EARLIER this year, a major review warned the cash system is "on the verge of collapse" and called for ministers and regulators to step in urgently. The Herald revealed Scotland is losing cash machines at a rate of more than 40 a month. So, would a cashless society work? Eleanor Shaw, professor of entrepreneurship and senior vice-dean at Strathclyde Business School, gives her opinion.

CLEARLY, the cost-effectiveness of providing cash machines is being squeezed, with operating fees falling and consumers using them less. Furthermore, with "fintech" – the impact of technological innovations on how we use and engage with financial services – on the rise, it is likely that these challenges will only increase.

Going forward, some radical thinking, including possible regulation, may be required if we are to ensure that the 25 million people for whom the Access to Cash Review (2018) argue cash is an economic necessity, are to be able to fully engage in our economy and have easy access to the cash they need to pay for the things they want to buy.

These figures seem to suggest that Scotland will not be cashless any time soon. But this doesn’t mean that our relationship with cash is staying the same – quite the opposite. Recent figures highlight our evolving relationship with cash, suggesting a “one size fits all” approach to how consumers access their money and make payments, will not work.

Data from the UK Payment Markets Review (2018) show that in 2016, 2.7 million consumers (5% of the UK population) relied almost entirely on cash while, in contrast, similar numbers (2.9 million) rarely used cash. While these figures show the extremes of our relationship with cash/cashless, figures from UK Finance (2018) show our growing love affair with contactless payments.

During 2017, while UK cash payments dwarfed contactless payments by almost £8 billion, cash payments fell by 15% while the number of contactless payments made increased by a whopping 97% to £5.6bn. It seems then that it is not that we don’t like cash but rather that we increasingly value the convenience, speed and other benefits of using contactless, mobile technology and even biometrics – fingerprints and, if you are in China, your smile – to make everyday payments.

This move towards digital and the growing application of technological innovations to drive change and innovation within financial services is good news for consumers. These innovations are making financial services cheaper, more widely available and more convenient to use.

Think of the convenience and the benefits of paperless mortgages – the use of digital technology to apply for, secure and drawdown a mortgage while keeping all information safely in one place.

Or what about the benefits of giving financial services providers accurate data on customers’ actual ability to afford products? By using "real-time" bank account data rather than historical information, Glasgow-based fintech company, Castlight Financial, is making it possible for consumers with previously poor credit rating scores to access financial products from which they would otherwise be excluded.

Despite these and other benefits there are concerns that as Scotland uses less cash, replacing it with contactless and digital means of making payments to companies, family and friends, not everyone will benefit. Particular concerns over the elderly and rural communities are well documented.

However, figures from various sources concur that while age and location can pose some challenges, these are not insurmountable and that the biggest demographic impacting on an individual’s ability to engage in a cashless society is poverty.

In the UK, 1.3 million people currently do not have a bank account either because they can’t provide proof of identity or address.

For these people and for the 16% of people with an income under £10,000 who rely only on cash, a move towards a cashless society is a real concern. In particular, there are worries that those in poverty will be disadvantaged by a "poverty premium" – having to pay over the odds because a growing number of retailers charge them more to cover the costs of administering cash payments or, because they have little or no access to online and digital platforms, are unable to shop around for and secure the lowest price for the things they need.

I don’t think Scotland will become a cash-free society any time soon. But our economy is changing. We are going through a period of significant transformation during which the majority of us are becoming much less reliant on cash.

It’s vitally important we acknowledge that large numbers of people have little or no access to cashless transactions or to the cost-saving benefits associated with new financial products.

To ensure that Scotland and the UK provides a "fit for purpose" banking and financial services provision that meets the diverse needs of its citizens and consumers, I believe we need better and more research – we need the data to inform evidence-based decisions and interventions and we need all stakeholders to work together: financial services, regulators, Scottish and UK governments, consumers and campaigners.

I suspect better evidence and greater collaboration are the key to helping provide a sustainable, inclusive financial services environment and who knows – maybe this approach will help us address other areas too.