When systems go down, they can go down big-time. As happened recently with the CrowdStrike software update glitch that caused a multitude of Microsoft systems around the world to crash, hitting hospitals and healthcare, transport, hospitality, retailers and payments. Cash, once again, was the fallback option.
Following initial fears of a cyber- attack, it soon transpired that the glitch (if one can call it that) was one of human error – an upgrade that had a cascading effect throughout infrastructure based on Microsoft systems that used CrowdStrike. Given it was more a case of bad engineers and processes than bad actors, it was quite quickly resolved. It was also possibly bad regulations to boot.
In 2009, the European Commission made an agreement with Microsoft that meant it could not make security changes that would have blocked the CrowdStrike update which caused such chaos. The aim was to boost choice for computer users in browsers and other software.
Microsoft has its own equivalent solution to CrowdStrike, Windows Defender, but agreed to allow multiple security providers to install software at what is known as the kernel level.
In 2020, Apple blocked access to the kernel on its Mac computers to improve security and reliability, something Microsoft could not do because of the 2009 agreement. Europe’s new Digital Markets Act will require Apple to allow alternative app stores and web browser engines on the iPhone.
So, it almost a given that similar events could happen in the future, particularly since, as IT specialist have warned, software supply chains have long been a serious cybersecurity concern and potential single point of failure.’
Computer problems that bring down systems, and with them the means to make electronic payments, are nothing new. What is different about the CrowdStrike incident is its scale.
And it’s a salutary reminder, if one is needed, of the need for resilience, choice and back-up in payments. After all, computers crash, and always will. Cash doesn’t, and never will.
In a completely separate development, but one that nevertheless feeds into the debate
on cash versus cashless, the decision by the UK Treasury to suspend orders of UK circulating coins this year has been heralded by many as yet another sign that cash is on the way out.
Whilst it is true that cash usage has fallen significantly in some parts of the world, it is also true too many coins have been produced for far too long – not just in the UK, but generally.
A few years ago, The Royal Mint estimated that 2 billion coins in the UK were ‘lost’ – down the back of the proverbial sofa. Given a population of c. 67 million, that’ a lot of sofas. It is also estimated that 27 billion coins are circulating (or not) in the UK, representing 400 coins per person.
Lack of coins in actual circulation point to a structural problem in the use of coins. Settlement coins, lower value coins only used as change, are effectively single ticket items – used once, and seldom seen again. Typically they account for 50-60% of all production, making them a rather expensive settlement solution.
This is hugely inefficient, and the ever-revolving cycle of replacement is a waste in terms of materials and production costs. Something that has become more pertinent in the current focus on sustainability.
While the number of UK cash transactions has fallen from 14% to 12% of all transactions, the actual number has been almost unchanged since 2020. The use of coins correlates directly with the number of transactions. The decision not to procure more coins this year in the UK reflects poor coin management, data on coins being particularly hard to get, and, perhaps, some change in payment behaviour.
Global cash in circulation data shows the growth in the number of banknotes increasing at about 4% per annum. The world isn’t going cashless, and lower (or even no) production volumes of coins in the UK and elsewhere should not be seen as a further sign that it is, but more of a necessary and logical local readjustment.
