There is no denying that the new £1 is a beautifully designed piece of metal.
The two-tone coin boasts a host of innovative security features making it supposedly the most secure in the world, and is the first UK coin since the threepenny bit to feature an octagonal design.
“The pound won’t be round for much longer” claims the Royal Mint on its promotional page, and they’re quite right – but are they conscious of the irony?
Because there’s every chance that this will be the last £1 coin in the history of our currency. The first made its debut in 1983 and remained fundamentally unchanged for the next 34 years. With the rise of alternative payment methods in the last few years, from contactless to mobile, it is nearly impossible to imagine that we will still be handing over bits of metal (no matter how secure) in 2051.
The decline of coins and notes is not just being driven by the convenience of alternative payments, important as these are. It’s also because of the simple fact that cash costs money. For a start, there is the cost of converting machines: the Mint optimistically estimates this at between £15-20m; the British Parking Association, however, says it could cost up to £50m just to fix the UK’s parking meters.
Management consultants McKinsey estimate that the cost of cash to countries with a high rate of cash use can exceed one per cent of GDP, through the cost of processing cash payments, banking and storing money, anti-counterfeiting measures and so forth. Even in the UK, where cash has been in a long, slow decline, physical money still costs British businesses £18bn a year – or an average of £3,520 for each small to medium-sized business.
While businesses are beginning to embrace alternative payments, consumers have long been turning away from cash. In 2005 notes and coins made up 64 per cent of all payments in the UK; 10 years later this had fallen to just 45 per cent. By 2025, barely eight years into the life of the new pound coin, it’s estimated that cash will account for a quarter of transactions.
The UK is already a world leader when it comes to alternative payments. In 2015, Britain spent more than £21bn via cashless payments, more than any other European country. And our love affair with alternative payments shows no sign of slowing: in the six months from October 2015 to March 2016 contactless payments grew by 237 per cent, and mobile payments are forecast to increase threefold by 2020.
Cheques and bank transfers long ago usurped cash for expensive purchases, but the last bastion of notes and coins remains high-volume, low-value transactions. Even here, however, cash is losing its allure. Every business, from chains to pop-ups, knows that their customers expect the option of paying by card (or phone, or wearable device), which explains why 1.7m UK businesses now accept payment cards.
There is another, less visible factor in cash’s inevitable decline: humans are playing an ever-decreasing role in financial transactions.
The growth of payment automation means people are doing less and less “paying”, whether it is the venerable direct debit, or the internet-connected washing machine that orders your soap powder when it senses that you’re running low. On every front, cash is fighting a losing battle.
So will our coins and notes, stained with the patina of dirt from thousands of grubby fingers, go the way of beads and sea shells as extinct forms of currency?
Or will it find its niche in the heritage industry, for those who miss the heft of a pound coin in their fingers or the satisfying weighty clunk they make when they fall on the ground? Only time will tell.