What economic impact could a cashless economy yield to our society, as a whole?
Despite what online payment solutions sellers and banks are claiming, a cashless economy would be neither cheaper nor safer, except for them. Last year, electronic fund transfer professionals launched a program to entice shopkeepers to give up on cash completely. Their argument was that cash was dangerous to hold, expensive to manage, and lengthy to count. However, they failed to remind their customers that they collect a percentage on every non-cash payment. Pushing companies to go all-virtual and refuse cash is an obvious way to expand their sales base. Banks discretely skim off fees for every payment instrument, rent out or sell debit card terminals, and take a percentage in every operation. Whereas with cash, there are no hidden costs.
How do you explain the support given by governments around the world to the campaigners for a cashless society?
Some countries along with the bank industry have common interests in wishing cash would simply disappear. If all payments were made through the banking systems or with a payment solution provider, servers would keep a log of every transaction you ever made. Where you were, what you bought, what time it was, how much it cost, which account it came out of, from whom you bought it, etc. It would give States, corporations and banks an unprecedented level of power, because they would be able to track every single one of us through our purchases and transportation payments. Do we really want a society where States and corporations have knowledge of everything we do?
Isn’t it true that States claim cash is used by criminals and tax evaders?
It is, but only to some extent. First of all, a large amount of crime and tax evasion doesn’t involve cash, and if cash were eliminated criminals would easily find a way around the problem and continue their dealings. As the most recent tax evasion scandals have shown, large currency transfers through borders are clearly a thing of the past. It is just too bulky and too risky to carry big bags of banknotes through customs. Most tax “optimizing” systems now use the international banking system through complex financial setups based on dummy companies, for example. Moreover, cash is an option used by virtually every single honest citizen around the world. Should the liberty of law-abiding people be curtailed because a few people make poor use of that freedom?
India’s chaotic move toward a cashless economy recently raised the question of acceptability. Yet modern, global economies seem ready for such a transition…
That’s what most people thought for some time. Some Scandinavian countries, and others around the world, indeed, are pushing cash towards the way out. Because so many new payment methods have arrived into our daily lives, it has somewhat reduced the use we make of cash - though it remains one of the main payment method, especially for day-to-day operations. However, a recent report from the Bank for International Settlements (BIS) revealed that the number of notes and coins has risen in most of the rest of the developed world since 2008. Even in Sweden the central bank argues that the country has gone cashless too far and urges lawmakers to impose measures to safeguard the population’s access to cash. And, last year, India’s prime minister decided, overnight, to withdraw 90% of the nation’s cash from circulating in the country. The results were quite devastating, according to economists and social observers. Presently, the few countries that claimed yesterday to be in the vanguard of getting rid of cash now try to go backward.
Would any segments of society be hit harder than others if we became cashless?
The poor and the elderly would bear the brunt of such a reform. The problem with a cashless economy is that it makes the rich more comfortable but makes the vulnerable even more so. When cash is gone, how are the people who have no phones or bank accounts supposed to get by? The elderly are often uneasy with computers, which belong to another generation, and are used to carrying out their business with cash. As for the under-privileged, it is a little-known fact that many of them do not have bank accounts. The latest studies estimate that nearly 40 percent of the global population is unbanked. If you kill off cash, what is to become of them?
Is cash the only way to escape control from corporations and banks, then?
If a society wanted to evade state control completely, it would need to revert back to bartering. Without going to such extremes, several Western countries still rely on cash because it provides the best compromise - the Germans, with their solid historical experience, are among the biggest cash users in Europe. Cash operations are the only type to include only two parties: buyer and seller. In every other type of transaction, like wire transfer, check, credit or debit card, or phone payments, at least a discrete third party is always involved, leaving an electronic trail and giving the citizen the subtle feeling that he is being watched - something so-called developed societies are quickly getting fed up with, hence their return to cash. I am betting my future, and my company’s future, on the people’s appetite for freedom.
