The Royal Mint recently issued 1.5 billion new Pound coins, but there are still some businesses that will end up out-of-pocket.
Tesco will have to unlock trolleys at many of its stores as it has been unable to convert all its trolleys to accept the new 12-sided Pound coin ahead of its circulation. It will have until 15 October 2017, when the old coin ceases to be legal tender, to ensure that all trolleys are converted, meanwhile putting part of its trolley fleet at risk. The Automatic Vending Association has estimated that it will cost £32 million to convert all machines to accept the new coin.
Funny money
The decision to introduce a new coin was made because, over time, the old pound coin has become more susceptible to fraud. Estimates suggest one in 30 of the old coins in circulation are fakes. The new coin has been designed to be as difficult to fake as possible, with two different metals, holographic images that respond to the light and 12 sides that are alternately rough and smooth. The Royal Mint believes this to be the most secure coin in the world.
But is there enough value in a hyper-secure Pound coin to make it worth the investment? The administrative burden on councils and businesses is very apparent. Cash has always been the lifeblood of criminal activity, enabling the black economy to keep funds away from the watchful eye of the authorities. Fraud-proofing cash won’t change this, and Mintel’s research shows that other payment methods are hot on the heels of cash spending.
How much longer can the old adage ‘cash is king’ last?
Driving a card bargain
Research in Mintel’s Consumer Attitudes towards Mobile Payments UK 2016 report reveals that although nearly everyone has used cash in the last three months, almost nine in 10 say they have used a debit card with Chip & PIN. Close to a third of people can be counted as recent users of contactless credit and debit cards. Contactless as a payment method is waiting in the wings, while contactless functionality extends to more pubs, restaurants and retailers than ever before.
This, alongside research from our Online Retailing UK 2016 report that shows more than nine in 10 internet users have shopped online, clearly indicates that alternatives to cash are on the rise.
A cash(less) cow?
Despite this, less than a third say they feel comfortable with the potential for a completely cashless society, so there is still a strong appeal behind using cash in some form. We remain many years away from going totally cash-free and card payments are dogged by a whole host of growing fraud issues.
The investment in a new coin will help combat the effects of fakery by future-proofing the cash system while we move closer to a scenario in which we no longer depend so heavily on it. For our economy to support a cashless society, a great deal of further investment in card security and contactless infrastructure will be required.
In the meantime, however, the organisations behind our vending and ticket machine networks will certainly be left wondering if they can still turn a profit for the year once the new coins hit full capacity.
Patrick Ross is Senior Financial Services Analyst at Mintel, writing reports and analyst insights for Mintel’s UK Financial Services team. Prior to joining Mintel in 2015, Patrick worked in both the payments and insurance industries, as well as working as an analyst for a market research company.
