I’ve noticed in the past few weeks reports that we (or at least some of us) may be moving rapidly towards a cashless society. Don’t panic: the intention is not to do without money, far from it. Sweden’s plans are probably the most notable, with a project to do away with all bank notes and coins. Sweden is a very sophisticated and technology-savvy society, but that would not make it immune from problems. Nigeria has similar plans, but based on limiting daily cash withdrawals. M-Pesa systems–branchless banking–which Kenya and some other countries seem to have operated successfully is a great step forward, using mobile phones.
I’m not new to cashless transactions; in fact, I often operate for weeks without using cash at all. I pay bills of many forms of many forms either using credit cards or some online option. I have had the same wad of bills in my wallet for months, but do not reach for them as my first option when I am out and about. However, I would feel a little uncomfortable if I did not have them. Why? I only need to meet one person who needs to be paid who cannot accept other means of payment for me to be totally at the behest of that person’s goodwill and trust. I have had that situation occur many times in the past, but would not like to feel that it had to be that way. I’ve also lived in many places where no access to banking existed–NONE. If cash did not enter the transaction, then I might have been lucky enough to arrange a barter exchange. That is truly cumbersome, and I cannot rely on having the right goods or service that someone else wants to get my transaction completed. That’s one of the great benefits of money, and especially cash in many places: it’s clear what value you are exchanging. I’ve also lived in places where the value of money was so low that the amount of cash needed for a day’s shopping had to be carried in a very large bag, and that was using the largest denomination bills available. That is also very cumbersome and risky. I remember one horrific story of man whose stash of cash, which he has just obtained from the central bank, was in his car trunk. He got into a crash, and his car caught on fire and with it all of his cash. He went to the central bank asking if he could be reimbursed: the possibility was considered, if he could cite the serial number of the notes that were burned. 🙂
If moves towards cashlessness were to become more widespread, an immediate concern would be for those who do not have bank (or credit union or similar) accounts, and receive payments in cash and hold their wealth in cash. Another concern would be for those businesses whose turnover really cannot work well without cash. I cannot be convinced (yet) that you can go into a street market and expect to get very far without any cash. If children are involved, are you going to trust them to do all of their buying on trust, with a credit card or equivalent? Despite the fact that the world has become more mobile, it’s one thing to use your phone to babble, prattle and text, and quite another to start making many, most or all of your financial transactions by using a phone. That said, the existence of such options have allowed people who live in countries that have limited banking system to leapfrog over that problem and make sizeable and significant transactions, including with overseas customers. Yes, it’s really cool to think of gold or diamond miners in the far reaches of a country that has limited banking being able to sell their output to buyers, who may be able to complete deals on their cell phones. Sure, the big mine owner or operator may be comfortable knowing that his account in Antwerp or Zurich is going to be flashing a bigger figures in seconds, but is he going then send a text to the panhandler up to his or her knees in water to confirm that the day’s pay is on the way? I wonder.
I remain to be convinced. Many air travellers will be familiar with airlines now taking only credit cards for the ‘meals’ that are offered. Many people do not buy. Why? Many are still not comfortable that such transactions are safe–not in general, but in the particular space (in this case, in the air). I pause (honestly) as an NPR report tells of another security breach as hackers get details of credit card accounts.
I also know the inconvenience that is created rapidly when trying to make electronic financial transactions but electricity supplies or Internet connections are broken, or merely hang up. Nothing much happens.
Not everyone wants their activities to be known by anyone other than the other party. Credit cards do not offer that, nor do mobile phone transactions (which may have the added tag of identifying exactly where the transactions take place). Cash is wonderfully anonymous in many ways. Underground economic activities thrive not least because they are subject to less scrutiny, often to the mutual benefit of those concerned (but often to the mutual loss of governments or bureaucracies). Cash helps a lot in such spheres. If we were all open and had nothing to hide (and that need not be for negative reasons–think of that surprise Tiffany gift ;-)) then cashlessness may spread faster. But…
Fear, not efficiency, may determine whether the move towards cashlessness picks up steam. But, fear aside, what do we do when we want to be spontaneously generous? I can imagine the conversation with a homeless person or whomever (no value judgements) asking for money, and I pull out my credit card or cell phone. You can create your own conversation to finish that thought.