The problem with abolishing coins

27 octombrie 2020

article written for the BBC by Chris Stokel-Walker

Many governments are contemplating taking coins out of circulation – and others already have. But the decision isn’t as easy as shutting off machines at the mint.


Jack Stirling groans when he sees customers at his supermarket rooting around in their purses for spare change. “I totally enjoy it when people decide to ‘lighten’ their wallets by dumping a whole load of coins on the counter,” jests the 21-year-old, who works in a supermarket in Australia.

Stirling generally works in his store’s express checkout lane, where customers buy 12 items or fewer. “Speed is really essential to make sure the line doesn’t build up beyond two or three people,” he says. And customers who meticulously count out change can slow down the process significantly. The supermarket worker prefers shoppers who use contactless credit or debit cards, simply tapping and going without much fuss.

A study by the National Association of Convenience Stores, an American trade body, estimates that counting out pennies can add up to 2.5 seconds to every cash transaction. That isn’t a significant amount in and of itself, but multiplied millions of times a day, it can have an impact on productivity.

But coins could soon become a thing of the past – at least if various governments have their way. Campaigns to draw down production of new coins regularly crop up in countries across the globe. The latest is in the UK, whose Royal Mint said earlier this year that a surfeit of coins meant they wouldn’t be making any more £2 or 2p coins for the next decade.

Canada stopped making one-cent coins in 2012, while Australia stopped producing new one- and two-cent coins way back in 1992. The Bahamas is the most recent country to stop production of its lowest denomination of coins, halting production on its one cent piece at the end of January 2020. From the end of the year, shoppers can’t use one cent coins there.

“I think the public in rich, industrialised countries is becoming less and less wedded to coins, generally,” says Lisa Cook, an academic economist and former White House aide during the Obama Administration. “After Canada stopped minting the penny in 2012, I think policymakers in other industrialised countries will be more willing to eliminate lower-value coins.”

However, eliminating coins isn’t as simple as mints halting production. Because even though many find lugging around or accepting loose change a burden, for others coins are a lifeline – and without them, their very existence is threatened.

Charitable concerns

Among those who’d feel the biggest impacts of a world with no coins are charities, who often rely on people impulsively giving up their spare change for a good cause. “Inevitably, you’re going to worry when a mechanism of giving to charity disappears, in term of small coins,” says Karl Wilding, chief executive of the National Council for Voluntary Organisations, a charity body.

Significant chunks of money are donated through coins dropped into charity tins at shop checkouts, or buckets held by on-street collectors. More than half of all donations to UK charities were made with cash in 2019, according to the Charities Aid Foundation (CAF), an industry body.

A separate survey by CAF found that £320m ($414m) of charitable donations came from loose change in 2018. “Cash is still by far the most common way people donate to charity, and nothing is easier than putting your hand in your pocket and putting a few coins into a collection,” says Susan Pinkney, head of research at CAF.

„Even though many find lugging around or accepting loose change a burden, for others coins are a lifeline

That’s something Felicity Spencer-Smith of the UK-based Institute of Fundraising also worries about. “There is potentially a wider impact that we should be aware of,” she says. “Back in 2018 our members have shared examples of how collecting small change on a regular basis provides much-needed funds for local and smaller charities, and noted the importance of spare change for many young children’s first experience of donating. This is symbolic of wider and more long-term change in how people give, and how people use cash more generally.”

“Lots of people get the giving habit when they’re at school and relatively young, by giving small amounts of money,” agrees Wilding. “Over time, when they find causes they believe in, they give more.” If that path to charitable giving disappears, financial support could dry up.

Homelessness worries

For many who experience homelessness, spare change can also be a lifeline. “I’ve been on both sides of the fence, and I can say without a doubt that people are far more likely to hand over change, or it’s easier to ask for change, because it seems like it’s insignificant,” says Phoenix Black. Black has been homeless in Massachusetts for more than a year, and posts about his and his partner’s journey on YouTube and TikTok.

Just because change seems insignificant, it doesn’t mean the donations can’t add up. “With enough perseverance, you can collect enough to get what you need,” says Black, who is in his late 20s. “When it’s something like a meal, that’s extremely important to the homeless.”

If fewer coins were in circulation, those experiencing homelessness may find it more difficult to ask for assistance from the public. “It already feels bad enough for someone to ask a stranger for help, so even the ability to keep the request sounding as small as possible helps the requester’s pride,” says Black.

“Clearly, there’ll be an effect on that if people are fishing around in their pockets for change, and maybe they replace it with a bill – or maybe don’t,” explains Kimberley Scharf, an economics professor at the University of Birmingham. However, she’s hopeful that it may not be all negative. She hopes that it might encourage people to give more through bank notes if they don’t have coins.

Reduced coin usage linked to the pandemic has already had an impact. Shops’ reluctance to accept cash payments, coins included, has disempowered people experiencing homelessness, who often don’t have credit or debit cards. The underbanked could be left behind as the world moves to a cashless – and coinless – economy.

Those shops that do accept cash often refuse to take coins, instead requiring shoppers to round up their purchases to the nearest full dollar. It’s a move that those running one centre for the homeless in Macon, Georgia, have called “an extra tax on the homeless”.

Impact on everyday consumers

Removing small denomination coins could also encourage retailers to hike prices. Items costing £6.99 could become £7 – which means consumers may end up spending more on aggregate.

Not so, say the Bank of England. “Such arguments are flawed on a number of levels,” wrote Bank of England economist Marilena Angeli in 2018, alongside her colleague Jack Meaning. (The Bank of England declined to grant an interview with Angeli.) Despite popular belief, only around one in eight items sold in UK shops end in .99 – down from a peak of nearly 15% in mid-2015. Seven out of 10 items are priced at either a round number, or ending in a five, meaning the impact of removing 1p or 2p coins would be negligible, according to Angeli.

But if you’re a customer scrimping and saving, every penny counts – and losing some can be damaging to household budgets.

When Canada removed pennies from circulation, Scharf’s anecdotal evidence was that shops simply rounded bills up to the next dollar – while keeping the ticket price the same. “If one has a price of $1.92, you wind up paying $2,” she says. “The price on the ticket remains the same, but they round it up and you don’t get change. I don’t know if the intention was to wind up like that. It means I’m paying more for what I’m getting.”

There is a solution to that problem, says Scharf. “If there are no coins available, what’s your incentive to use cash at all?” she questions. “My suspicion is people avoid the issue completely by using a card and avoiding cash entirely.”

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Gabriela Nistor – director general adjunct BT

Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”

Sondaj

In 23 septembrie 2019, BNR a anuntat infiintarea unui Fintech Innovation Hub pentru a sustine inovatia in domeniul serviciilor financiare si de plata. In acest sens, care credeti ca ar trebui sa fie urmatorul pas al bancii centrale in 2020?