Don't give up on cash, just yet.

Plenty of people walk around these days, proud in the fact that they can just carry around a mobile phone or watch, no purse or wallet. For some it is almost a religion. I was one of them.? I converted all my loyalty cards to their digital equivalent, set up phone tap-and-pay, and had my electronic driver’s license activated.

We feel liberated not carrying notes or coins, and yes, if you are going for a jog in tight pants, the last thing you want are jingling coins digging into your skin.

In my own case, my career would have been limited if there were no electronic payments. For many reasons there are advantages with moving away from cash – and eCommerce would be number one. I have long advocated for better digital payments, but there is an important counter-argument.

Are we, as consumers, always benefiting from this “cashless” world?? Here are a few reasons you should not give up on the notes and coins, just yet.

1. You will spend less if you pay by cash

Remember having a $50 note and thinking twice about breaking it?? Or when you are making a big purchase, psychologically taking out all those notes pinches more than a paperless tap?

When you have cash, that is generally your money, that you have intentionally withdrawn from available funds, and budgeted for spending. Paying by card may be unbudgeted spend, and if on credit, it may be money you did not have.

It is well known that the introduction of credit cards increased consumerism and spending. We can all look back at our spending and identify a large portion that was unnecessary, and how credit may have contributed to it, whether intentional or impulsive. The demise of cash has been coincidental with an increase in the reliance on credit.

The decline of the piggy bank has disassociated young people with value.? To a 10 year old, $1, $10 and $100 are just numbers now. The satisfaction of cashing in a heavy jar of coins has gone.

Have we lost the value of money?

Paying by cash will encourage you to spend less and save.

The move to cashless has probably contributed to increased inflation ... it's easier to push up prices when you don't feel the difference.

In Australia, there was a time when you had to pay tolls by cash and departure tax.? When the toll increased, people noticed that $1 did not give them a green light. They were furious. Departure tax increased from $10 to $20 - you had to pay for it by cash, and when it went up, people were up in arms. Now that it is no longer paid by cash, it has crept up to $70, one of the highest in the world according to the World Economic Form, and no one knows ... because they don't pay it via cash (it's included in the ticket price).

2. There is no surcharge on cash

Despite the inconvenience of handling and banking cash, merchants, especially small ones, generally prefer cash, as per regulatory surcharging guidelines, they won’t charge you extra, like they do with cards.

3. Access to the cash economy

Cash is still king in certain sectors.? Some of the reasons are dubious: illegal transactions, and tax avoidance.? I once heard of a builder who gave 20% off (more than the normal 10% for GST evasion). He said 10% for GST, plus he wouldn’t have to pay income tax, and also he was divorced and could skip alimony payments.

Some other legitimate areas of the cash economy benefit from cash.? Tipping (if you believe in it), donations, buskers, young people or workers helping with domestic work are all legitimate users of cash, that have been marginalised by its decline. If you wish to support this sector – think about cash.

4. Cash transactions are guaranteed

Electronic payments are subject to the regulatory and scheme codes (ePayments code in Australia), charge-back and disputes.? While in many cases this benefits the payer, in some cases, legitimate payees have lost money, as the “real payer” claims fraud etc.? The transaction is reversed, and the merchant is out of pocket: they may have shipped the goods already.

If you are privately selling a car, how can you be confident that the bank cheque won’t bounce (they can!) or the transfer into your account won’t be reversed, due to a fraudulent payment?

5. Safety

Few people would intuitively think cash is safe, but with the surge of cybercrime, the tide may have turned. Cash requires you to eyeball your payee, something that does not always happen with electronic payments.

In order to steal your cash, a criminal needs to be in proximity: there are limited people in your proximity, and in an age of extensive video surveillance, a would-be criminal would not find the risk and return of physical theft appealing. Thanks to an average decline in cash, cash theft, as a vector has declined in favour of online scams and fraud.? Online payments are subject to a number of risks that old-fashioned cash payments are immune from: and the online world exposes you to a much larger cohort of criminals.

6. In many ways, it’s still a perfect payment

When the industry was developing new payment systems, they were looking for a number of features – guaranteed exchange of value, real-time, the ability to attach additional information. It could have been used for eCommerce, with the now defunct “cash on delivery” so it was not as limited as many would think.

Blockchain cryptocurrency was established as a "peer-to-peer version of electronic cash" to mimic cash - the exchange happens without intermediaries.

7. Privacy

There are many aspects of privacy when it comes to making payments. Electronic payments exposes your data to hackers, corporations that may want to use your data for other purposes, and to the government.? You may think, you have nothing to hide, and this is fine. By turning our back on cash, ?we are accepting that our data, including spending habits is known and discoverable potentially by good and bad players.

8. Reliability

Whether it’s a problem getting contactless working on your phone, the banks falsely assuming your account is being accessed by a fraudster, or a bank or telco failure, we have all experienced the frustration of a payment failure.? Keeping a generous amount of cash accessible is a good mitigation for all sorts of risks.

9. Cash is the best gift

Gift cards generally cost their face value, but are not as liquid as the original and often expire. Some may say the gift card industry is a scam (they make a lot of money from unused balances).? With eCommerce, and everyone having access to a global marketplace, the chance of you finding a better and more meaningful gift than the recipient is remote. Sorry to tell you this: but what you buy them is probably junk to them.? Cash is physical, versatile and substantial. Electronic transfers are just not the same: the money just gets lost in consolidated revenue.

10. Cash is real money

Cash (notes and coins) makes up an increasingly small part of money supply, M1 it is called, it is real money.? Only about 10% of money in the economy is “real” and issued by the central bank. The rest is mainly private money, money created by the fractional banking system, banks lending money out essentially. While these days, the central bank guarantees money, ultimately this guarantee has conditions. There are no conditions with cash.

11. The ATM – an endangered species

After reading this you may be satisfied that cash has its place, but is of declining importance.? You would not be alone.

Collectively our behaviour has transformed the ATM landscape: You may notice how hard it is to find an ATM these days. It will not get easier, and collectively the ATM may become in danger of extinction.? Supporting a small amount of cash transactions, and encouraging banks that support cash, helps keep cash alive, even if it is only a secondary option for you.

In addition no cash is one less reason for local branches. Your local branch gives you a person to talk to if you have a problem and supports the economy.? I always get a better response to issues by talking to someone than by calling up or chatting to a bot. Supporting cash supports the branch infrastructure.

12. Encourage incentives to move to cashless

The government, and merchants are the biggest beneficiaries of a cashless economy, yet there are few incentives for payers.? We are under greater scrutiny and face more surcharges with cash. We should get a better deal for moving away from cash: no surcharges, discounts, and guaranteed privacy. Until then, let’s not jump the gun.

How to support cash

If you agree with some or all of the points above, here are some tips to using some cash in a cashless world:

• Keep a good amount of cash readily available for rainy days.
• Give cash gifts.
• Carry some cash and use this to budget for small discretionary spend.
• Avoid surcharges by using cash – it all adds up.
• If you don’t like carrying a wallet, just carry a note or two in your phone case or bag. If you get coins empty them in a jar at home at the end of the day – or be generous, donate them to a busker or homeless person on your walk home – yes they need it more than you, and you can feel satisfied with one more good deed for the day!
• Use your local bank/ATM to top up your cash.
• Only use electronic payments if it is beneficial. Don't overplay convenience, because chances are you are paying for it.

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