|Does PayTag mean the end of cash in your pocket?
A new mobile phone device for small payments, PayTag, could kill off banknotes and coins. That’s bad news for our spending habits.
| April 19, 2012
'Save the Pound” was the cry when we feared Tony Blair was about to sacrifice our ancient currency for membership of the new-minted euro. Having seen off that challenge, those who prefer their money in traditional form face an equally sinister threat from the forces of banking technology. “Save the Pound Note” might have been our slogan if that paper denomination had not been withdrawn from circulation as long ago as 1988: “Save the Tenner” will have to suffice.
The end of the cash economy is nigh. Millions of Barclaycard Visa cardholders are about to find they can make “contactless” payments of up to £15 (and from June, £20) by means of a sticker called a PayTag on the back of their mobile phones, which will merely have to be waved over a reader device without need of a signature or a PIN.
Hardly the end of civilisation, I hear you say: what’s so sinister? Like the Oyster Card and pay-by-phone parking, any electronic application that removes the need to carry a pocket full of change – or scuttle to find some when you’re in a hurry and it’s pouring with rain – is surely to be welcomed.
Technophobia can be irrational, and is overcome by familiarity: some of us resisted hole-in-the-wall cash dispensers long after they were introduced, on the grounds that PIN numbers were hard to remember, the machines were in exposed places and often out of order, and we preferred to be handed cash by a polite cashier who addressed us by name. But the technology became more reliable, PINs and passwords became basic tools of existence, and we realised that bank staff no longer knew or cared who we were. So the ATM became part of the furniture of life, with no accompanying sense of unease.
And that’s probably the way it will be, five years hence, for the daily stream of cashless, contactless transactions that will have largely replaced the regular visit to the ATM. The need for notes and coins will gradually diminish, and we will begin to forget why we ever felt emotionally attached to the idea of them.
Our money still carries the patriotic symbol of the monarch’s portrait – reinforcing a sense of nationhood that our European neighbours chose to dilute when they swapped their own currencies for the supposedly grander ideals of the euro – but it no longer carries any certainty of value or exchangeability. It is more than 80 years since we abandoned the gold standard; more than 40 since (after a series of painful devaluations in the 1960s) we abandoned fixed convertibility to the US dollar, which was itself fixed against gold.
Since then, the pound has been a pure “fiat” or paper currency, at the whim of government machinations and devalued in real terms by decade after decade of inflation – and lately by the Bank of England’s quantitative easing. The resonant phrase still found in tiny print on the notes, “I promise to pay the bearer on demand the sum of twenty pounds” over the signature of the Bank’s chief cashier, means nothing more than that (if the security men let you through those great brass doors in Threadneedle Street) you can swap it for a bag of assorted coins.
As to the metal content of those coins, its value bears no relation to what they might buy – and in the case of the new nickel-coated steel five and ten pence pieces now being phased into circulation, they may (according to some dermatologists) carry the risk of a nasty skin disease.
Those as-yet unproven health risks, incidentally, were first flagged up in Sweden, which is leading the world in the shift to a cashless society. Most Swedish buses no longer accept cash fares; some bank branches no longer handle cash at all; even churches are installing card readers to collect small donations. And the leader of the campaign to make notes and coins a thing of the past is none other than Bjorn Ulvaeus, the bearded bloke in Abba and co-composer of Money Money Money, who was converted to the cause after his son was repeatedly mugged.
The potential for reducing cash-related misbehaviour is a big arrow in the quiver of the advocates of cashlessness. It’s easy to count who loses out in the transition: not just the mugger but the market stallholder, the vendor of contraband booze and rolling tobacco, the odd-job plumber and anyone else who routinely fails to account to the taxman. The Spanish government, teetering on the brink of the next episode of Europe’s debt crisis, is proposing to outlaw all cash transactions involving more than 2,500 euros in order to quell the black economy and maximise tax collection – but also proposing to exempt non-residents, so cash-rich British bank robbers can rest assured that they will still be able to live it large on the Costas.
Take all these points together and you might be beginning to think: I really don’t need notes and coins any more, send me my PayTag sticker and let’s move on. But think again. There are a set of practical and psychological reasons to hang on to money in its old-fashioned, tangible form.
First, security – both physical and electronic. You are as likely to be mugged for your mobile phone, with or without its PayTag attached, as for the relatively small amount of cash you routinely carry in your wallet these days. If the PayTag will buy the mugger a bottle of cut-price vodka before you’ve had time to ring in and cancel it, you are offering him a bonus.
And if every small purchase or donation to charity you ever choose to make has to pass through the electronic banking network, not only will you be contributing tiny slices every day to the profits of the banks but you will also be surrendering precious anonymity. Every detail of your consumer preferences, even your location at any given moment, will be digitally recorded.
And given that no such system is ever 100 per cent secure, this giant database is certain to be exploited by advertisers and unsolicited sales-callers, or extracted by the taxman or the insurance company or someone else to whom you would rather not reveal your spending secrets.
Second, psychology. Cash – if we’re lucky enough to have it – makes us free. Reliance on electronic systems progressively enslaves us. Cash signifies a simple, direct relationship between the individual citizen and what we still think of, despite QE, as the last bastion of financial integrity, the Bank of England, endorsed by the head of state in the form of her portrait. Electronic banking puts us at the mercy of banks that have proved fragile to the point of collapse.
And although cash makes us free, it also restrains our spending habits in a useful way. You cannot spend more cash than you have; you have to count it carefully before you commit yourself.
By contrast, it was the introduction in 1966 of Barclaycard – Britain’s first credit card, copied from American models – that heralded the era of consumer debt, with all its consequences of excess. How much easier will it be to waft your phone casually over the reader for that last little addition to your personal debt mountain, and then again in the next shop and the one after that, without even a pause for second thoughts before you tap in your PIN. Our last remaining mechanism of personal financial control will be sheer willpower, and we’re all short of that.
Convenience is good, technology is our friend, nothing in economic life is sacred however familiar and long established. But banknotes and coins have a utility, a symbolism and a significance that we should not rush to abandon: save the tenner before it’s too late.