Non-cash society: what gives people the rejection of traditional money?

The US government did not issue notes until 1862, minting only coins. In addition to them, a variety of currencies issued by private banks were used to pay for goods and services. Today, cash is gradually out of circulation: in 2012, only 40% of payments were made with their help in the USA. The idea of ​​withdrawing cash from the economic system has many advantages, such as stopping the existence of black markets and the possibility of a simpler monetary policy. However, in the case of electronic operations there is always a risk that each individual operation can be traced, verified and falsified. Be that as it may, one pattern is obvious: as online purchases become more common, and credit cards are increasingly used even for small purchases, cash gradually loses its relevance.

Of course, it’s too early to talk about a complete waiver of cash, but in some countries, activists are already conducting large-scale experiments confirming the possibility of building a cashless society. Alternative payments - from the bold Greek TEM and Canadian Demi to the more traditional Swedish Swish and American ApplePay - are gaining more and more supporters and form a true global network, part of which is our Blockx - based financial service Wirex , without banking intermediation.

Protection of personal information in the cashless world

Governments and their agencies love electronic transactions, because unlike cash, they make it harder for anyone to evade taxes. Police and agencies like the NSA appreciate the ability to track records that are left behind by non-cash payments. Last year, laws were passed in France and Spain that impose restrictions on cash transactions. Now attempts to pay for the purchase of bills worth more than 1 thousand euros are illegal in France. In Germany, the position of opponents of cash is also strong. Economist Peter Bofinger, one of the members of the German Council of Economic Experts, supports the ban on the use of cash, calling them an anachronism. The authoritative German publication Der Spiegel believes that [thanks to the ban on cash] "the markets for drug trafficking and illegal labor activity may cease to exist, and the monetary policies of central banks will become much simpler from the point of view of practical implementation."


Illustration: Eric Palma for Fast Company
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Despite the fact that the abolition of cash can put an end to black markets, the withdrawal of paper money from circulation can cause honest citizens a lot of serious inconvenience. Already, credit card transactions are easily tracked, and electronic payments can, in principle, eliminate the notion of anonymity of payment transactions.

Of course, from a technical point of view, implementing an anonymous digital currency is not so difficult, but governments will hardly miss the opportunity to keep track of all currencies moving in the system, as is the case with credit card transactions or some digital currencies that record all transactions.

Once information on financial transactions is recorded, it easily comes into the view of government agencies such as the police or intelligence services, and can also be transferred to insurance companies, tax authorities, anti-fraud departments, and even marketers. If digital money, as experts Ben Dyson and Graham Hodgson write in their Digital Cash newspaper, were issued by federal or government banks, and then distributed among private agencies, you would have to read the small text of the contract in order to understand to whom it could be sold. your personal information when you buy something.

Director of Economic Activism of the Foundation for Electronic Frontiers Reyni Reitman says the following about this:

“Tracking all of our payment transactions leads to the creation of a whole collection of data over which we have no control. In such circumstances, it is easy to imagine a bold divorce lawyer or government agent trying to gain access to our financial history in order to concoct the story they need about what kind of people we are. ”

Rich and poor

Reitman also believes that rich people have more opportunities in terms of protection against the collection of personal information.

“For this purpose, they can establish commercial legal entities and carry out operations with them or make political donations through the so-called political action committees . However, when an ordinary person tries to use a traditional bank account to make an online payment, he does not have to rely on any anonymity. ”

As for the less well-off strata of the population, non-cash transactions for them are simply impractical. In their case, good alternatives are prepaid credit cards, as well as all sorts of vouchers to pay for purchases in iTunes, Amazon, Spotify and other online services.

“There are a large number of people who for many reasons do not have a bank account, and with it access to credit lines,” says Reitman, “and the ban on cash will particularly affect them.”

About 8% of the US population still do not have access to banking services. At the same time, 20% of family farms are very limited in this access. This means "that they have a bank account, but besides it, they also use alternative financial services provided outside the banking system." These data were collected during a national survey conducted by the Federal Deposit Insurance Corporation in 2013. While in the US, the number of people without access to formal financial services remains more or less constant, in the whole world, according to the World Bank, this figure decreased by 20% (to 2 billion people) from 2011 to 2014 year. During this time, 700 million people gained access to the services of financial institutions.

