PayWaving goodbye to cash? Not so fast, expert says

A recent Reserve Bank survey found only 43 percent of us still are still using cash regularly.
Photo: 123RF

The bungled Crowdstrike software update that caused the recent global IT outage has revived calls for society to stop prioritising plastic cards over paper money and coins.

A recent Reserve Bank survey found only 43 percent of us are still using cash regularly. Roughly 3.5 percent said they never carry cash, and about the same number said they use it a lot.

Eighty percent use debit cards, and would have run into problems earlier this month when much of the world’s computer network was sent into disarray.

Retailers reported angry and aggressive customers taking it out on blameless retail staff.

Frances Cook, financial journalist and author of books Your Money, Your Future and Tales from a Financial Hot Mess says moves towards phasing out cash come with big risks – not just for the economy, but our individual bank accounts and personal lives.

“I am one of those people who doesn’t (use cash) very often, despite really believing in it, because I am just lazy and disorganised. I will often find that I am out and about with only my car keys and my phone, and so I end up using Apple Pay for everything,” Cook told RNZ’s Sunday Morning.

“It’s not even just that I only use my card – it’s that I only use my phone because I never want too many things on me.

“I don’t carry a wallet, I don’t carry a handbag – I carry a toddler these days. I don’t have any hands left.”

And that means sometimes inadvertently paying fees retailers stack on goods in the name of convenience, like payWave.

“It can cost you so much more if you’re doing that because my favourite cafe has the 2.5 percent surcharge if you’re tapping and going. If you just take the time to actually carry your card for once and insert it, it’s cheaper.”

In some places, such as the UK and European Union, added fees have been banned. Cook said New Zealand is “a bit slack” in this regard.

“We take a long time to put in regulations that are totally commonsense and have often existed for years in other jurisdictions. So the fact that we haven’t dealt with these sorts of fees and payments [is] totally unsurprising to me because we just seem to be behind the eight-ball on a lot of our banking regulations, and it all adds up to surcharges.”

The financial impact of the Crowdstrike outage has been estimated at up to US$15 billion (NZ$25b) – and that episode was an easily rectified mistake that was fixed within hours.

In a bigger outage, a cash backup would be necessary, Cook said.

“This sort of thing happening is a good reminder that we cannot entirely say, ‘Woohoo! We’re going cashless society. Who needs cash anymore? Totally old hat.’

“Well, actually, we do need a backup, actually, we do need a failsafe – because what happens if next time it’s a bit smarter and it is an attack, and it is deliberate and it lasts longer?

“You know, we came to a grinding halt for a few hours and look at the devastation it caused.”

Frances Cook.
Photo: Supplied/Frances Cook

Even from a personal perspective, there were good reasons to keep using cash, she said.

“Cash allows us to be private. I mean, we don’t have to let the banks and the credit card companies know about every facet of our lives, which doesn’t mean that we’re all dishonest. We just want to stay private.

“There’s all sorts of things we keep private for no further reason other than it suits us to, right? You know, I put a huge amount of my work online on social media. Do I put most of my personal life on there? Absolutely not, because it’s private, it’s special to me. It’s not for public consumption…

“I’m someone who just waves my phone at everything to pay for it – and yet I would consider myself a very private person. I don’t like the idea of being tracked. So truly, that’s pure laziness winning out over my logical brain, which says, ‘Oh, they probably shouldn’t be allowed to track me that much.’

“There are implications of how much data you hand over and what can be done with it. Companies like Netflix, for instance, you might think of them as a media company – really, they’re a data company. They are predicting what you want to watch, what will keep you in your seat and what will stop you from unsubscribing. That’s their business. The media is just, you know, what keeps you there.

“So when you are doing everything through a credit card or your phone and you’re just handing over your data willy nilly, you’re handing over probably the most valuable asset you have.”

And for some, cash was just their way of life.

“I’m based in Te Awamutu these days, right? And I’m a huge fan, huge proponent of rural New Zealand, I think it’s brilliant, and I see some of the bank outlet closures around the country, and it makes me sad because people need these outlets to do things like literally get out physical cash.

“There are good solutions that are around, things like some of the banks coming together and creating these hubs where you have a few staff and it’s a hub for all the different banks. I think that’s a brilliant idea, and I’d like to see more of that.”

While businesses had good reasons for not accepting cash – such as crime – Cook said, she would like accepting physical money made compulsory.

“My understanding of the rules is that you don’t have to accept cash unless it’s payment of a debt, and then you must accept whatever form of payment is being offered – which is interesting to me, because before looking into it, I would have assumed it’s legal tender, of course you have to take it.

“Now, I don’t want to put unreasonable restrictions on businesses because I think times are tough for them. As it is, they don’t have to take the time at the end of the day to cash up, or they are less susceptible to getting robbed if there’s less cash in the till, so I understand that there are arguments for allowing businesses to go cashless…

“But I still think that I would like to see it, that you have to take cash – that if someone has legal tender, you have to accept it. Whether we’re talking cash or whether we’re talking anything else in business, going all-in on one thing is always known to be very dangerous. It’s the first rule of investing.”

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