Are We Really Ready for a Cashless, Paperless World?

For younger generations that have grown up with tech and who can scarcely imagine life before the Internet, a cashless, paperless economy seems like no big deal, and online banking is the only way to bank. And with the growth of ever more convenient and “contactless” or “tap and go” methods of payment, we’re coming closer to what some have called the frictionless economy, where money increasingly becomes virtual rather than physical. When making a purchase in one of those old-fashioned brick and mortar stores you simply wave your debit or credit card or smartphone somewhere in the vicinity of a small machine on a counter. What could be easier and faster? A cashless, frictionless society? Bring it on.

Why the big push for a frictionless economy?

Much has been written about how consumers’ demand for convenience has been the primary driver toward a cashless society, and while that demand has certainly been a factor, the real impetus behind the change lies in the banking industry itself.

As the competition in the banking and financial sector heats up, members struggle to be competitive while maintaining the highest possible returns and the biggest bottom lines. Given the consuming public’s eagerness to pay as little as possible, combined with workforce pressures to increase wages, banks and financial firms are seeking less labour-intensive ways to manage their operations, including customer accounts.

While a secure, stable, and user-friendly online accounts management system is quite expensive to develop and maintain, that cost is still significantly lower than the continually rising cost of human account management. The banks have little choice but to automate as many of their operations as possible if they hope to remain competitive and profitable.

Not surprisingly, they have aggressively – and successfully – promoted these automated functions as being offered for the convenience of their customers. The banks stress that the use of digital transactions is more economical to the consumer. Most customers have embraced the additional convenience with open arms, but not everyone is so enamored of the technology. And even if you embrace it gladly, there are a few things you need to watch out for.

“Resistance is futile…”

Even as technology races ahead, beckoning us with its siren song of speed, economy and convenience, there are still a few holdouts – traditionalists who prefer the simplicity and perceived security of writing cheques or paying cash for their purchases and bill payments.

The more digitally-attuned public, particularly the younger generations, might be prone to scoff at those who insist upon using only older technologies as being Luddites, but given the media’s focus upon recent breaches in the security of hundreds of thousands of customers’ digital accounts, the resistance to a frictionless economy is quite understandable. The fact that contactless credit and debit cards are even more accessible by criminals than traditional cards further amplifies the concerns of even those customer who are not tech-averse.

Some banks and other institutions are increasingly refusing to accommodate customers who want to do things the old-fashioned way. To further incentivise customers to “get with the times”, people who opt for traditional methods are being charged more. According to the UK Consumer Digital Index, compiled by Lloyds, adults who insist upon doing business via more traditional, non-digital transactions pay an average of £744 a year more for those services than their counterparts who have gone digital. In other words, technophobes are penalised financially.

If it’s convenient for you, it’s convenient for hackers too

Wariness about the new technologies doesn’t necessarily make one a technophobe or a Luddite. Like most things in life, the cashless, frictionless society involves a trade-off: that convenience comes at a price. The most notable concern – security – can be averted for the most part by following relatively simple security protocols:

– Use secure password protocols – Don’t use an easily guessed password, such as a birthdate, address, child or pet’s name, or other easily-discovered sequence. A good password should be easy for you to remember, but difficult for a fraudster to find. Do not use the same password for your banking and credit card accounts that you use for other less-secure things such as social media account logins. And by all means, do not store your passwords on a smartphone or on a slip of paper you carry in your wallet.

– Don’t respond to emails or telephone calls where you are asked for personal information – If you receive such a call or email, report it to your financial institution to verify the validity of the request before responding to it in any way.

– Keep a close eye on your accounts and your credit report – Report any suspicious activity immediately, to increase your chances of having a bogus charge reversed and prevent subsequent unauthorized charges.

Is “Big Brother” watching?

Privacy and protection from government interference are also potential issues with a totally cashless society, and some argue that the worldwide “war on cash” is another “in” for Big Brother. For the most part, such concerns are overstated, but at any rate, they are beyond the scope of this article. If you have such concerns, research ways to make yourself feel more immune to such intrusions without being drawn into a paranoid tinfoil hat brigade.

Like it or not, the UK, like the rest of the developed world, is moving much closer to being a cashless society. You might as well accept it, but always keep your eyes open, because hackers and identity thieves are everywhere. Welcome to the future.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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