The Shift to a Cashless Society is Snowballing
JEFF DESJARDINS on May 17, 2016 at 12:15 pm
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The Shift to a Cashless Society is Snowballing
Love it or hate it, cash is playing an increasingly less important role in society.
In some ways this is great news for consumers. The rise of mobile and electronic payments means faster, convenient, and more efficient purchases in most instances. New technologies are being built and improved to facilitate these transactions, and improving security is also a priority for many payment providers.
However, there is also a darker side in the shift to a cashless society. Governments and central banks have a different rationale behind the elimination of cash transactions, and as a result, the so-called “war on cash” is on.
ON THE PATH TO A CASHLESS SOCIETY
The Federal Reserve estimates that there will be $616.9 billion in cashless transactions in 2016. That’s up from around $60 billion in 2010.
Despite the magnitude of this overall shift, what is happening from country to country varies quite considerably. Consider the contradicting evidence between Sweden and Germany.
In Sweden, about 59% of all consumer transactions are cashless, and hard currency makes up just 2% of the economy. Yet, across the Baltic Sea, Germans are far bigger proponents of modern cash. This should not be too surprising, considering that the German words for “debt” and “guilt” are the exact same.
Within Germany, only 33% of consumer transactions are cashless, and there are only 0.06 credit cards in existence per person.
THE DARK SIDE OF CASHLESS
The shift to a cashless society is even gaining momentum in Germany, but it is not because of the willing adoption from the general public. According to Handelsblatt, a leading German business newspaper, a proposal to eliminate the €500 note while capping all cash transactions at €5,000 was made in February by the junior partner of the coalition government.
Governments have been increasingly pushing for a cashless society. Ostensibly, by having a paper trail for all transactions, such a move would decrease crime, money laundering, and tax evasion. France’s finance minister recently stated that he would “fight against the use of cash and anonymity in the French economy” in order to prevent terrorism and other threats. Meanwhile, former Secretary of the Treasury and economist Larry Summers has called for scrapping the U.S. $100 bill – the most widely used currency note in the world.
“SMOOTHER” AGGREGATE DEMAND?
It’s not simply an argument of the above government rationale versus that of privacy and anonymity. Perhaps the least talked-about implication of a cashless society is the way that it could potentially empower central banking to have more ammunition in “smoothing” out the way people save and spend money.
By eliminating the prospect of cash savings, monetary policy options like negative interest rates would be much more effective if implemented. All money would presumably be stored under the same banking system umbrella, and even the most prudent savers could be taxed with negative rates to encourage consumer spending.
While there are certainly benefits to using digital payments, our view is that going digital should be an individual consumer choice that can be based on personal benefits and drawbacks. People should have the voluntary choice of going plastic or using apps for payment, but they shouldn’t be pushed into either option unwillingly.
Forced banishment of cash is a completely different thing, and we should be increasingly wary and suspicious of the real rationale behind such a scheme.
http://www.visualcapitalist.com/shift-cashless-society-snowballing/
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How will the homeless survive in a cashless society?
Toby Meyjes for Metro.co.uk Friday 10 Jun 2016 4:47 pm
In less than ten years time it is estimated that only one in four payments will made by cash.
Although it might feel to some like we have reached that point already, it will mark a dramatic shift from the current status quo when around half of all payments are made by notes or coins.
But while the shift to a cash free existence might feel like an inevitability, there are people on the fringes of society who are so reliant on it, that a life without it almost seems like an impossibility.
Yet, there is a growing awareness amongst the homeless and those that support them that action needs to be taken now so they are ready when the time comes.
For those with no fixed abode there are a huge array of different hurdles that need to be jumped in order for them live a life not wholly reliant on cash.
Take setting up a bank account, for instance.
It seems tough enough when you have a permanent address, proof of other credit facilities and ID.
But when you don’t it becomes a whole lot harder.
And that is why charities like St Mungo’s and the Big Issue Foundation (the charitable arm of the Big Issue) are working hard to help as many people as possible gain access to the things we take for granted.
Around one in four of St Mungo’s clients dont have a bank account, many having only dealt with cash before.
read more here:
http://metro.co.uk/2016/06/10/how-will-the-homeless-survive-in-a-cashless-society-5936662/
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Sweden leads the race to become cashless society
Swedes are blazing a trail in Europe, with banks, buses, street vendors and even churches expecting plastic or virtual payment
Jon Henley
Saturday 4 June 2016 11.00 EDT
In 1661, Stockholms Banco, the precursor to the Swedish central bank, issued Europe’s first banknotes, on thick watermarked paper bearing the bank’s seal and eight handwritten signatures.
Last year – as Britain did last week – Sweden launched a new series of notes, cheery affairs featuring 20th-century Swedish cultural giants such as Astrid Lindgren, the creator of Pippi Longstocking, Greta Garbo and filmmaker Ingmar Bergman. But like its Nordic neighbours Norway, Denmark and Finland, Sweden is fast becoming an almost entirely cashless society.
“I don’t use cash any more, for anything,” said Louise Henriksson, 26, a teaching assistant. “You just don’t need it. Shops don’t want it; lots of banks don’t even have it. Even for a candy bar or a paper, you use a card or phone.”
Swedish buses have not taken cash for years, it is impossible to buy a ticket on the Stockholm metro with cash, retailers are legally entitled to refuse coins and notes, and street vendors – and even churches – increasingly prefer card or phone payments.
