Old Money

It may be the best part of fifty years since Britain switched to decimal currency, but there still remains the odd occasion when I cannot help but look at the price of something, a newspaper perhaps, and convert the price into old money. "Ten bob for a paper!" I will exclaim (usually just mentally, but sometimes out loud). It proves that old habits die hard...very hard.

"Ten bob for a newspaper!"

The conversion from pounds, shillings, and pence (LSD) to decimal currency back in 1971 was greatly facilitated by the short drama, shown repeatedly on television, called Granny Gets The Point, in which Doris Hare played a grandmother who was taught how to use the new-fangled coinage by her grandson. Naturally, this being Britain, embracing the principle of a decimal system could only be achieved by retaining some non-decimal measure as part of the process, hence the retention of the old sixpence (worth 2½p) and the introduction of the decimal half-penny coin. 

While the old sixpence, which remained legal tender until 1980, was held in great affection - I found one a few years ago and came over all nostalgic - the half-penny was universally unloved. It was a nuisance for shop-keepers and bank cashiers,  and it was ignored by anyone who saw one lying on the pavement, yet it remained in circulation until 1984, retained on the grounds that it was an important factor in the defence against inflation.

The old tanner was held in great affection by the British public...

...the same could not be said for the ha'penny.

Just as the value of the half-penny fell to the point that it was ignored by most people - many were just thrown away - so the penny and two-penny pieces may have outlived their usefulness. It has been reported that prior to the 2015 General Election, the then Chancellor, George Osborne, proposed abolishing the 2p and 1p coins - largely on the grounds that they cost more to produce than they are worth. The plan was abandoned when he was told that similar plans in Australia had met with much opposition from charities who collect a lot of low-value coins. And just as with the half-penny, withdrawing the two bronze coins would inevitably lead concerns about increased prices and increased inflation.

But would it? When cash was king and paying by cheque was rare, and by card unheard of, the argument made sense, but now when the majority of transactions are by card or some other electronic method, it loses some validity. The psychological effect of the .99 price would be a greater driver to keep prices down than the abolition of the 2p and 1p would be to drive them up. Even without the bronze coins in circulation, prices for electronic transactions could remain as they are; only cash prices would need to be rounded up. Ah, but that's unfair on the elderly who still cling to paying by cash, goes the argument, and yes there remains a significant minority of the older generation for whom paying by card for a loaf of bread and a pint of milk remains anathema, but even my old Mum happily embraced Chip and Pin before she died, and would probably have been happy with contactless payment too. And just maybe, retailers would round cash prices down to the nearest 5p or 10p...maybe. 

As the years pass, the number of cash transactions will fall through choice, regardless of what coins and notes remain in circulation. Until just a few years ago, I would draw a sum of cash from an ATM on a weekly basis, but now I find I do so less frequently. Similarly, I used to spend cash every day, now I often go days without using notes or coins. There's the Oyster card for rail and bus fares, an app to pay for food and drink in coffee shops, and the contactless bank card for most other things.  I read somewhere that about two in five British people would be happy to do without cash and rely on the electronic alternatives and in mainland Europe, that figure goes up to three in five, apparently. In April this year, Britons spent nearly £4billion using contactless cards, nearly 150% more than twelve months before, proof that we are moving in the direction of a cashless culture.

In Sweden, cash has become such an underused medium for transactions that some banks no longer accept cash deposits in some branches, and many have no ATMs. In  Swedish shops, cash is now used in only around one in five transactions, compared with the global average of seven in ten, and according to Niklas Arvidsson, an associate professor at Stockholm’s Royal Institute of Technology (KTH), Sweden is likely to become a cashless society by 2020. Even the homeless magazine salesmen take electronic payments, and church collections are 85% cash free. And removing cash from the economy aids the fight against crime. Bank robberies and ATM ram-raids become a thing of the past, while money laundering becomes harder, although as we all know, electronic payment methods are hardly immune, nor are they safe from other types of fraudulent activity.

In 2016, a Big Issue salesman became the first in Britain to accept payments via Apple Pay.

An obvious concern about the movement away from cash is that the ease of use of contactless cards, Apple Pay and the like encourage binge spending, that the value of the transactions are less apparent, and it becomes easier to get into debt. Clearly, digging notes and coins from wallet and pocket focuses the mind on the price of a purchase more vividly than merely tapping a contactless card on a reader, but the same things were said when cheque cards were introduced, and when credit cards first became popular and more widely held.

More insidious perhaps is the likely growth of surge pricing that is more easily facilitated when payments are made through electronic methods. Sometimes called dynamic pricing, surge pricing is a strategy in which business set flexible prices which are essentially determined by supply and demand in real-time. Football clubs use dynamic pricing in setting ticket prices, for instance with Premier League clubs in particular categorising games in different price bands depending on the opposition. The London Congestion charge and some other toll road charges are another example of dynamic pricing, while taxi firm Uber base their fares entirely on this principle.

And the practice is spreading. Last year, Marks and Spencer ran a trial where the price of sandwiches was reduced in the mornings to encourage people to buy their lunch early. While surge pricing for theatre tickets, concert tickets, and football matches is well understood and purchasers will be well aware in advance, a purchase that is made on a daily basis but which may vary in price depending on what time of day it is made is subtle enough to be missed by all but the most alert of shoppers. It is certainly something consumers will have to be watchful for in the future.

The price of your M&S Prawn sandwich may well be determined by when you buy it.

One day it may go even further. Not just dynamic pricing, but pricing tailored to the individual, based on their spending habits. Retailers already send us discount vouchers according to our shopping habits based on the data they collect through loyalty cards, so the day when that data is used to personalise our shopping experience to affect the price we pay at the till cannot be far away. We've come a long way since the half-penny was abolished, doing away with the penny and tuppence would be nothing compared to what could lie ahead.