The Cashless Society Is Here
Electronic Money
Fewer people carry bank notes and coins than at any time since money was invented. The vast majority of transactions involving money are now handled electronically and the need for currency is vanishing.
Sorry old pal, we don't need you anymore.
Sweden Leads the Way
In 1976, Swedish pop group Abba wrote a song titled “Money, Money, Money.” Today, visitors to the Abba Museum in Stockholm can’t use coins or bank notes to pay the entrance fee—they only accept plastic or apps.
The New York Times reports that even the homeless street vendors “carry mobile credit-card readers [and] many of the country’s banks no longer accept or dispense cash.” And when the collection plate comes around at church, worshippers can donate with plastic.
Sweden has plunged further into a cashless society than any other nation. Gone are the days when people carried wads of bills in purses and wallets while coins jangled in pockets. Almost gone too are cheques mailed to businesses to settle accounts.
According to the European Payments Council, Swedes now use cash for just one percent of the country's financial transactions; essentially, it has become a cashless society.
The Upside of Cashless
Except for the elderly, most people easily adjust to electronic payments. The benefits are many:
- Every transaction creates a record so budgeting and recordkeeping are much simpler.
- Many people don’t keep receipts, but if there is a dispute over a purchase, the proof still exists.
- Money is saved because coins and bills don’t have to be manufactured.
- Banks will see lower costs by not having to count and secure physical money.
- Some people might not see the digital trail as an advantage if they try to cheat on their taxes.
- Counterfeiting will become a skill of the past, like stagecoach hold-ups.
- When consumers use credit or debit cards rather than cash, they tend to spend more. This, obviously, creates more economic activity and, therefore, more jobs. It also creates more debt.
Cash turns digital.
Crime and the Cashless Society
Time was when a man with a knife, gun, or even a large, threatening fist could take cash from people in the street. A study in the United States confirms that street robberies are down and that going cashless is the reason.
In the 1990s, governments started to deliver welfare benefits electronically. Poor people no longer had to cash their cheques and carry the money home. Bloomberg News says this meant “a big reduction of cash on the street and, as a result, significantly lower crime rates.”
The same rule applies to bank robbery. There’s no incentive to threaten a teller with a gun if there’s no cash in the building.
There’s another thing the criminals don’t like about going cashless—deals settled with bags of cash are hard to trace, while electronic payments leave a trail that law enforcement can follow.
Of course, the smarter crooks now carry out their robberies with computers, so there has been a massive increase in cyber crime. Hackers can and do get into the bank accounts of people and drain them, with devastating impacts.
And, here's a rather chilling report from the accounting firm Deloitte in February 2023:
“During the past 12 months, 34.5% of polled executives report that their organizations’ accounting and financial data was targeted by cyber adversaries. Within that group, 22 percent experienced at least one such cyber event and 12.5% experienced more than one.”
Tap and it's done.
Security Issues in a Cashless World
No computer system is completely error free. All networks have glitches and are prone to failure.
If money is to be carried as a digital signal on a smartphone, it has to be protected against theft. Experts say the best way to do this is by using biometrics. This means that the owner’s fingerprints, iris scan, or voice signature are needed to unlock the device.
If the smartphone is lost or stolen, it can’t be opened by anybody else. But, even biometrics are not 100 percent secure. A study in the United Kingdom found that biometric security systems can go wrong as much as one percent of the time.
That doesn’t sound like much, but about 24 million Canadians, for example, have smartphones. So 240,000 people can expect to have biometric identification failures every year.
There are other problems:
- If the phone dies, its owner is out of money.
- It’s easy for someone with ill intent to shut down a smartphone remotely.
- Hackers are certainly finding ways to get around digital wallet security.
- Biometric signatures have to be stored in central databases and criminals will be eager to access this information.
More Downsides to Cashless Transactions
While electronic cash makes it easier and quicker to handle money, it has the same impact on the abuse of money. When people don’t use physical cash they spend more, and this can and does cause debt problems.
Americans are now carrying almost $1 trillion (that's $1,000,000,000,000) in debt on their credit cards, with an average balance of more than $5,800. Annual interest on these debts exceeds 20 percent.
Paying cash carries no fees, but there are charges for using credit cards. Merchants must pay 1.5% or more to credit-card companies on the value of each transaction. Store owners, restaurants, and other businesses add this cost to their prices. In a cashless society, every transaction would have a processing cost. Some retailers now offer discounts to people paying cash so they can avoid bank fees.
There are privacy issues as well. When someone uses a credit card, the information about the activity is stored somewhere. Businesses mine this data and can and do draw up profiles of peoples’ spending habits.
Scores of retailers such as Target, Home Depot, and eBay have been the victims of cyberattacks by hackers. The personal records of hundreds of millions of customers have been accessed.
Whatever the benefits or drawbacks of a cashless society, it’s on its way; in many places, it's already here.
Cash not accepted here.
Bonus Factoids
- Bitcoins are a new sort of money that doesn’t actually exist; it’s called a cryptocurrency. The money is valuable simply because people believe it is valuable. Bitcoins, Etherium, and others can be used to buy things electronically. In that sense they are like regular currencies, such as dollars, pounds, and yen. However, cryptocurrencies are not controlled by any government or banks and many see them as highly risky.
- Conventional money exists in a form that can be touched. It is based on gold. In theory, a person can go to a bank, hand over a dollar, and get a dollar’s worth of gold in return. Bitcoins are not based on precious metals but on mathematics.
- Coindesk.com explains: “Around the world, people are using software programs that follow a mathematical formula to produce Bitcoins. The mathematical formula is freely available, so that anyone can check it.” This is called mining and involves solving complex mathematical sums.
- According to The British Broadcasting Corporation: “… the sums are becoming more and more difficult to stop too many Bitcoins being generated. If you started mining now it could be years before you got a single Bitcoin.”
- As of late April 2023, one Bitcoin was worth about $29,000.
- In 2009, Norwegian Kristoffer Koch bought 5,000 bitcoins at a cost of $27 total. He forgot about them until 2015 when he discovered they were worth $886,000. It was enough to buy an apartment in a sought-after area in Oslo. Those original Bitcoins would now be worth $145 million.
Bitcoin involves the use of blockchain technology, something that mere mortals such as writers cannot understand.
Sources
- “How a Cashless Society Could Embolden Big Brother.” Sarah Jeong, Atlantic, April 8, 2016.
- “In Sweden, a Cash-Free Future Nears.” Liz Alderman, New York Times, December 26, 2015.
- “Fighting Crime by Going Cashless.” Cass R. Sunstein, Bloomberg News, April 29, 2014
- “Pros & Cons of Biometrics and a Cashless Society.” David Gomez, Money Crashers, undated.
- “Guide: What is Bitcoin and how Does Bitcoin Work?” BBC, January 24, 2014.
- “The Pros and Cons of a Cashless Society.” Justin Pritchard, thebalancemoney.com, April 19, 2022.
- “Almost Half of Executives Expect a Rise in Cyber Events Targeting Accounting and Financial Data in Year Ahead.” Deloitte, February 8, 2023.
- “U.S. Credit Card Debt Jumps 18.5% and Hits a Record $930.6 Billion.” Jessica Dickler, CNBC, February 3, 2023.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2023 Rupert Taylor