Despite what online payment solutions sellers and banks are claiming, a cashless economy would be neither cheaper nor safer, except for them. Last year, electronic fund transfer professionals launched a program to entice shopkeepers to give up on cash completely. Their argument was that cash was dangerous to hold, expensive to manage, and lengthy to count. However, they failed to remind their customers that they collect a percentage on every non-cash payment. Pushing companies to go all-virtual and refuse cash is an obvious way to expand their sales base. Banks discretely skim off fees for every payment instrument, rent out or sell debit card terminals, and take a percentage in every operation. Whereas with cash, there are no hidden costs.
How do you explain the support given by governments around the world to the campaigners for a cashless society?
Some countries along with the bank industry have common interests in wishing cash would simply disappear. If all payments were made through the banking systems or with a payment solution provider, servers would keep a log of every transaction you ever made. Where you were, what you bought, what time it was, how much it cost, which account it came out of, from whom you bought it, etc. It would give States, corporations and banks an unprecedented level of power, because they would be able to track every single one of us through our purchases and transportation payments. Do we really want a society where States and corporations have knowledge of everything we do?
Isn’t it true that States claim cash is used by criminals and tax evaders?
It is, but only to some extent. First of all, a large amount of crime and tax evasion doesn’t involve cash, and if cash were eliminated criminals would easily find a way around the problem and continue their dealings. As the most recent tax evasion scandals have shown, large currency transfers through borders are clearly a thing of the past. It is just too bulky and too risky to carry big bags of banknotes through customs. Most tax “optimizing” systems now use the international banking system through complex financial setups based on dummy companies, for example. Moreover, cash is an option used by virtually every single honest citizen around the world. Should the liberty of law-abiding people be curtailed because a few people make poor use of that freedom?
India’s chaotic move toward a cashless economy recently raised the question of acceptability. Yet modern, global economies seem ready for such a transition…
That’s what most people thought for some time. Some Scandinavian countries, and others around the world, indeed, are pushing cash towards the way out. Because so many new payment methods have arrived into our daily lives, it has somewhat reduced the use we make of cash - though it remains one of the main payment method, especially for day-to-day operations. However, a recent report from the Bank for International Settlements (BIS) revealed that the number of notes and coins has risen in most of the rest of the developed world since 2008. Even in Sweden the central bank argues that the country has gone cashless too far and urges lawmakers to impose measures to safeguard the population’s access to cash. And, last year, India’s prime minister decided, overnight, to withdraw 90% of the nation’s cash from circulating in the country. The results were quite devastating, according to economists and social observers. Presently, the few countries that claimed yesterday to be in the vanguard of getting rid of cash now try to go backward.
Would any segments of society be hit harder than others if we became cashless?
The poor and the elderly would bear the brunt of such a reform. The problem with a cashless economy is that it makes the rich more comfortable but makes the vulnerable even more so. When cash is gone, how are the people who have no phones or bank accounts supposed to get by? The elderly are often uneasy with computers, which belong to another generation, and are used to carrying out their business with cash. As for the under-privileged, it is a little-known fact that many of them do not have bank accounts. The latest studies estimate that nearly 40 percent of the global population is unbanked. If you kill off cash, what is to become of them?
Is cash the only way to escape control from corporations and banks, then?
If a society wanted to evade state control completely, it would need to revert back to bartering. Without going to such extremes, several Western countries still rely on cash because it provides the best compromise - the Germans, with their solid historical experience, are among the biggest cash users in Europe. Cash operations are the only type to include only two parties: buyer and seller. In every other type of transaction, like wire transfer, check, credit or debit card, or phone payments, at least a discrete third party is always involved, leaving an electronic trail and giving the citizen the subtle feeling that he is being watched - something so-called developed societies are quickly getting fed up with, hence their return to cash. I am betting my future, and my company’s future, on the people’s appetite for freedom.
Thomas Savare, Oberthur Fiduciaire CEO