We’re headed toward the cash-free economy
A recent New York Times article, “In Sweden, a cash-free future nears”, about Sweden’s move toward a cash-free society based on credit cards and smartphone payment is just one of many that have been discussed widely on the social networks. Sweden’s success and other Nordic countries’ experiences have prompted other countries, such as the United Kingdom and Australia to consider cutting cash out of the equation.
In the United States, the widespread availability of credit cards and electronic systems such as Square and Apple Pay mean that barely 20 percent of purchases are made in cash. In South Korea, 70 percent of payments are electronic, in the Netherlands the figure is 85 percent, in Canada 90 percent, and in Belgium 93 percent. If you want to park your car in Amsterdam, remember that parking meters only accept payment cards, as do a growing number of shops. In Sweden, many banks no longer dispense or take cash, while most tickets on public transport can only be bought with a card.
A number of years ago I visited London, arriving at Heathrow airport with no pounds. I soon discovered that I didn’t need them: I was even able to pay for a pint in a pub, along with tip, using a card. There have been calls in Australia for a No-cash November, along with initiatives to issue people on welfare with cards that could not be used to buy alcohol, place bets, or draw cash.
So, what are the pros and cons of a no-cash economy?
- Traceability: proponents of electronic payments say that it makes it easier to dismantle the hidden economy, meaning governments get more tax revenue. On the downside, it makes it more difficult to buy things anonymously: not even the bitcoin, made popular largely by people buying illegal goods, guarantees anonymity.
- Security: no cash means less violence against the person, for example, mugging and bank robberies. The downside is more cybercrime: both trends have been reported in Sweden.
- Exclusion of some sections of society. Firstly, we’ll all need to have smartphones, and then how to use them. Anybody with an elderly relative will know that this could present a challenge. A cashless society also means that we’ll all have to have bank accounts, whether we like it or not: this could present problems for those living in extreme poverty, refugees, recently arrived immigrants, and other vulnerable groups.
- The privatization of all economic activity: cash means extra costs for banks, while cards generate money through commissions, which cost us and retailers money. Cards make it easier for private entities to control what we do with our money. For example, I stopped using PayPal when it prevented me from donating money to Wikileaks, even though doing so was perfectly legal.
- Consumerism: if you limit your spending to the amount of cash you have on you, it’s impossible to get into debt, but cards and smartphones encourage impulse buying and make it much easier to get into debt.
- Small transactions: figures on the use of electronic payment in many countries are generally based on the overall amount of spending, not on the number of transactions. The reality for most of us is that there are plenty of occasions when it makes sense to use cash, from tipping in a restaurant to buying a carton of milk, or even giving money to the homeless lady who lives on the corner of your street, and who is unlikely to have a smartphone with the Square app.
- Government control: in the future, our current accounts will not be kept in banks, but in the central bank, or will be directly held by the government. Banks will continue to exist, but will get their money from the central bank. This will give governments more power to deal with downturns in the economy. It will also make it impossible for us to stash some cash away under the mattress for a rainy day.
- Problems: anything from our smartphone running out of battery or having some other kind of system failure, to our payment card being deactivated by our bank for whatever reason. The idea of suddenly having no money, even when you have money in the bank, is a frightening one, and a powerful argument against going over to a fully electronic system.
I’m sure there are plenty of other upsides and downsides to an electronic economy, and I welcome suggestions. We’re not all going to shift toward an electronic economy overnight, and it won’t be simply imposed by our governments. If it’s going to happen, it will be through a gradual process of introducing more convenient, efficient, and simple ways to pay for things, and will involve a generational transition. In the meantime, most of us will continue to keep a few bills in our wallets, just in case. But make no mistake, sooner or later, this is where we are headed.
(En español, aquí)
