The UK has passed a milestone towards a cashless society. Should we be worried?

“Turnover is vanity, profit is sanity but cash is king.” So goes the age-old business proverb. Throughout the ages, the measure of whether an entity can ultimately operate as a going concern gets down to cold, hard cash. Of course, cash-in-bank, is considered cash from an accounting perspective and that perception has permeated into our psyche. The recent UK Finance’s annual UK Payments Markets report disclosed that last year British consumers and businesses made 13.2 billion debit card transactions compared with 13.1 billion cash payments – the first time that there have been more card transactions than cash. The popularity of “contactless” payments has been responsible for the extraordinary growth in plastic transactions. As the chart below shows, the outperformance of Visa and Mastercard shares has accelerated since 2017. It’s looking a bit exponential now.

Undoubtedly, attitudes towards cash have changed (my wife has a 22-year old colleague who has never carried cash at all!), so it appears to be a structural change in how society operates. The problem is that the herding-into-plastic-fantastic does not come without risks. The lesson of (only) a decade ago is that big banks can and do go bust. “Oh, poppycock!,” I hear people say – banks are much stronger financially than they have ever been. Well, at this juncture perhaps, but hardly anybody thought there was a developing problem in 2006, and our Elliott wave analysis suggests that European banks are at the start of another dramatic wave down. If that analysis is correct, we fully expect issues to emerge which will be rationalized as the cause of banks’ decline. When the next dash for cash occurs, be sure to have some readies at the ready.

(Footnote: the phrase plastic-fantastic first became popularized on Jefferson Airplane’s 1967 album Surrealistic Pillow, fittingly at the top of another positive trend in social mood.)

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