The Cashless Society
The Covid-19 pandemic has challenged the world’s pre-2020 economic infrastructure and social norms. For the past 10 years consumers have moved to digital payment methods proving to be more convenient and reliable, such as the creation of payment apps such as PayPal or Apple Pay. Consumers have opted out of cash for banking cards and digital wallets. With new technology developing, the world is experiencing a sudden shakeup of the availability of cash. Tennessee State University Dr. Achintya Ray commented “The decline in the circulation of coins is also driven by a movement toward cashless transactions that has been going on for some time” (Lucas Johnson, 2020). As more people turn to this new monetary system, there is no doubt that an economic revolution is coming.
The markets and the global economy have been hit hard by Covid-19.
The Covid-19 pandemic created an unemployment crisis in which small businesses were shut down. These closures reduced local economic activity in communities, reducing cash and coin flow.
The Federal Reserve announced in June 2020 of a national coin shortage affecting the coin flow in the economy. Time Magazine reported “Quarters, dimes, nickels aren’t circulating as freely… because many businesses have been closed and customers aren’t spending as much” (Lucas Johnson, 2020). Businesses that opened after some restrictions were lifted were caught in a crossfire.
Businesses required exact change at check-out in order to relieve their cash dilemma. Laundromat owners like Daryl Johnson from Minneapolis said “Obviously we were freaking out a bit” referring to the rationalizing distribution of coins as part of the Fed’s operations to relieve pain felt by businesses (Tibi Puiu, 2020).
Treasury Secretary Steven Mnuchin predicted that “as soon as the economy opens up again, the coin shortage will be reasonably solved” (Lucas Johnson, 2020). However, international economists had already begun discussions ever since late 2019 about a future cashless society. The San Francisco Federal Reserve conducted an annual survey which determined that cash remained the most popular form of payment for Americans in small transactions. Transactions that were less than $10 were often paid using cash than bank cards or other methods. For the majority of transactions, authorized bank cards were used or mobile apps such as Google Pay. Major consumer industries have already introduced optional payment methods to their stores for customers who prefer non-cash, and these methods tend to be the most utilized.
A new age has arrived as cash is disappearing in today’s economy.
The Economist reported in August “cash transactions have decreased by 80% in Sweden over the last 10 years.. Cash accounts for just 6% of purchases in Norway. In China digital payments rose from 4% of all payments in 2012 to 34% in 2017” (The Economist, 2020). Signifying that new forms of payments are happening in major economies. As media outlets and economists express often, young people are demanding the elimination of outdated payment systems by transitioning fully digital. From credit cards to app payment options such as Apple Pay or Google Pay, the use of these methods has dramatically increased.
Billionaire CEO of Twitter Jack Dorsey commented to Forbes Magazine “We believe there needs to be a global native currency for the internet… everyone should be able to participate in cryptocurrencies and have access to its underlying innovation” (Billy Bambrough, 2020). Cryptocurrencies are digital currencies that are independent from central banks, allowing individuals to invest, use, and grow their wealth. Cryptocurrencies have gained traction, most notably Bitcoin. Bitcoin is an online digital currency created in 2009 by an anonymous group of people called Satoshi Nakamoto, gaining the interest of young computer professionals. Bitcoins are computer files inserted in a ‘digital wallet’ app which can be used for transactions as well as money transfers. Store purchases are also allowed in a small number of stores today.
Corporations such as PayPal have designed digital paying methods that transfer money directly into users’ bank accounts making personal transactions much more easier. Many stores have recently adopted phone tapping technology that completes the transaction by simply swiping the user’s phone.
Entire global regions with developing financial industries have begun to adapt to modern day transaction softwares.
In Africa, citizens have turned to mobile payments ending dependence on cash. One of the biggest platforms M-pesa based in Nigeria; money transfers for businesses and transactions have seen the biggest surge after collaborating with the Central Bank in developing contactless methods. Transaction fees were dropped to encourage citizens to move to mobile platforms avoiding human contact. Kenya, with a population of 53 million, currently has 20.5 million users, making it the biggest mobile-adoptive center in the world. Senegal introduced their own national digital currency known as eCFA, the equivalent to CFA Franc Senegal’s currency coin. The West African Economic and Monetary Union (WAEMU) announced the introduction of this currency to Ivory Coast, Benin, Mali, Burkina Faso, Niger, Togo, and Guinea- Bissau controlled by the Central Bank. Additionally, Bitcoin has gained African spotlight to battle high inflation rates from failed Central Banks’ policies. Already, 725 mobile users have entered Bitcoin, improving financial stability and avoiding bureaucratic policies limiting monetary access. Other cryptocurrencies such as Luno Exchange/Geo Pay from South Africa, Abra from Morocco, and Bitmari from Zimbabwe have emerged into African markets since 2019 alone.
Currently, AliChat and WeChat Pay dominate China’s digital payment market, accounting for 25% of retail spending as reported by The Atlantic Council. AliPay is the biggest e-commerce platform in China, reporting more than 120,000 transactions per second (double the speed of Visa and MasterCard). Recently, the Chinese government implemented its own digital currency of the yuan. The new digital currency, DCEP (digital currency electronic payment), has overtaken traditional chinese transactions.
This started as a pilot program in four major chinese metropolises and grew steadily. The government owned Public Bank of China distributed DCEP to central banks, where the currency was then distributed among bank users through a digital wallet on their mobile phones. QR codes came with the digital wallets which were able to be scanned such as ApplePay or WeChatPay during transactions or money transfers by simply placing two phones together. The digital wallets have also been programmed to work independently from central banks. In 2018, 83% of payments were made through the digital platform compared 17% using bank or credit cards in China.
Ever since the recession of 2008, cash has been becoming digitized in America with the introduction of convenient mobile apps for purchases and money transfers. The recent technology introduced in the retail industry includes using the swipe of a card or tap of a phone. It is undeniable these new technologies have reshaped American culture and the global culture alike. The impact will be transformative, changing our daily lives permanently. What once seemed impossible is taking shape before our eyes.
Sources:
Huan Tran, Barbara C. Mathews “ China’s Digital Currency Electronic Payment Project reveals the good and bad of central bank digital currencies” Aug 24,2020
Lucas Johnson “ TSU Economists Discuss Nation’s Coin Shortage” Sept 10 2020
https://tntribune.com/tsu-economists-discuss-nations-coin-shortage/
The Economist “ Rich countries must start planning for a cashless future” Aug 1 2020
Billy Bambough “ Billionaire Twitter CEO Jack Dorsey Reveals Why Bitcoin is ‘The Best’ Internet Currency Sept 17 2020 https://www.forbes.com/sites/billybambrough/2020/09/17/billionaire-twitter-ceo-jack-dorsey-reveals-why-bitcoin-is-the-best-internet-currency/#4dcdbd09439e
Pavithra Rao, “ Africa could be the next frontier for cryptocurrency” July 2018
Jake Bright, “ Africa turns to mobile payments as a tool to curb Covid-19” March 25,2020
Tibi Puiu “ The pandemic may be accelerating a trend towards a cashless society”, August 27,2020 https://www.zmescience.com/science/pandemic-cashless-society-054353/
