[Dave Birch] Yesterday, I made the statistically well-founded claim that most cash appears to be used for crime and I mentioned Carol Benson, from our good friends at Glenbrook Consulting, who was one of the authors of their excellent Payment Systems in the US. That reminded me that Carol had made this straightforward observation after reading Forum friend David Wolman’s “The End of Money“:

But the truth is we really don’t know why non-criminals use cash.

[From Don’t Trash-Talk Cash — Payments Views from Glenbrook Partners]

She goes on to make an excellent, and perfectly sensible, suggestion for some focused, multi-disciplinary work, on the topic.

What research there is tends to focus on patterns of use (diary studies, etc.), rather than on the “why” of use. I was frustrated a couple of years ago, when I tried to raise funds for a study on the psychology of cash usage: I got no interest from our payments industry clients and colleagues… But cash is still a preferred method of payment for a great number of people. And whether you like cash or not, it’s not going away any time soon… It seems to me that we need to know more than we do about the psychology of why people like using cash.

[From Don’t Trash-Talk Cash — Payments Views from Glenbrook Partners]

I actually have a tiny amount of experience of this. A few years ago, for a reason not germane to the tale, I had to go to a large supermarket in the North of England and spend some time standing at the checkout line asking people about their payment choices. This was shortly before the particular supermarket chain was to stop accepting cheques. We turned up at the store early in the morning before it opened for business and had a chat with the manager about the payments methods and their impact on his operations. Then, when the store opened for business, I went to one of the lanes and asked people who did not pay using cards (which, by the way, was most of them) why they had chosen either cheques or cash. The answers broadly speaking were that people who pay by cheque did so because they liked having the written record of spending in the form of notes written in their cheque book. They weren’t really cheque users, they were cheque stub users. I remember thinking at the time that this might be a key element of functionality to incorporate into the mobile payment systems for the future because the delivery of electronic receipts directly into a mobile wallet might be a key factor in persuading members of the public to use the mobile payment mechanism.

For the people using cash, as I recall, it was mainly a question of budgeting and the “jam jarring” of household expenditure. I know from our work on the delivery of financial services to socially excluded groups with the Payments Council and the Technology Strategy Board that managing multiple pots of money is a general problem for a great many people and that making this an element of the wallet proposition is a win-win because it provides genuine added value to the users.

The London Rebuilding Society (LRS) and Consult Hyperion have been awarded funding by the Technology Strategy Board (TSB) to explore the use of the television as a channel for payments for socially-excluded groups, using both bank accounts and pre-paid “jam jar” accounts to explore the relationship between financial and social inclusion.

[From Press the red button for financial inclusion]

This work has gone on to look at the use of mobiles in the provision of services and the use of smartphones to provide context-aware financial support (e.g., helping people to budget properly), so I’m really looking forward to the Wallet Wars conference in New York next week where I thought I might test out my hypotheses around budgeting and receipting to see if the context and drivers are similar in the US market. Replacing cash is not about price/performance (ie, telling people it’s cheaper and quicker) but about better functionality. And now, a commercial break…

Wallets are hot right now. That’s why over 150 decision makers from the biggest banks, financial institutions, retailers and network operators are signed up for Wallet Wars on 8-9 March 2013 in New York. Here’s why you should join them.

Consult Hyperion global ambassador Dave Birch will be chairing the first day of Wallet Wars, covering topics such as customer acquisition, security, integration with loyalty and ticketing and whether new entrants will beat incumbents. Companies and organisations presenting include RBS, Mercantile Bank and Movenbank. 

On day two, Dave will be sharing his opinions on the future of identity and money. By quoting ‘Dave Birch’ when you book your place you can get $100 off registration. See who else is going at http://www.mformobile.com/mobile-wallet-wars-usa/attendees.php and then book to join them at https://secure.mformobile.com/mobile-wallet-wars-usa/register.php.

But back to Carrol’s point. I will be very interested in seeing the results of a study on the use of cash in retail environments because I do think we need to understand more about the dynamics around its usage. However, I don’t think this kind of study will give us the whole picture. When discussing “peak cash” earlier in the week I made that claim that the only reasonable explanation for the growth in the narrow money supply in developed countries is crime. I think this is demonstrably true. But I want to press the issue a little harder. Cash is not a neutral facilitator of crime, its effects are more pernicious because cash doesn’t just facilitate crime and corruption, it stimulates them.

I found academic papers noting incidents in which cops would find a stash house, but wouldn’t bust the place until all or most of the drugs had been sold. There’s no return on a house full of dope. There’s plenty of return on a house full of cash.

[From Highway Robbery | The Agitator]

The mere existence of untraceable, anonymous cash puts temptation in the way of people who might otherwise stay on the straight and narrow path.

Warwickshire police has confirmed that £113,000 went missing after being held in a “secure storage area” at its former headquarters.

[From Inquiry launched after £113,000 stolen from police station – Telegraph]

I’ve said before that I don’t believe for one moment that getting rid of cash would stop crime. It wouldn’t. But reducing the amount of cash in circulation and removing the higher-value notes from circulation would at least increase the cost of crime. That would be a start. 

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers

1 comment

  1. At least with cash, thieves are constrained by how much they can carry. With digital money, they are only restricted only by the integrity of the auditing firms they pay.

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