Michiel Mulders

@michielmulders

The future of cash money— Is it obsolete?

Licensed stock photo by Jeler.

Opinions are divided about the benefits of a cashless society. Let’s first take a look at the cons of a fully-digital economy. According to David Reid, a cashless society could handicap those who are poor or in debt, disabled people, rural families and anyone who may be at risk of having their finances controlled by an abuser. The “Access to Cash” study which published this information also said that many people are struggling to participate in our digital society.

Technology moves fast, especially for our older generation who are not accustomed to technology. For them, it feels like losing control over their hard-earned cash. Besides that, many elderly people just don’t have access to the internet or smartphones. To give an example, my grandmother still saves every bank extract on paper to have that physical proof of what happened with her money.

At last, security will remain a big hurdle to take. Do we want to rely completely on automated systems that determine how much money we own? What happens if someone is able to pull off a successful cyber attack? This would be a catastrophic failure which would disrupt the economy severely!

What happens if someone is able to pull off a successful cyber attack?

On the other side, we can find a strong trend towards a cashless society. On June 29 (2018), The Guardian published an article with the title “Hundreds of cash machines close as UK turns to contactless payments”. According to the article, cash machines are closing at a rate of 300 every month. Contactless payments are taking over, especially for smaller payments as they do not require you to input your PIN code.

Hundreds of cash machines close as UK turns to contactless payments.

Physical cash is still deemed to be anonymous and untraceable, allowing it to play a large role in crime, including bribery, tax evasion, counterfeiting, corruption, …

Added to that, digital payments make it harder to evade taxes and hide black market transactions. Technologies like retina-scanning and face and voice-recognition allow users to better protect their online cash.

In China, we can already find peer to peer, feeless, instant transaction via the famous chat application WeChat. WeChat Pay is an all in one app that allows people to charge it with money and you can pay everywhere with it via scanning a QR code. It feels a bit like Bitcoin, but without the whole mining setup and being more efficient.

We can find other startups trying to innovate the Western world into this idea of a cashless society. Looking at how China handles money, it feels like Europe and other regions are 10 years behind. A startup called Cashfree is set to take the fintech world by storm. Their Cashfree app wants to simplify the lives of everyone in a local community by eliminating the need for cash and the hassle of dealing with third party service providers and card terminals.

In fact, it’s very similar to what WeChat Pay offers as it also works with QR codes. When shoppers buy something in a local store, it allows the shop owner to directly retrieve funds from the users’ bank account instead of using a virtual currency as WeChat Pay does. This is instant, feeless, and also eliminates the middlemen. Besides that, the app allows for the integration of crypto payments for local shoppers.

Currently, Cashfree has received a European payment license in Belgium and has 4000 active users in Ghent with over 300 registered merchants. It’s definitely a project to keep an eye on!

Other products like crypto credit cards can be found that try to incorporate both crypto and fiat into people’s lives as one mean of payment. TenX is the first and most famous Visa card. Quickly after, crypto credit cards started to pop up like the one from Monaco on the Ethereum blockchain.

However, cryptocurrency-backed debit cards issued by the Visa were dropped from the network at the beginning of 2018 as Visa said the issuer in Europe violated their operating regulations. It is not yet clear if we will see a larger adoption of crypto-backed credit cards.

Nonetheless, China is certainly a step ahead in the run for a cashless society. Whereas other countries are doing a great job towards the cashless idea of living. In Sweden, for example, barely 1% of the value of payments is made using coins and notes. A recent study shows that 20% of the Swedes claimed they didn’t withdraw any cash during the last year.

The value of Swedish cash in circulation over the last 25 years. Image: Bloomberg.

In the end, there are certainly risks involved when moving to a cashless society, however, it seems to be a plausible idea for the future. It feels like a natural thing to happen as part of the digitalization wave. On the other side, we can also find countries that don’t like the idea of digital money. The average German carries on average more than 100 Euro in his wallet as most restaurants and shops only accept cash payments. Let’s see what the future will bring!

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