far more preparation. Small businesses need to be able to handle digital payments and contactless/mobile methods and older people will also need time to make sure they are comfortable with the new processes.
But given a timescale of 10 or 15 years this is a feasible approach that will show Britain leading a new technological revolution that can only be good for our economy. A similar cashless policy in Nigeria, enacted by the Government and Central Bank in 2012, has had numerous benefits for the country as it seeks to modernise and make its financial system more efficient. We have the ability to go even further than they can, and to do so in a less disruptive way, and I think we should exercise that ability.
Currency systems change all the time, and in the last fifty years in Britain we’ve already had the introduction of decimalisation, card payments, online payments and Chip and Pin. Now I think it’s time for the next stage in that evolution.