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What would a cashless society be like?

Everything has a price, and so does the tech-based cashless society. Albeit convenient, it will be a world of hidden charges on our wallets, welfare and liberty.

Over the past few years there has been much hype surrounding the growth and implementation of cashless technologies. The changes are occurring at all levels around the world, starting with Japan’s recently set goal to increase cashless payments from 20% to a 40% market share by 2025 to a new cashless edition of the good old Monopoly game.

Cash is waning, but the faster we are moving in the direction of a cashless society, the more the dispute is heating up. Cashless society makes two basic promises: lower crime (any crime related to money, be it street robbery or black-market transactions) and convenience and smoothness of the world where you can buy anything by just swiping your phone or waving your bank card. For many this promises life without wallets, ATMs and coins jingling – a life safe and more efficient. “We want a cashless society”, says Bank of America CEO Brian Moynihan, referring to cashless transactions booming around the world.

It is undoubtedly convincing when we hear leading financiers welcoming the cash-free future. However, others, whose responsibilities include caring not about money, but about people, have a different opinion. Among them are US lawmakers, some of which have recently prohibited stores from going cashless. Why would they do it?

 

More weight on shoulders of the poor because of cashless

“A lot of these people [those who prefer cash] are the working poor who go to work every day, earn low wages, get their checks cashed at a check-cashing place, and need that cash to go buy groceries and food”, says New Jersey Assemblyman Paul Moriarty. Many of these people have low-paid jobs, which, nevertheless, are important. But is there a room for them in future?

In 2017 the FDIC (US Federal Deposit Insurance Agency) estimated that about 8.4 million US households (6.5% of all households) were unbanked. This number reaches 1.7 billion adults worldwide. What will we see if we translate these numbers to real life?

The non-cash society would cut these people out of the system. Doors of cash-free stores would be locked for them; housing or medicines would be unavailable. And even if they eventually received access to a cashless payment system, it wouldn’t mean that their situation would get better. “When you are on a shoestring budget, a little hiccup can lead to a snowball of overdraft fees,” says Kat Lilley, who, along with six children, aged 18 months to 12 years, was homeless from the summer of 2013 to early 2014.

And this “hiccup” can happen to anyone. Unbudgeted expenses, let alone impulsive purchases, can happen to everyone. When we hold physical cash, we clearly understand value of the money, know how full our wallets are, and what we can afford. However, when the money shapeshifts into numbers on the screen, we lose control over it. There are also overdraft facilities that push the subconscious boundaries of what is permitted and aggravate the situation even further. This can become a great danger to welfare and deepen the economic stratification in a world where only 33 percent of people are financially literate. Do we really have to force people with money problems to pay extra?

 

The price that everyone will pay

Everything has a price, and so does the tech-based cashless society. The poor pay this price almost immediately. However, people with a normal income also tip the cashless world, only just these tips are often subtle and hard to notice.

Cashless society proponents like to emphasize its cost effectiveness. Indeed, it will no longer be necessary to constantly print money, transport it and keep retail bank branches. However, none of them even touches upon the cost of maintaining a huge mass of technology behind the millions of daily cashless transactions around the world.

Global banking and financial smart card market was valued at $3,574.4 million in 2018, and is expected to more than double by 2026. Most of these numbers are associated with the need to maintain and constantly update the complex infrastructure on which the entire system depends. At the same time, technology has not yet reached the point where we can stop chasing perfection.

Who will pay for this race? Obviously, users of the banking system. A customer won’t notice any difference between paying by credit card or with cash as the price remains the same. However, the seller knows it because he pays commission to his bank. And this commission is already included in the price for the buyer.

Fintech companies are coming up with new products, each of which has practically nothing to do with cash. At that, all of them aim to get money from the user, directly or not. Cryptocurrency exchanges and wallets claim exchange fees, and banks charge for opening accounts. These seemingly small expenses accumulate and fall on the shoulders of each of us.

Coincidently, higher price doesn’t mean better safety or convenience. Total cost for cybercrime committed globally has added up to over $1 trillion in 2018, and software failure caused $1.7 trillion in financial losses in 2017. As long as you keep your money in a bank, and this bank has computers connected to the Internet (spoiler: every bank does), your savings are exposed to these threats, too.

 

Out of the frying pan, into the fire?

Cash-free society may resolve many issues, but it won’t be completely problem-free. There are many new difficulties for which we are obviously not ready. Is it worth changing bad to worse?

We can’t and shouldn’t put a spoke in the wheel of technological progress. But we can also make our future convenient for everyone by offering alternative choices. A tremendous part of our lives depends on money, and limited choice is not about inconvenience only — it is an assault on economic liberty. Do we really want to live in a future like this?

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