Dave Birch has some harsh words for the European Central Bank (ECB).
“They should be prosecuted,” he says. “For printing the 500 euro [US$673] note. What possible use could there be for it except illegal transactions?”
You might think that the ECB would have more pressing matters at the moment, with the euro threatening to collapse into a shuddering pile of debts and sky-high bond yields. However, the point that Birch, a director at electronic transaction consultancy Consult Hyperion, is making is that it is things like printing physical notes that have helped to get the eurozone into its present calamitous position: one where Greece’s tax receipts in no way reflect actual spending by its citizens, and Italy’s “black economy” is reckoned to be about 20 percent of the overall economy there.
However, there is another way. Money is turning virtual. More and more of our transactions are digital anyway, but soon even those for which we think cash is essential — the low-value transactions that make up about 65 percent by volume (but far less in value) of transactions in the UK annually — will go digital.
From next year, Londoners will be able to use their Visa cards just as they do their Oyster cards, swiping them against monitors on buses and at underground stations to pay for their journeys.
You can even, if you are feeling Dick Tracy-ish, now get a ￡99 (US$155) watch that can be loaded with money, like an Oyster, and used to pay for your lunch/lattes/wine with one quick tap at high-street chains such as Pret A Manger, Subway, McDonald’s or Oddbins. Your transactions are limited to a maximum of ￡15 a time, and it is being marketed as great for runners (“Buy your bottled water! Your newspaper! Without taking your wallet!”) or for parents who want their children to pay for little bits and bobs, rather than blowing all their money on some gewgaw. Or, indeed, on other stuff that is sold on the streets, for although drug dealers are resourceful, they have not quite got themselves hooked into the electronic payments system yet.
Birch, though, thinks the “watch2pay” system will be a flop.
“Kids don’t wear watches,” he says simply. “They use their phones.”
And it is the mobile that is really powering the change in how we spend money.
“One of the big things we have been looking at is whether there’s enough of an appetite among the banks to develop a mobile payments structure,” says Sandra Quinn, head of communications at the British Payments Council, which handles transactions at the major clearing banks. “You’d use your phone to transfer money to, say, your best friend — you text your bank and tell it to send Pete ￡20.”
Sounds futuristic? Something like that has been running in Africa since 2003: called M-PESA (set up with funding from the British Department for International Funding and Development), it lets people transfer credits to mobile phones, which they can then swap for cash at various outlets.
So there is no real problem in doing it. The real problem is in our attitudes to money, and transactions.
People do love old ways of doing things. When the British Payments Council announced two years ago that checks were entering the sunset of their life and would be phased out by October 2018, the howls of outrage could be heard up and down the land. The council said that after 350 years, there would be “no scenario” for writing checks by that date. (Even so, its forecast suggested there would be around 400 million checks written in 2017, compared with 750 million in 2008.)