According to central bank the Riksbank, cash transactions made up barely 2% of the value of all payments made in Sweden last year – a figure some see dropping to 0.5% by 2020. In shops, cash is now used for barely 20% of transactions, half the number five years ago, and way below the global average of 75%.
And astonishingly, about 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits – and many, especially in rural areas, no longer have ATMs. Circulation of Swedish krona has fallen from around 106bn in 2009 to 80bn last year.
“I think, in practice, Sweden will pretty much be a cashless society within about five years,” said Niklas Arvidsson, an associate professor specialising in payment systems innovation at Stockholm’s Royal Institute of Technology (KTH).
more here:
https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-europe
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A last hurrah for banknotes as UK switches to mobile and card payment
With the launch of the new plastic fiver, Patrick Collinson looks at changing payment methods and asks if Britain is ready to become a cashless society
Patrick Collinson
Saturday 4 June 2016 11.00 EDT
Winston Churchill gazes out from one side of the new £5 plastic note, the Queen from the other. But the chances of Prince William appearing on a banknote are looking slim. More than 300 years after the first Bank of England banknotes appeared, the new plastic ones could perhaps be the last.
Stop a young adult on a British high street and you will find that one in eight has not a penny in cash on them. Even the ones who do are likely to have no more than £20. For them, the cashless society is not tomorrow’s world, but today’s: a contactless card flashed to enter the tube; a smartphone tapped at Pret for a lunchtime sandwich; another card waved at a Tesco Express on the way home; the cab journey back from the pub processed by Uber.
Who needs banknotes? According to a survey by payments company Worldpay, six out of 10 young adults would prefer not to use cash at all.
When Transport for London banned cash on the buses in mid-2014, it was greeted with a backlash from some quarters; “passenger fury” said one headline, “ban hits the vulnerable” was another. Yet, two years on, behaviour has adjusted. TfL says it has saved £24m in cash-handling costs, and queues have improved.
The cashless society has been long mooted, but only now is it arriving. A 1996 trial in Swindon to encourage the town’s 150,000-plus people to use “electronic purses” flopped through lack of interest. But contactless cards – there are now more than 36m in Britain’s wallets – and more recently Apple Pay and Android Pay, have dramatically accelerated the switch away from cash.
Crucially, it has been the readiness of big retailers to accept “tap-and-go” technology for small-value items, with Tesco and TfL at the forefront, that has spurred the revolution. Monthly spending on contactless cards is now running at around £1.5bn, or three times the level of just a year ago.
Technology experts see contactless payment as just a stepping stone to the cashless society, with smartphones becoming the main way to pay. Since the launch of Apple Pay in July last year, 8 million journeys on London Underground have been paid for by iPhone users tapping their handset at entry and exit points. Meanwhile, Google’s rival, Android Pay, was launched last month. Unlike contactless cards, where spending is capped at £30, Apple and Android users can spend more freely, although they may have to authenticate with a Pin or fingerprint.
more here:
https://www.theguardian.com/business/2016/jun/04/uk-switch-to-cashless-society-contactless-payment
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The Countries That Would Profit Most from a Cashless World
Bhaskar ChakravortiRavi Shankar ChaturvediBenjamin Mazzotta
MAY 31, 2016
It’s been nearly 300 years since paper money became accepted as legal tender. While much has changed about how we make, sell, and buy goods, cash has stuck around. It’s been only recently that the road to a wider cashless society has started to really take shape. From apps such as PayPal, Venmo, or Square Cash to mobile payment platforms like Kenya’s mPesa, Bangladesh’s bKash, or Apple Pay, there are signs that cash is following the path of other “information goods,” such as printed photographs, cassette tapes, and DVDs in being replaced by digital alternatives.
Or as Samantha Bee, host of the show Full Frontal, put it recently: “I’d like to talk a little bit about money. For those of you who haven’t heard of it, it’s like Venmo for old people.”
But all of this may still leave us with a question – if cash isn’t inherently broken, why fix it?
Policy makers and economists, such as Harvard’s Ken Rogoff, have made elegant arguments for the benefits of a cashless society. Economic uncertainty around the globe has raised concerns that consumers could take cash out of banks – especially in negative interest rate envrionments — and hoard it. Eliminating cash is one way to reduce that risk. Denmark, Sweden, and Norway are already considering it, while the European Central Bank is considering getting rid of large-denomination bills.
Cash, according to a recent MasterCard study, accounts for nearly 85% of global consumer transactions. Cash has stubbornly resisted going the way of digital extinction. Paper currency is ubiquitous. It is also untraceable and universally accepted (except in some circumstances, usually involving very large payments). For many users, cash equates to a sense of security and for many it is a sense of independence from government oversight. The rise of cyber-crime and growing concerns about the ability of public agencies to look through digital records will add to the unwillingness among many to let go of paper money.
The migration to a cashless society is far from being either uniform or universal. Whereas most Swedes are embracing a cashless future, along with an unlikely peer group, that includes both Somaliland and South Korea, some of Sweden’s neighbors, in response to EU’s increasing regulations on restricting cash usage, are demanding a “constitutional right to pay in cash” fueled by concerns around negative interest rates and a perceived loss of privacy that comes with digital money.
more here:
https://hbr.org/2016/05/the-countries-that-would-profit-most-from-a-cashless-world
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-Spyda
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