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Who is Contactless REALLY helping in the UK?

Those vested-interests pushing for a "cashless society" in the UK are delighted with the move to contactless payments in the last 10 years. They believe contactless will end up destroying cash as a payment method.

To help things along, they are encouraging retailers and restaurants to refuse cash payments, though we haven't yet seen this to quite the same extent as now exists in the United States, where Visa have been offering catering outlets $10,000 to stop accepting cash.

If you read the summary of the UK Finance - the finance trade association - UK Payments Market report for 2018, you will see nice graphs that depict card payments increasing from around 5 billion in 2007 to around 20 billion in 2017. Much of that grow is attributed to the growth in contactless card use.

So how have the UK public been doing in the same period? Surely prospering?

ALAS.

Consider wages.

In September 2018, the Institute of Fiscal Studies produced data revealing that median annual earnings in 2017 fell to £23,327, 3.2% lower than in 2008, when the average wage was £24,088.

Meantime, growth in German wages averaged 0.8% a year in the same period. Compounded, this amounts to around a 10% increase. If this increase had been enjoyed in the UK, the average wage would be around £26,500 instead of the £23,327 it is today. That is a difference of over £3000.

How about UK  High Street retailers. Has contactless helped them?

HARDLY.

In 2008, internet shopping amounted for 5% of UK retail sales. By 2017, that had increased to 20%. Contactless payments can therefore hardly be claimed to have helped UK High Street retailers improve their businesses.

Queues are certainly shorter now, without the help of contactless cards, because 15% of shoppers have migrated to online.

Meantime, as we all know, shops have been closing at a record rate. Since 2008, the UK High Street has lost Woolworths, C&A, Comet, JJB Sports and BHS, to name but a few.

In the same period, cash use for purchases in the UK has fallen by around half, to under 40%.

How about Germany, where workers have enjoyed  a nice increase in wages since 2008?

According to the Bundesbank, in 2017 cash was used by the German public for 74% of all purchases.

Meantime, contactless cards are of marginal interest in Germany, where, incidentally, credit cards are also nowhere near as popular as in the UK.

There is no doubt that many in the UK have bought into the advertising and PR campaigns promoting cards in general and contactless payments in particular.

The German public, less gullible maybe, and certainly more focused on looking after their cash, are clearly doing so much better than their British counterparts.

Foolish, perhaps, to be too easily parted from our cash?

 

Wednesday, 2nd January 2019

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