TOM UTLEY: Blowing £100 with just one tap… and why I fear we’re losing all sense of money in our pocket
Don’t ask me if Rishi Sunak has struck the right balance between borrowing lashings more money to keep the economy from total collapse and increasing taxes to pay some of it back in the far distant future.
I freely admit that I’ve never begun to understand economics (which is one thing I seem to have in common with a great many professional economists, particularly on the Labour Left).
All I can say with any certainty is if I’d been in charge of solving the horrific money problems posed by Covid and the lockdown, we’d all be eating rats by now.
Isn’t it a fact of human psychology that the easier and more painless it becomes to part with our money at the point of sale, the more recklessly we’re inclined to spend it?
But while I have great sympathy with the Chancellor, given the immense difficulty of his task, I reckon you don’t have to know the first thing about economics to realise that one measure he announced on Wednesday is a seriously bad idea.
All you need is a smattering of insight into what the immortal Jeeves called ‘the psychology of the individual’.
I’m thinking of Mr Sunak’s foolhardy decision to increase the legal limit on single contactless payments from £45, as set by the European Commission, to as much as £100, now that we’re free of EU law.
Under this measure, which the Chancellor hopes the banks will implement later this year, we’ll be able to spend up to £300 in cumulative payments, at the tap of a card or a smartphone, before we’re asked to enter our PIN.
And not only us, of course. If we lose our cards, or they’re pinched, anyone who finds or steals them will have the easiest imaginable access to a hefty chunk from our accounts.
True, banks will remain liable to refund money spent by fraudsters in this way (unless they can prove we negligently failed to take proper care of our cards).
But though the big lenders are said to be nervous of increasing the limit so sharply, you can bet your last penny they’ll devise ways of recouping any losses they incur by milking us with extra charges.
What worries me even more, however, is the effect this much higher limit is likely to have on our spending habits.
I’m thinking of Mr Sunak’s foolhardy decision to increase the legal limit on single contactless payments from £45, as set by the European Commission, to as much as £100, now that we’re free of EU law
For isn’t it a fact of human psychology that the easier and more painless it becomes to part with our money at the point of sale, the more recklessly we’re inclined to spend it?
Now, I’m quite old enough to recall a time, in the not-too-distant past, when almost all everyday transactions were conducted in cash. In those days, we were either paid in notes and coins or we had to queue for them at the bank.
Indeed, I remember that back in the 1970s, during my apprenticeship as a cub reporter on the Tavistock Times in Devon, I used to withdraw £6 in cash from the bank every Monday.
Though it’s incredible to think of it now, when money is worth so much less, this was my weekly budget to cover all the food, booze and cigarettes I needed.
Though I seldom went short of any of these essentials, believe me I took notice when my wallet and pockets were almost empty by the end of the week and reined in my spending accordingly.
I felt the pain, too, when I wrote out cheques for larger outgoings, such as my monthly rent.
What a very different world we inhabit today, in our increasingly cashless and chequeless society.
Standing orders, direct debits, one-click Amazon shopping, Apple Pay . . . Every innovation from the fintech companies has been designed to ensure we barely have to do anything to send large sums whooshing out of our accounts. The upshot is we don’t really notice how much we’re spending — until it’s too late.
As for those ever-proliferating pieces of plastic, first they merely bore our signature and a number to be written on the back of a cheque, as a guarantee that the bank would honour it.
But still it was thought that the business of paying for goods and services was too much bother. After all, we still had to write out those cheques, spelling out the sum involved in letters and numbers, and then we had to sign it.
So next came the payment card, which meant we could leave both our cash and our chequebooks at home. All we needed was that piece of plastic, to be swiped by one of those hand-held printing machines. The only thing required of us then was our signature.
But in the eyes of the banks, even this made payment too stressful. So along came chip and pin — which meant we had only to enter a four-digit number into a card-reader and the purchase was complete.
Scroll forward, now, to 2007 and the arrival of the ‘tap and go’ contactless card, with an initial spending limit of £10. If our purchases came to less, we just had to wave our card in the general direction of a reader and — bingo! — job done.
Before we knew it, that limit was doubled to £20. Then, in 2015, it became £30 and, in April last year, it was up to £45, under that EU ruling which fixed the maximum contactless payment throughout member states at the equivalent of 50 euros.
Heaven knows, I’ve never been a fan of EU directives — and generally speaking, I believe in light regulation and trusting the public to spend their money as they wish. I’ve certainly seen enough of life to know that individuals spend their earnings a great deal more sensibly than governments (though that’s hardly saying much).
But I can’t help feeling that Mr Sunak is piling up all sorts of problems for the country by easing the brakes on contactless spending still further.
Already, says UK Finance, the banking and financial services sector’s trade association, tap-and-go purchases account for a whopping 64 per cent of all debit card transactions, and 46 per cent of payments by credit card. How much higher does the Chancellor want those figures to climb before he’s satisfied?
Of course, it’s undoubtedly true the Covid pandemic has hastened the move towards a cashless society. Indeed, I can’t remember the last time I signed a cheque — and I’ve had the same £20 note in my wallet for a good three months since I started buying everything by card.
But don’t tell me that Mr Sunak is lifting the contactless limit to £100 in order to reduce the minuscule risk of contracting Covid-19 by keying a PIN into an infected card-reader.
No, his intention is quite clearly to encourage the spending boom that he hopes will push the economy out of the doldrums of the pandemic.
For the truth is he realises as well as you and I that people tend to spend more the less trouble it takes to make a payment.
Only yesterday we saw the latest example, with the opening of the new Amazon store in Ealing, West London, where payment is fully automatic
I’ve certainly found this from my own experience. I can’t believe I’m the only one who would have hesitated to foot the bill for his wife’s latest home improvements if he’d had to write out a cheque or dig into his wallet, instead of merely clicking a mouse or tapping a card.
How long before the fragile psychological link between money and the hours of work required to earn it is broken altogether — plunging families into the misery of debt they can never hope to repay? And who will pick up the pieces then?
But still the techno wizards are coming up with new ways to relieve us of our earnings with the minimum of fuss.
Only yesterday we saw the latest example, with the opening of the new Amazon store in Ealing, West London, where payment is fully automatic.
Thanks to cameras and sensors galore, shoppers simply have to walk in, take the goods they want and walk out, without going anywhere near a checkout.
But I’ll leave the last word on that to a long-suffering local newsagent: ‘At school chucking-out time, kids have been doing that for years!’
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