Nudging people towards a cashless life

Brits are using less cash so ATMs are disappearing. Is it the natural course of events or are we being nudged away from cash?

“I’m sorry, I don’t have any cash on me.”

I can’t remember how many times I’ve uttered this sentence to a homeless person on the streets of London this year.

And I’m probably not the only person to tell them that, judging from their reactions.

They act resignedly, as if they expected me to say those words. Or sometimes I hear them mumble, “that’s what they all say”.

People carry a lot less cash in their wallets these days. Asking for money doesn’t cut it anymore for beggars.

They’ve been forced to be more creative.

They now ask me for my Oyster card (they can claim the £5 deposit in addition to the balance still left on the card).

Or they memorise the nearest ATM and point me in that direction.

But even that tactic could become harder to employ.

Approximately 250 free-to-use cash machines are disappearing from British streets every month.

It’s another huge blow to the roughly 300,000 homeless people in the UK. It could also be a problem for older generations who are still very attached to cash.

We’re all being “nudged” into adopting the cashless lifestyle. How long before we all feel the consequences?

Cash is losing the battle

Cash machines are being closed at an alarming rate.

From the end of January until the end of June, the number of free-to-use cash machines fell by 1,300. That’s according to figures published by cash machine network Link.

What’s more, 76 out of the 2,365 so-called “protected” free ATMs stopped operating somewhere between the start of February and July.

Protected ATMs are cash machines that are located more than a kilometre from the next closest ATM. They have been given this status to make sure people in remote areas maintain their access to cash.

Nicky Morgan, chair of the Treasury Committee, calls it “a worrying trend”.

Protected ATMs are “the only feasible means of accessing cash for many people”, she said.

Of course, this shouldn’t come as a shock. It’s completely in line with the trend that people use less and less cash to pay for things.

Last year debit card payments overtook cash payments for the first time in the UK.

A mighty total of £277.1 billion was paid for by cards, or 76% of all retail sales. Cash, which is rapidly sinking in popularity, was used in just 22% of purchases.

Digital payment methods like debit and credit cards, and mobile phone apps have lured people away from cash. The removal of ATMs will only serve to reinforce this trend.

In fact, people may have already forgotten what physical cash looks like. Or at the very least they must be forgetting how to use it.

Last week the Bank of England revealed it’s still missing 250 million of the old £5 and £10 notes after it replaced them with new versions.

That’s £1.84 billion worth of old banknotes which are yet to be returned. You can’t pay with these notes anymore but you can still exchange them for legal tender at the Bank of England.

Let’s hope people exchange their Elizabeth Frys for Winston Churchills (£5) and their Charles Darwins for Jane Austens (£10) before they, too, are taken out of circulation.

In any case, I expect the new notes to be in circulation for a considerably shorter period than the old notes.

We’re being nudged

Prime Minister Theresa May’s predecessor, David Cameron, set up a “nudge unit” to improve the economic behaviour of Brits.

Led by behavioural economist and Nobel Prize winner Richard Thaler, the idea behind it was to help people choose what’s best for themselves and society by “nudging” them into making certain decisions.

That doesn’t sound so bad if it boils down to etching the image of a fly in the urinal so men don’t miss the bowl or sending people letters to encourage them to fill in their tax returns.

But it becomes a lot more Machiavellian if these techniques are used to make citizens act in a way that benefits governments.

The disappearance of cash machines across the UK could be an example of this.

People are already adopting digital payment methods left and right. Clearly it’s in the government’s interest to stimulate that trend, if not accelerate it.

It would allow them to monitor all of our transactions while we could kiss the informal economy goodbye.

No more work paid “off the books”, no more money “under the table”, safely away from the tax man’s piercing look.

And, if worst comes to worst, governments and banks might even impose negative interest rates without people having a chance to hide their money under the mattress.

If even protected ATMs are being removed, we can safely assume that thousands more are at risk of being scrapped.

Or, perhaps just as worrying, free-to-use cash machines could be turned into fee-charging machines.

Both will be effective means of pushing us more rapidly towards a cashless society.

If there are no cash machines around, people will have no choice but to start paying more often with plastic cards or perhaps their mobile phones.

Fee-charging ATMs will similarly nudge more and more people away from cash.

Getting your physical cash would after all become more expensive than paying with your debit or credit card where no transaction costs apply.

Not so long ago, it used to be the other way around.

Cash was the preferred method of payment in many stores and restaurants. If you wanted to pay by credit card (and also debit card if it was a small amount), it would come with a charge.

Now credit card charges are disappearing while taking out physical cash could cost you.

We’re being nudged away from paper money and towards plastic.

That’s definitely a bad thing for the UK’s army of homeless people. But in the long run, we could all be feeling its effects.

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