Bye Bye Cash, Hello Cashless Society
Remember those times when you had a wallet? A wallet full of coins and banknotes. In today’s world, people don’t carry cash around anymore and cardholders and digital wallets have replaced traditional wallets. Cash is slowly disappearing. With the near death of personal cheque’s, increases in debit and credit card use and innovations such as Paypal, Square, Apple Pay and Bitcoin, the cashless society is well within our reach.
Today, Square lets any business accept debit or credit cards, Tikkie allows consumers to send payment requests, like a dinner bill, via Whatsapp and even for a candy bar you can use a card or phone. Almost all banking is now done through mobile devices. In the Netherlands card payments have been growing by about 10,7% annually over the past years (betaalvereniging , 2016) and the Bank of Korea is even planning for cashless society by 2020. The question thus arises, will cash become obsolete?
Electronic payments means faster, convenient and more efficient purchases. The Federal Reserve estimates that in 2016 there will be $616.9 billion in cashless transactions. In 2010, this was $60 billion. (Desjardins, 2016)
Governments support the shift for a cashless society. By having a paper trail for all transactions, crime, money laundering and tax evasion can be prevented and traced. Furthermore, a cashless society could empower central banking to have more ammunition in smoothing out the way people save and spend their money. By eliminated the prospect of cash savings, monetary policy options like negative interest rates would be far more effective when implemented.
All the money would be stored under the same banking system, instead of under a consumer’s pillow. Moreover, prudent savers could be taxed with negative rates to encourage consumer spending
Companies also love this idea of a cashless society since electronic payments are faster and much cheaper. And as far as multinationals are concerned, the sooner there’s a single global currency the better.
The cashless society is certainly getting closer from a technological point of view. For example, PayPal already has 188 million accounts, making it larger than most national banks. These days, more people own cell phones than computers hence phone companies could be the banks of the future, and for consumers their wallets. Furthermore, in the future all phones will be GPS equipped so products like holiday insurance could be sold directly on a pay-as-you-go basis, simply because the insurance company would know where you are in real-time and calculate risks and payments accordingly (“Future of Banks, Mobile Banking, Insurance,Finance”, 2016). As for security reasons, there are methods to ensure encrypted financial data. Due to this technological explosion, there are a lot of benefits and opportunities for new entrants and will lead to a strategy innovation of incumbent companies to keep up with the cashless society.
However, physical money has been with us for thousands of years. Cash is untraceable, easy to carry, widely accepted and reliable. If there is a power blackout, there is always cash. There are obviously some concerns, cases of electronic fraud have more than doubled in the past decade and the electronic system is considered as a threat to privacy.
Nobody can predict what the future will bring us, but it’s a fair bet that change will happen!
References
(2016). Betaal Vereniging. Retrieved 20 September 2016, from https://www.betaalvereniging.nl/nieuws/sterke-groei-elektronisch-betalen-2015/
Canteneur, P. (2016). Atelier. Retrieved 20 September 2016, from http://www.atelier.net/en/trends/articles/mobile-payments-surge-digital-wallet-adoption-forecast-2016_438960
Desjardins, J. (2016). The Shift to a Cashless Society is Snowballing. Visual Capitalist. Retrieved 20 September 2016, from http://www.visualcapitalist.com/shift-cashless-society-snowballing/
Eveleth, R. (2016). The truth about the death of cash. Bbc.com. Retrieved 20 September 2016, from http://www.bbc.com/future/story/20150724-the-truth-about-the-death-of-cash
Future of Banks, Mobile Banking, Insurance,Finance. (2016). Globalchange.com. Retrieved 20 September 2016, from http://www.globalchange.com/Future-of-Banks-Mobile-Banking-InsuranceFinance/
Gonser, T. (2016). 5 Things That Will Disappear In 5 Years. TechCrunch. Retrieved 20 September 2016, from https://techcrunch.com/2016/01/03/5-things-that-will-disappear-in-5-years/
PayPal: active registered accounts 2016 | Statistic. (2016). Statista. Retrieved 20 September 2016, from https://www.statista.com/statistics/218493/paypals-total-active-registered-accounts-from-2010/
I think this new way of payment is easy. You don’t have to carry a lot of money and the stores don’t need much change. When you pay with a bank card, you never have to hear the words ‘Do you have 15 cents?’. But on the other hand, like you said, physical money has been with us for a really long time. Not having cash is a weird thing for me to think about.
I think electronic payments are very interesting, whether ths is about online payment or electronic payment in offline environments.
I have to admit, that all different methods available can get you lazy easily and I sometimes chose PayPal over getting my RandomReader to pay with IDeal.
However, I just lived in Germany for one year and electronic payment over there is completely different from for example the Netherlands. In many bars and shop it is only possible to pay by cash, something that is very rare in the Netherlands. This is also why I am wondering about the development of electronic payment through Europe or even worldwide.
This is for example an interesting article about why Germans are completely happy with paying in Cash.
http://qz.com/262595/why-germans-pay-cash-for-almost-everything/
They state that paying in cash for example helps them to better keep track of their money and they like the anonymity of cash, as you stated. But this behavior also relies on history, which brings up a new question: When will the history influencing this not be on top of consumers minds and will the pattern really change..?
On top of that, this article also shows, that the average amount of euros every Dutchie still has in his wallet is 52 euros…
I am wondering, just as you are, how quick this cashless society will develop and what kind of new innovations will still be done, within the Netherlands and on a broader level.
Hi Christianne, thank your for this great blog. I think you mentioned most important things to consider when making our society completely cashless and what it would mean to us. However, I would like to elaborate on the benefits for companies and the privacy issue. I think it is quite obvious why expecially retailers and banks would love a cashless society. For retailers it would mean a great deal as they would be able to collect way more data than before. Banks would love it because no cash would mean that all money is in the financial system. This would eliminate the risk of bank runs and it would also improve their equity to debt ratio. Further, I think that physical money also is a part of personal freedom. It allows everyone privacy and the freedom to do and buy whatever he/she wants without getting tracked. However, I see your point with eliminating the black market. But as always you can either have freedom or security but not both. I would appreciate the possibility of paying cashless where ever and whenever I want, but I still wanna have the possibility to pay with cash. This is because I like to track what I spend and appreciate the privacy coming with anonymous transactions.