Is cash no longer king
PROJECTS TO CREATE A WORLD WITHOUT CURRENCY ARE ON THE RISE, BUT USERS STILL NEED SOME CONVINCING.
BY MEREDITH LANDRY
The cash you have in your wallet may already be obsolete.
In a digital world, paper money is inconvenient to carry, costly to produce and increases transaction times. The question isn't if cash will become obsolete, but when.
Around the world, cash is already on the way out. In Sweden, for example, bills and coins represent only 3 percent of the national economy; that number is 9 percent in the eurozone and 7 percent in the United States, according to the Bank for International Settlements. Worldwide, debit cards are the preferred method of payment for millennials—those between the ages of 18 and 28—according to a July 2012 survey conducted by finance firm Visa.
The trend away from cash is accompanied by changes to the economic and commercial infrastructure, with project teams across the globe working to keep pace.
- In many Swedish cities, public buses no longer accept cash—riders use their mobile phones to purchase prepaid tickets.
- In March 2012, Canada killed its penny because of production costs and introduced the Mint-Chip, an electronic payment system allowing users to make small transactions with “digital currency” via their mobile devices.
- Last July, the South African Social Security Agency issued 2.5 million MasterCard debit cards to social grant recipients across the country. The cards feature a special biometric functionality that identifies the recipients using fingerprints and other personal information to ensure that only the approved beneficiary of the card can collect grant money.
“This conversion is being driven by a new generation of technology users that care more about convenience and less about privacy,” says J.J. Eden, vice president and director of tolling at professional technical and management support firm AECOM in Raleigh, North Carolina, USA. “Time-saving is a major factor with today's emerging generations. Waiting in line to pay is not acceptable.”
Mr. Eden, a member of the group that created the cashless toll-collection system E-ZPass, is spearheading partnerships with various North American toll agencies to allow customers to use their transponders to pay for services other than tolls, including parking, fast food and car washes.
As governments and consumers grow more anxious to get rid of bills and coins, he says, a cashless world will become a reality.
BARRIERS TO ENTRY
Though cash may inevitably go extinct, the evolution won't happen overnight, particularly in emerging markets, says Douglas Borges Oliveira, PMP, São Paulo, Brazil-based IT director at ePay Brazil, a provider and distribution network of prepaid products.
“It will be several decades before the world becomes completely cashless,” he says. Barriers include a population's resistance to adopt new technology and infrastructure limitations, such as a low bandwidth for connectivity and a lack of reliable data centers.
Even in economic powers such as China, India and Brazil, the tech lag—especially among the older generations—is hindering the cashless transition. “The older portion of the population shows high difficulty when using passwords and swiping cards, and a low percentage of the population has contact with computers, though that's quickly changing,” says Mr. Oliveira.
Jon Davis, head of business systems at Chester Race Company Ltd., a horse racing course in Chester, England, asks a simple question to better determine the timetable for cash's demise.
“This conversion is being driven by a new generation of technology users that care more about convenience and less about privacy.”
—J.J. Eden, AECOM, Raleigh, North Carolina, USA
PHOTO BY NEIL BOYD
“When talking about new technology, I always think, ‘Would my mum use it?’ and at present she would not,” says Mr. Davis, who's currently working with English bank Barclays on projects to create cashless horse racing facilities. “It would be too far removed from what she has come to know over the course of her life.”
But as the generation raised on smartphones and broadband comes of age, more and more people will see this type of transaction as part of their everyday lives, he says.
Your Money Is No Good Here
Cashless projects aren't limited to the retail and government sectors. Jon Davis, head of business systems at Chester Race Company Ltd. in Chester, England, shares three other areas in which he's witnessed the successful shift to cash-free functionality.
Professional Campuses: “From very early on, college campuses saw the benefit in creating cashless environments for students, from purchasing books to eating lunch. Today, more and more work campuses have followed suit, with companies offering cashless options for staff meals.”
Sports: “Sporting venues will be the next area to really take the technology to the next level, offering cashless options for the whole customer journey, including traveling to and from events, and purchasing merchandise and food. With so many people in an area for a short period of time, vendors can speed service up to serve more people.”
Military: “Army defense bases that feed thousands of people daily have been adopters of the technology, and this will continue to be the case.”
The looming cashless world seemed closer for Mr. Eden at a recent conference of engineering students when one asked, “When are you old guys going to get it? Our generation doesn't carry cash.”
Before digital wallets and paying via smart-phones become the norm, project teams need to overcome several hurdles, from buy-in to security.
THINKING OUTSIDE THE WALLET
The first obstacle is deceptively difficult: educating stakeholders on the true definition of “cashless.” For project professionals, cashless means no paper money or coins whatsoever.
“The term ‘cashless’ means exactly that: no cash,” Mr. Davis says. “Yet I’ve seen it used to describe cards that people can add to using cash, adding another step to the process. Cashless has to make the process easier, not harder.”
Project professionals also need to communicate the benefits of a cashless project to those who will be using it. “The majority of people still think cash is king,” Mr. Davis says. “So if a cashless project is going ahead, they'll need to be convinced there is a suitable benefit to them to use it.”
That means making sure that the benefits outweigh the risks.
Of primary concern is security. In April 2012, a Pew Research Center study found that one-third of the 1,000 U.S. respondents wouldn't trust technology in the next decade to go cash-free.
Skeptics cite the increased potential for issues already plaguing the world's electronic finances, including identity theft, hacking and credit card theft.
Knowing that companies can track your every purchase is another cause for concern, Mr. Eden says. According to a February 2012 article in The New York Times, major retailers around the globe gather and analyze consumer data—including digital purchases—to maximize marketing efforts. In one instance, the retailer Target began sending a teenager coupons for cribs and diapers before she told her father she was pregnant—an awkward situation, to say the least.
“Privacy concerns must be addressed in the technology, and businesses will need to enforce rules in order to avoid abuse,” Mr. Eden says.
On the plus side, the myriad potential benefits include improved transaction speed and convenience, and more targeted customer loyalty programs, since purchases can be stored digitally.
Communicating those benefits starts with effective marketing. For example, at the 2012 Summer Olympics in London, England, the speed and convenience of cashless transactions were heavily promoted through Visa-sponsored advertising campaigns throughout the Olympic Village. While the so-called “cashless Olympics” weren't error-free—the terminals with touchless technology briefly froze during a soccer match at 90,000-seat Wembley Stadium—the concept of going cashless still got through to consumers, Mr. Davis says. All told, 150,000 transactions were made using the technology.
FROM TOP TO BOTTOM
A one-off global event such as the Olympics may move to a cashless model, but the long-term financial costs of cashless technology projects, and the personal costs of transitioning workers from cash-based transactions, are daunting for smaller enterprises.
“It is all well and good if the larger businesses adopt these technologies,” Mr. Davis says, “but if the local businesses cannot afford to do the same, then the customer will suffer, as cash will still need to be carried for day-to-day transactions.”
“When talking about new technology, I always think, ‘Would my mum use it?’ and at present she would not.”
—Jon Davis, Chester Race Company Ltd., Chester, England
Workers whose jobs are currently specific to cash collection—such as tollbooth operators—will need to be retrained to work in other departments such as back-office operations once their existing positions become obsolete, Mr. Eden adds.
There's still time to make that transition, as project teams work to not only implement the framework for a cashless economy, but also help users get more comfortable jettisoning their currency.
Ultimately, Mr. Oliveiros says people must first know and trust the technology. “Normally we don't use what we don't understand.” PM
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