The praises of cash

10 Jul 2017

So how did you celebrate "No Cash Day"? In case you've forgotten (or never realized), NCD was June 27.

The idea, according to the self-proclaimed holiday's website: 'No Cash Day is a public call to stop using cash over a 24-hour period to offer the opportunity to reflect on the issue of financial inclusion and cultural change offered by digital money as an opportunity to overcome the boundaries between people, countries and languages; as constant technological revolution; as redefinition of relationships between citizens and institutions."

Presumably, world peace is just around the corner if all of humanity hurled those pesky coins and banknotes into the nearest rubbish bin and embraced...errr...what, precisely? Bitcoin? WeChat Wallet? Or Hong Kong's Octopus card?

Paying the piper
A recent press release from credit card monolith MasterCard tried the "shame approach"—the firm quoted their own survey on "Consumer Purchasing Priorities" for the second half of 2016. Among other nuggets, this gem: "Compared to other everyday items, cash was perceived by consumers to be less hygienic than public toilet handles."

MasterCard of course makes a percentage on their transactions, but no central bank commissions studies to provide metrics on "filthy lucre." In Hong Kong, big heavy coins are still plentiful, although the HK$10 ($1.30) coin is increasingly supplanted by the psychedelic plastic HK$10 banknote, supposedly based on the design of the pre-euro Dutch ten-guilder note.

However, Hong Kong adopted the Octopus card (a contactless payment system based on Sony's FeliCa technology) in September 1997. While you can get a personalized Octopus card, you can also get a generic one with no personal details. In an age where privacy is an ongoing concern, this is noteworthy.

Credit card firms take a percentage for their service. In return, the consumer receives perks, such as frequent flyer miles. But increasingly, the perks diminish—fewer air miles per dollar, etc. The cut taken by the credit card firms isn't appreciated by Hong Kong's many SMEs, who will tack on a surcharge. Whether selling electronic goods or air tickets, businesses that work on thin margins aren't gonna pay credit card vig on your behalf.

Since Mastercard listed some "reasons why paying with a card is safer than doing so with cash," let's check out the flipside.

Traceable records
Mastercard says their records allow you to monitor your expenses, which "comes in handy when you need to dispute or cease an unauthorized transaction," and that's true. A bank that understands your typical spending patterns can spot fraud, decline those payments, and contact you in a secure way (if you do use a credit card, make sure your bank can contact you—email them before you go on a trip as well).

But do you trust credit card firms not to share your personal details with other entities? Media juggernauts like Facebook, Amazon and Google keep their shareholders happy by tracking your spending habits and other personal details. Being "traceable" isn't always optimal.

Cumbersome payments
Using "payments cards...offer a discreet way to carry large sums of money, making transactions quick and unnoticeable, says Mastercard, as opposed to "taking out a large, conspicuous wallet or fumbling through wads of cash." A bit disingenous, say I, noting that wads of cash can be placed in an inconspicuous envelope or other container for transfer.

I like the use of "payments cards" however, as this includes the Octopus card, which can handle transactions up to its limit, which is HK$1000 (US$130) plus whatever deposit/AAVS scheme is attached to the card. That's a lotta dim sum.

Mastercard also offers security and travel perks as reasons to use their card, and these are more rational than germophobic scare-tactics. Credit card security has tightened up considerably over the last decade—issuing firms have implemented the chip-and-PIN scheme which is an improvement over the traditional magnetic-swipe-strip.

But security is a continuum. Ten years ago, I interviewed a former FBI employee who worked in the private sector. He went to Venezuela on business with a wad of bolívares because at that time the country was notorious for credit card information theft.

He checked into his hotel and the clerk asked for a deposit—the man counted out a stack of banknotes. "No no señor, we only accept credit cards," said the smiling clerk. When the inevitable theft-attempts began, the former lawman called his bank with the name of the hotel and the name and description of the main suspect—he'd worn a name-tag on his hotel uniform.

Security, privacy, and common sense
Security is a continuum, and privacy is an increasingly valuable commodity. Payment systems keep records, which is sometimes a good thing, but not always. Cash will always be used for dodgy payments, but that's no reason to, say, suddenly demonetize most of a country's currency, as happened in India late last year.

For Hong Kong residents, the Octopus combines the best of both worlds. You can buy one at any MTR station, load it with cash, then use it at the many transport & retail outlets around the HKSAR. Of course, this is Hong Kong, which occupies the sweet spot on many a continuum.

Common sense tells you to keep your Octopus card secure. Some keep their Octopus in a wallet-style case along with their mobile phone. Probably more secure than a wad of cash.

But my travel agent doesn't accept Octopus, so I pay her via ATM transfer. Payment options? Aplenty.

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