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Given that we can summon food and drivers to our door with a couple of swipes, going cashless seems like the inevitable next step in this tech-dependant world. But making all of the world’s bank notes disappear is no easy task.
Consumers around the world are reducing the amount of cash they carry. This year for the first time card payments will overtake cash globally. European countries such as Belgium, where 93% of transactions are cashless, are leading the way. But Australia isn’t far behind, with cash payments falling by a third in the past six years. And as cashless payment systems such as Apple Pay become common, it seems we’ll increasingly be buying our wares with phones instead of plastic, too.
Banks are a major force pushing for society to remove physical money from circulation. Going cashless has obvious security benefits, as a would-be bank robber found one morning when he burst into Stockholm’s Enskilda Bank, only to be informed that there was nothing to steal. This was a ‘cash-free’ location, the staff told him.
According to Deakin University’s Professor Pasquale Sgro, ‘This kind of security is revolutionary, and not just for banks.’ He explains the ‘black economy’, made up of crime, drug money, tax evasion and undocumented work, would be disrupted by the removal of physical notes. ‘By removing cash and requiring online transactions, you remove the illegal money funding these elements and keep records of online data,’ he explains.
Governments that try to revise the way a currency functions face a daunting task. Burma in 1987, the former Soviet Union in 1991 and North Korea in 2009 all tried to change currency systems, and in all cases hunger, riot and violence were the outcomes. ‘As India found out this year, the speedy transition away from cash disproportionately affected the poorest and the elderly,’ Prof. Sgro says, referring to India’s attempt to remove its two largest bank notes. The government withdrew 500 and 1000 rupee notes from circulation to combat corruption and counterfeit currency in India, a country with a cash-focused economy. The aim was for the population to turn in their two largest notes to a bank and exchange them for new notes, flushing out illegality. But rather than singling out those driven by greed, the reduction of cash in circulation hit honest people who relied on it most.
Given the social and economic challenges of converting to a cashless society, Prof. Sgro says it mightn’t be a reality in Australia any time soon. ‘Giving up a few coins in return for allowing governments to track our every purchase and move is scary,’ he points out. Paul Harrison, senior lecturer in Deakin University’s School of Business agrees. He’s analysed the negative impacts of cards, and other cashless payment options, on our ability to control our finances.
‘When we buy something with cash, we know straight away how much that thing is going to cost. We also know that we no longer have that amount of money in our wallet or purse. But when we use a plastic card, we are handing over something quite abstract,’ he writes in The Conversation. Prof. Sgro adds, ‘This loss of control over purchasing power, privacy and data is no convenience at all.’
Interested in the business of cash? Explore our range of business courses at Deakin University.
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