Ian Wylie and Liz Stuart
Plastic may be the gold standard for a new millennium, but people are proving reluctant to give up notes and coins. Cash is still king and electronic purse pretenders are finding it tougher than expected to win allegiance.
When coins tear holes in pockets, notes disintegrate and both make the carrier a prime mugging target why do we still bother with money?
The technology to transact all our purchases electronically has been available for the best part of a decade, yet still we insist on using clammy coppers and battered bills.
Whatever happened to Mondex in the United Kingdom? This substitute for cash, owned by Mastercard and a consortium of 19 banks, was billed as the gateway to the cashless society – a “smart card” that could be loaded up with money at an ATM, then used as an electronic purse to pay for small items such as groceries, parking or a quick beer at the local pub.
After three years on trial in Swindon in southern England, Mondex seems no nearer a national roll-out.
Although the town has a population of 100 000, only 14 000 people have agreed to take a Mondex card and 30% of retailers have declined.
To an extent, Mondex has been chasing its tail – consumers won’t use stored-value cards until they know all retailers accept them, and vice versa.
However, the slow take-up has prompted Mondex to revise its predictions of a cashless society to one which uses less cash.
Attempts to convert Americans to a cashless culture are being similarly frustrated.
Visa, Mastercard, Citicorp and Chase Manhattan had high hopes for their common operating system which would allow each shop counter terminal to accept either Mondex or its rival, the Visa cash card.
At the end of their six-month Manhattan project, which ended this month, only 10% of the 40 000 cards they distributed were used.
The banks claim the take-up still compares favourably with the early days of ATMs and debit cards in the United States.
Yet on both sides of the Atlantic, credit cards have made much faster progress than cash alternatives: we are happy to be offered new lines of credit, but we dislike being separated from our hard cash.
Money remains more taboo in conversation than sex or death, say professors Adrian Furnham and Michael Argyle, authors of the just published The Psychology of Money.
Yet, they add, we are powerfully wedded to our notes and coins.
Changes in currency meet resistance, sometimes with hostility, depending on the symbolism of the coins and notes. Just ask a Euro-sceptic.
Cary Cooper, professor of organised psychology at the University of Manchester’s Institute of Science and Technology, says our love of cash goes beyond sentimentalism and that the hard stuff will exist whatever the electronic devices.
“We need the security of having something tangible on our person,” he says.
“When I went on holiday recently I took credit cards from different issuers, but I also took a wad of cash – far more than I’d need for postcards and cabs.
“In fact, I returned with most of it unspent. I did that because real money is a comfort blanket.”
Ron Hobson, the multi-millionaire former partner in National Car Parks, would understand. He is said to have insisted his salary was paid in a brown paper envelope.
Cash, in the words of financial analyst Terry Smith, is fact; everything else is opinion.
Cash does not depend upon machines working, upon cheques being processed or upon phones being answered.
According to Adrian Furnham, psychology professor at University College London, few people are ready to place their trust in smart card technology.
“Cash is a powerful emotive symbol,” he says. “And people are more unhappy about losing money from an electronic purse than a real-life wallet.”
He adds that those who prefer to be rewarded cash-in-hand to evade tax do not believe card transactions are anonymous.
Phasing out cash also brings a social danger. Even in Western countries, many people have no relationship with any financial institution. Introduce a money system that relies entirely on expensive technology and you financially disenfranchise even more people.