Cashless society

A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.^[1] Cashless societies have existed, based on barter and other methods of exchange, and cashless transactions have also become possible using digital currencies such as bitcoin. However this article discusses and focuses on the term "cashless society" in the sense of a move towards, and implications of, a society where cash is replaced by its digital equivalent - in other words, legal tender (money) exists, is recorded, and is exchanged only in electronic digital form.

Such a concept has been discussed widely, particularly because the world is experiencing a rapid and increasing use of digital methods of recording, managing, and exchanging money in commerce, investment and daily life in many parts of the world, and transactions which would historically have been undertaken with cash are often now undertaken electronically.^[2][3] Some countries now set limits on transactions and transaction values for which non-electronic payment may be legally used.^[4]

The trend towards use of non-cash transactions and settlement began in daily life during the 1990s, when electronic banking became popular. By the 2010s digital payment methods were widespread in many countries, with examples including intermediaries such as Paypal, digital wallet systems operated by companies like Apple, contactless and NFC payments by electronic card or smartphone, and electronic bills and banking, all in widespread use.^[3] By the 2010s cash had become actively disfavored in some kinds of transaction which would historically have been very ordinary to pay with physical tender, and larger cash amounts were in some situations treated with suspicion, due to its versatility and ease of use in money laundering and financing of terrorism, and actively prohibited by some suppliers and retailers,^[5] to the point of coining the expression of a "war on cash".^[6] By 2016 in the UK it is now reported that 1 in 7 people no longer carries or use cash.^[7]

It has also been described as a highly controversial and at times a "sinister" or "creepy" move and as a concept connected to negative interest rates, banking transaction tax and a global taxation regime,^[8][9][10] since such a move would be both potentially useful and potentially socially dangerous, with widespread implications for society. It has potential to be very helpful for central governments and economies, in the context of global negative inflation and quantative easing, and central control of the money supply. However a loss of cash also transfers complete control of transactions, interest, and individual use of money, and information about these, to the nation state and third party providers, since the individual cannot avoid their money being held in an external system capable of regulation and control. Many countries have regulated, restricted, or banned private digital currencies such as Bitcoin. While helpful to the global economy and to the fight against crime and terrorism,^[11] many concerns have been raised over "dangerous" unintended consequences.^[12] It would mean that negative interest rates can be fully enforced, and money could be controlled in great detail. For example, some kinds of money might be set to "expire" and be worthless if not spent in specific ways or by specific times, or to devalue gradually. It also makes individual savings, and information about individual incomes and transactions, accessible to any party able to access the records - either legitimately (police and tax related) or not (hackers and persons with access to the relevant data), and in this way, it facilitates population surveillance.^[13] It also means that groups, individuals and causes could be deprived of cash by the simple expedient of preventing their access to cashless transaction media.^[8]

Amount of cash in circulation

Even though cashless society is widely discussed most countries are increasing their currency supply. The table below is taken from the red books for members of the Bank for International Settlements, which includes most of the major fiat currencies of the world. Exceptions are South Africa whose supply of banknotes fluctuates wildly compared to most nations and Sweden which is drastically reducing its currency supply since 2007,^[15] The values in the table are "per capita" so they already are scaled to population changes. But even the smallest increases of 3% per year are much higher than any possible GDP growth.

Cashless transactions vs reduced cash

A common measure of how close to a "cashless society" a country is becoming is some measure of the number of cashless payments or person to person transactions are done in that country. For instance the Nordic countries conduct more cashless transactions than most Europeans.

Across the 33 countries covered in the European Payment Cards Yearbook 2015-16, the average number of card payments per capita per year is 88.4. In comparison, the average Dane makes 268.6 card payments each year, the average Finn 243.6, the average Icelander 375.5, the average Norwegian 353.7 and the average Swede 270.2. This makes card payments in the Nordics two-and a-half to four times higher than the European average. ^[16]

But cash can also function as a "store of value" just like commodities like diamonds, gold, silver, and platinum or real estate and antiques. Levels of cash in circulation can widely differ among two countries with similar measure of cashless transactions. For example, Denmark has more than double the amount of cash in circulation as Sweden and a considerably higher percent in the largest denomination banknote, the 1000kr bill.

South Korea has made the decision to end coins as legal tender by 2020. So if you conduct an all cash transaction you must forego any change in amounts of less than the value of the smallest banknote, ₩1000, or slightly less than US$1. This change will undoubtedly greatly increase the number of electronic transactions in the country, but the wide circulation of the ₩50,000 bill, the largest denomination banknote, will mean that citizens can still easily use cash as a convenient store of value.

The largest denomination banknote of any currency is often associated with criminal activity, counterfeiting, or tax evasion. The United Kingdom declared only banknotes of 5 pounds or less were legal tender after WWII because of fear of Nazi counterfeiting. In 1969 in the USA the government declared that banknotes of value over $100 would remain legal tender, but any notes in government hands would be destroyed and that no new notes of those denominations would be printed in the future. Such notes were last printed in the USA in 1945. Canada did the same thing with the CAD$1000 banknote in the year 2000. Sweden printed 10,000kr banknotes in 1939 and 1958 but declared them invalid after 31 December 1991. Singapore has recently announced that they would no longer produce the SGD$10,000 banknote. The Euro Area has announced that the €500 denomination banknote would not be included in the next series of banknotes. The ECB has not announced if it intends to reduce the amount of cash in circulation, or to simply replace that value with smaller denominations.

See also

• Global economy
• Digital currency
• Legal tender
• Mass surveillance
• Cheque § Declining use

References