No... that’s not a typo. I do not mean that “cash is dead”. I mean the cashless dystopia that continues to be pushed by some analysts and those who will profit from a cash free society, is dead. Cashless society, we have long been told, is an eventuality that cannot be avoided or ignored. Let’s look at the facts behind this though...
There are several reasons that we should consider the much-vaunted cashless society already dead. Costs, security, reliability, acceptance, and capability are some of the reasons that cashless is DOA (dead on arrival).
In 2019 the Swedish central bank was so alarmed that they said, “If nothing is done, the general public may no longer have access to state issued money, which is the most secure form of money existing.” Since then the Riksbank has made the decision to open two additional cash centres, and the leading ATM deployer in Sweden is set to deploy new cash machines in 17 locations, with 10 of these being placed in brand new (link in Swedish) locations. Meanwhile on the 1st of January a new law requiring large banks to provide an “adequate level of cash services” came into effect.
Many have cited Sweden as the example of the closest any country has got to being cashless. Norway, Sweden’s Scandinavian neighbour is the real leader, with only 4% of transactions being completed using cash. As Norway moves to further explore the use of a central bank digital currency (CBDC), they have admitted that they need another 2 years to understand whether it is even feasible or necessary to issue a digital currency.
Why do these developments in Sweden matter? Well for a society that is often linked to cashless, they are making a great effort to ensure cash is protected. The reason for the protection of cash is, essentially, that cash provides protection for everyone in society.
The very fact that we have not seen the full implementation of CBDC in many developed economies begs the question: are they needed at all? What problem does a CBDC solve for the most developed financial systems?
The Central Bank of the Bahamas certainly solved a problem when launching the Sand Dollar after Hurricane Dorian. Many of their citizens were left with no access to cash as banks had been destroyed. To allow the rebuilding of their lives, a digital currency that’s value is backed by the government, was a logical step to keep their population safe. Since then cash has come back into use, and the Sand Dollar is now another payment choice, which also acts as a back in case of such disaster in the future.
In the UK, as lockdown has begun to lift, restaurants and bar owners have warned the public to bring cash with them. Many of the restrictions that are still in place mean that patrons of these places must dine and drink outdoors. The warning has been made that contactless and other forms of payments may not work outside because of poor connections.
There are, sadly, more serious risks than not being able to pay for a burger and a beer if cash is no longer a payment option. Discrimination or exclusion from participating in society is still a very real risk in many countries across the globe. An individual can’t be excluded from using cash, but the ability to make an electronic payment can be turned off with a switch. This leads us to another danger, that of the risk of cyber-attacks. If an attack on the infrastructure were to take place, it could leave both the citizens and the economy of these countries in jeopardy.
Cash also deters those who provide alternative payment methods from raising the fees they charge. Consumers are protected from policies such as negative interest rates so long as physical cash is available and can be readily withdrawn from an account. Without cash, both scenarios could quickly become a reality, bringing with them negative consequences for consumers.
The cashless society we have been conditioned to expect is dead. The reasons for this are numerous, but above all, consumer choice and security remain paramount. Those nations that have sped into cashless initiatives are looking at ways to provide more security for their citizens. The security measures they are embracing are the provision of cash. Cashless is dead, a less-cash future where cash and alternative payment methods co-exist is what we should expect