Saturday 26 May 2018

How cash is no longer king in debit card era

Although we still use cash more than debit cards, our cash spending is being relegated to low-value daily payments

Our reliance on cash for low-value transactions will wane due to the proliferation of 'contactless' facilities now available on some debit and credit cards.
Our reliance on cash for low-value transactions will wane due to the proliferation of 'contactless' facilities now available on some debit and credit cards.

John Cradden

We've been talking for years about how we are slowly changing from a cash-based economy to a cashless one, but the truth is we're practically already there.

Recent figures from Banking & Payments Federation Ireland (BPFI) confirm that Irish people now spend more on their debit cards than they withdraw in cash from an ATM.

Last year we made debit card payments worth, on average, €7,442 compared with €5,388 per head in ATM cash withdrawals. However, we're still ahead of most other European countries, withdrawing more than €20bn every year.

There are those of us who still like the feel of cold hard cash, with some arguing - not unreasonably - that using cash is an easier way of tracking your day-to-day spending.

But although we still use cash more than debit cards, the use of cash is being relegated to low-value daily payments, with BPFI estimating that the average transaction involving cash is €18 compared with €50 for debit cards and €80 for credit cards.

Furthermore, the BPFI insists that our reliance on cash for low-value transactions is also set to wane in the coming years thanks mainly to the proliferation of 'contactless' facilities now available on some debit and credit cards, especially now that the limit on a single contactless transaction was raised last year from €15 to €30.

In Cork, a pilot project led by the city council and local business organisations called 'Cork Cashes Out' has seen the value of contactless payments in the city soar by 522pc - 176pc more than the national average.

Although not every bank offers the facility yet, those that do are not currently charging for such transactions.

If that's not enough, Bank of Ireland last year introduced new rules banning cash withdrawals of under €700 from bank branches and that cash lodgements of sums up to €3,000 would have to be done in the bank's dedicated lodgement ATMs and not in-branch.

The announcement sparked a bit of an uproar, and the bank later said it would allow 'vulnerable' and 'elderly' customers who are not comfortable using self-service machines or other technologies to continue to transact in cash over the counter.

But the Bank of Ireland's move was widely interpreted as a sign of the times and is likely to prompt others to set limits on over-the-counter cash handling in the near future.

The Government wants you to use less cash, too. Since January, the old annual €5 stamp duty on ATM/debit cards has been replaced by a 12c fee that is charged every time you withdraw money from an ATM, although the fee is capped at €5 a year.

Permanent TSB and Ulster Bank currently don't charge current account customers to use an ATM, but Bank of Ireland, KBC, AIB and EBS charge up to 35c for each cash withdrawal.

So it'll cost you up to 47c a time to withdraw cash from some ATMs unless you meet the onerous 'fee-free' banking conditions that some banks ask. (In AIB's case, that means keeping a minimum daily balance of €2,500 in your account.)

The BFPI figures show that cheques are still popular, with the average person writing 18 cheques last year. But remember that you have to pay 50c in stamp duty for every cheque you write, with additional bank charges on top of this. Bank of Ireland charges 60c to process a cheque, for instance.

However, Ireland is unlikely to become a completely cashless society in the short term given that an estimated 10pc of Irish adults still don't have a bank account.

This, in turn, has given rise to criticism that banks are penalising the poorest in our society, not to mention those who are not comfortable with new technologies, such as smartphone e-wallets, Paypal apps etc.

Critics also point to concerns about their personal data and consumption patterns being mined by banks and other businesses for marketing purposes, not to mention worries about data security or what would happen if a bank's systems were hacked or compromised.

But we're so far along the road to a cashless society that such concerns, while valid, are unlikely to halt its relentless march.

Irish Independent

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