Fantastic Plastic: The Cashless Society

With many UK politicians apparently fixated on the issue of the European single currency, it is tempting to forget that there is the prospect of the UK facing the end of cash itself. Rather than worry about what types of coins we have in our pockets and notes in our wallets, we ought to be more concerned, perhaps, with whether cash itself will continue to be with us in its physical form.

Let's get hold of some data to show how reliant on plastic we are becoming in the UK.

Get a copy of the Volume of transactions table [Excel file 18K].

OK, the first thing to notice is how the volume of transactions in the UK economy has moved according to movements in the overall economy.

Compare these two variables on the Excel sheet (as above) GDP % change set against total transactions.

This illustrates very well that recessions, including the 1991 - 92 slump, have real effects on people and their spending. In fact the fall in total transactions actually persisted longer than the decline in GDP, (1994 transactions fell by more than 2 % when GDP rose by over 4 % in the same period).

What is clear from the data is that cash is declining as a share of all payments, over the period studied.

Try to represent this trend graphically using pie charts:

See the TimeWeb Guide on drawing pie charts if you are not sure how to do this.

Draw two pie charts to show the respective shares taken by cash and non-cash payments, as a proportion of total transactions. You should build into non-cash payments the data for post office order book and passbook withdrawals, given in the Volume of Transactions table.

Now let's focus on the component parts of non-cash payments:

Calculate the percentage change that has occurred in the following non-cash elements over the period studied. Complete the gaps in the following table.

UK Non-cash transactions % change 1991 - 1999

What do you think are the main reasons for the changes outlined above?

Here are some ideas...

• Social change - Pace of life has quickened so saving time when seeing to your finances is seen as beneficial.
  
• Consumers want a virtual economy - Although some people would agree with this, the majority of consumers would be reluctant to give up cash as main method of payment.
  
• Technological change - Technology now allows for rapid transfer of funds.
  
• Paper costs make cheques dearer - This is not a major factor.
  
• Banking industry development - Restrictions have been lifted on some banking activities as a result of legal changes. This has forced the pace of change in the industry.
  
• EU directive forces cashless society - This is merely an EU scare story!
  
• Political direction - Government has been keen to see faster change in payment methods, as this is seen as boosting the competitiveness of the economy.
  
• Utility charging policy - The utility companies (gas, electricity, water etc) have given discounts to consumers willing to pay their bills by direct debit.
  

What do you suppose the future holds for cash as a method of payment? Well of course there are a number of factors that could change the way transactions are carried out in the economy. Try to suggest some of the likeliest from the following list.

But we cannot accurately predict what might happen technologically, politically or in terms of taste and fashion. What we can do is use the existing data that we know is reliable to find out the trend that could be seen in the decline of cash, if all else remains equal. This means that if we assume that the current social, technological and political circumstances stay the same, we can see what would happen in the future.

This activity is based on functions that Excel offers. If you are not sure about these, you may want to have a look at the relevant section of the TimeWeb guide to Excel.

When you have finished finding out how to go about predicting the trend using Excel, return to this worksheet and use the data in the table below for 1991 -1999 to extrapolate cash transactions for the years 2000 - 2009. Can you get these results using Excel?

Trended data in italics
Original data from Social Trends No 31.

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