In Sweden, cash transactions make up less than 2% of the total transaction value across the entire economy. The small number of centralised banks are co-operating in a push toward a cashless society – so much so that micro card readers have been issued to the homeless to allow them to accept donations from credit and debit cards.
Cities in China are being purpose-built as cash free, India has been outing large denominations of cash notes in a publicised attempt to tackle corruption and travel giant Expedia now accepts Bitcoins – but are the rewards exactly as advertised, does it justify the risk, and are we really paying attention to the potential consequences?
As life become digital it’s obvious that finance should follow suit. Money apps are ubiquitous worldwide, enabling consumers to track spending, to manage finances and rid themselves of ‘burdensome’ cash. New payment methods are embedded in the most innovative solutions – I personally enjoy not handing over cash at the end of an Uber journey – living a cashless life has never been so convenient.
Cashless transactions simplify, reduce unnecessary admin and save consumers valuable time. They can help consumers track and save money. Sweden’s move has been communicated as organic and reactionary by those who advocate a cashless future – a direct reaction to this desire for convenience. Those against a cashless future fear a deliberate coercion by 5 of the nation’s 6 major banks, who worked together to remove ATMs and place restrictions on cash deposits and withdrawals. The reality is somewhere in the middle but both points of view have merit to be explored further: It’s one thing for consumers to actively chose to use less cash, another completely for a government or institution to actively reduce its supply.
Cash, fundamentally, is empowering to an individual. A physical form of cash allows a person to store and accumulate wealth completely independent of influence from banks or any other institution. In a cashless world, every payment will be traceable and could be data used to make important decisions about your life. For fear of scaremongering or being overly Orwellian, I present a case study from the Ugandan elections in February 2016. In the month leading up to the election, Twitter, Facebook and the mobile application that Ugandans use to send money were shut down. The fear was that the opposition would use the networks to bribe voters. Many analysts saw it as a method to stop donation being given to the opposition part and create an uneven playing field.
The payoff is that less cash would lead to reduced tax evasion – but leading with cash payments as a form of tax evasion, when we could focus, perhaps, on off-shore loopholes (a topical example from hundreds of possible alternatives) seems counter-intuitive. The argument that cash makes illegal economic activities easier is also far from cut and dry. Those who truly seek to benefit from illicit activities at scale can hide through Bitcoin. It’s not a coincidence that the largest ransomware attack in history, from WannaCry, demanded payment in Bitcoin.
Of course, there’s nothing inherently valuable about physical cash – the value only exists because we have all decided that it should. Money is simply about the exchanges and transactions that we have with each other – Neha Narula calls it, “a collective fiction” in her excellent TED Talk about The Future of Money. This is why Bitcoin and equivalent cryptocurrencies are so exciting. The technology behind them, Blockchain, is an unprecedented opportunity to truly democratise money. When money is programmable, we don’t need to trust institutions to deal with it, we don’t have to ask for permission to trade. Currently, mining Bitcoin, (or Ethereum) takes the electricity required to run a small country and is an inaccessible mystery to the vast majority of the population. There is only a finite amount of Bitcoin available. It’s exciting – but needs many iterations and improvements before it can replace and retire physical cash.
Electronic payments, contactless payments, peer to peer payments, cryptocurrencies and the technology behind them are here and here to stay (and evolve). That is undeniably a good thing. They serve an excellent purpose but should exist to compliment cash, not completely replace it. In the midst of a Bitcoin bubble, it’s important to keep new technologies in perspective. Cash, tangible material pounds, dollars or yen has been around for thousands of years. It won’t disappear in just a decade – and that, for now, is a good thing.