By Mike Sawatzky
It’s an image most baby boomers can appreciate: a wallet bulging with crisp banknotes ready to be spent.
Alas, for some, cash is a concept that could soon be a quaint, historical footnote.
The technology for cashless transactions has improved so dramatically over the past two decades it could be only a matter of time before some countries go completely digital. Canada is on the forefront of that trend.
“I think the need for it is dissipating over time,” admits Paul Edmond, president and CEO of Winnipeg’s Edmond Financial Group. “I honestly believe there will be a point in time where cash may not even be required. But for privacy, it can be an important factor and for convenience.
“You think back to the old days – people used to barter for things. That’s not a very convenient method of exchanging products and services but it exists. So someday, maybe, there will be no cash and everything will be on plastic but we’re not there yet.”
The cashless revolution has been a long time in coming.
Access Credit Union president and CEO Larry Davey points to the introduction of the iPhone, in 2007, as the trigger for the proliferation of smartphone technology in banking..
“(The iPhone) moved people towards convenience in every area of their lives and utilizing the home,” says Davey. “We saw a lot of requests from our credit union members to make things more convenient. One of the first steps was when deposit anywhere was launched, which allowed people to deposit their cheques with their phone. So that was one thing where they weren’t coming in to get cash, now they weren’t coming to the ATM to get cash, they were simply depositing their cheque.
“The next thing that happened, two or three years later, e-transfers came out. And now the requirement for small amounts of cash was going away because you went out for lunch with your friends, one of them could pay, you could e-transfer the money. It made it a lot easier.”
That convenience has dramatically altered the number of people visiting banks and credit unions.
“We’ve seen transactions in the branches drop a significant amount – they’re only about five per cent of our transactions now – and the rest are electronic,” adds Davey. “But what’s dropped even faster is ATM (traffic). ATM has dropped from about 20 per cent to three per cent of our transactions. People just don’t require cash. And then what hit was COVID and people not wanting to carry cash and deal with cash.”
In Canada, the introduction of smartphones was preceded by the arrival in 2000 of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), a federal government initiative to detect, prevent and deter money-laundering and financing of terrorist activities.
Six years later FINTRAC’s mandate was expanded to ramp up client identification, record-keeping and reporting measures.
It currently analyzes millions of transactions in Canada each year. Banks, credit unions and staff are subject to heavy fines if they flout the regulations.
“As we’ve seen with TD Bank, there are large penalties if institutions don’t follow their rules,” says Davey. “FINTRAC is looking to monitor people who are only utilizing cash or trying to use cash under the table and/or money laundering. So that’s all come together to move people to less cash.”
Adds Edmond: “Problems in our economy with crime and money-laundering, these are real issues,” says Edmond. “Often for money-laundering reasons, cash is king, so there could be an argument made that with less cash might come more safety.”
The preference for the anonymity of cash transactions persists. Some like the ease of old school budgeting, avoiding interest that accrues on credit cards and the additional fees attached to debit and credit cards.
While those fees could be raised in the absence of cash, banks could also choose in the future to attach fees to cash withdrawals.
“I’d love to say everything isn’t tracked,” says Davey. “…(But) if you came into our institution today and opened up a savings account, we have to ask you what the money is for. And if you go, ‘That’s just for savings’ and we say, ‘That’s fine but what is it for?’ If you don’t tell us we have to send in a report saying this person didn’t want to tell us what the money was for.”
Edmond still likes the flexibility cash provides in a bar or restaurant.
“I’m a cash-carrying person,” he says.. “I like having cash. I find it fast and convenient but people say to me, ‘Why are tips so high, the range?’ You put in your credit card and the options are 15, 25 and 35 per cent. It’s a little nutty. But the reality is they’re having to report everything that they’re making these days and inflation has been pretty hard for most people.”
Davey believes a cashless economy – Canada has some of the highest credit card usage and contactless payment limits in the world – isn’t far away.
“I think we will get there,” he says. “I work for an institution and I barely go to a branch to take out cash. I barely ever carry cash and I’m not in the young demographic. Young people coming along – they’re just not using cash. They don’t understand the requirement for it, in most instances.”