According to a survey by the Gallup Institute , in 2014, 29% of Americans did not have their own credit cards, and this figure is growing, partly because the cards do not use polarity in millenials. The Bankrate company published data according to which 63% of representatives of this generation do not have a “primary” credit card. Perhaps the reason for such a high rate is the law on credit cards adopted in 2009, which complicates the procedure for obtaining them for persons under the age of 21. The main alternative for online purchases are prepaid cards, but they are also subject to increased commissions, which, despite the overall improvement in the situation, cause an even greater blow to the wallet of the less affluent segments of the population.

In Sweden, which is at the forefront of cash rejection, the low-income segments of the population have already adapted to the cashless reality. There you can meet homeless people who carry card readers and sell Situation Stockhlm, the street newspaper . The New York Times talked to 65-year-old Stefan Wikberg, who now has his own home and who makes a living selling Situation Stockhlm.

“Now people have nowhere to go,” says Stefan. “When they say that I will not have a change, I reply that they can pay with a credit card or even via SMS.”

Wikberg says his sales have increased by 30% since he began accepting cards.

“We weren’t sure what would come out of it and whether people would want to transfer their credit cards to homeless people,” said Pia Stolt from Situation Stockhlm in a news report, “but the results were excellent: sales on the streets increased by 59%.”

Alternative currencies

If the money released by the government actually disappears, alternative currencies may take their place. Such unofficial payment systems are already flourishing around the world: from the Greek TEM to the Canadian “Demi” - halves of 20 dollar bills, which are divided in half, from which we get some semblance of a new currency. In addition, there are even less formal alternatives, such as Tide powder, which was massively stolen from the shops of a small American town and used as a means of payment when buying drugs.

Alternative currencies have many advantages. One of them is the ability to stimulate the economy of a single territory. For example, Greek TEMs, which appeared in the city of Volos, are designed to pay for goods and services, but since they are accepted only in the city, they can be used, respectively, only there. Also, the rules prohibit keeping more than 1,200 TEMs or owing more than 300 units, so it’s impossible to accumulate them as ordinary money from the owner. One way or another, to be able to get more of this money, you have to spend it, which in turn creates a constant circulation of funds for local business.

Ethical money

Similar rules that work for purely local currencies may also be useful in more extensive use. When money exists only in electronic form, and not in hard-to-follow paper, any innovative experiments in monetary policy take place much easier than when a significant portion of money in the system exists in the form of cash in pockets. For example, money could slowly, over time, automatically lose its value, encouraging owners to spend it. This will make the accumulation of huge stocks of money less useful and, as in the case of the Greek TEMs, will create some reasonable limit for one person, thanks to which the money supply turnover will improve. Electronic money will also allow someone who spends them adding legal clarifications to their purchases, just as we now use Creative Commons licenses to determine who and how can use our copyrighted works. For example, you could designate a certain amount of electronic money as "ethical", so that they could only be used in other places that adhere to the rules of ethics and morality. Such a measure may depreciate "cash", limiting their possible use, but possible losses can be included in the cost of goods, just as we are now paying more for organic and natural products.

Also, parents could limit the spending of pocket money of their children only to such useful hobbies as books, or prohibit the use of them in fast food restaurants.

Swedish experience

Some of these bold ideas have already become a reality. In order to see how society can function without money, we can turn to the example of Sweden, where cash is almost never used. In Stockholm, you do not need to carry checks or small bills. You can make a donation in the church with a credit card or using a special application called Swish to transfer money to a friend while paying a bill in a restaurant. Branches of many banks do not accept or issue cash, and payment applications are very popular.

Swedish banks and businesses have good reasons for preferring electronic payments. The fact is that Stockholm has long been the capital of armed robberies. Attacks on banks and collector cars have recently been there in the order of things. In 2009, it came even to the famous “ Westbury robbery ”, when the criminals fled from the scene by helicopter. However, not only banks prefer payments that cannot be stolen. Peter Matson, Stockholm native, says local people rarely use cash. Even the smallest operations are performed using the card. However, despite the fact that Swish is gaining popularity, mobile payments have not yet received distribution. Matson explained this by the fact that there is a very common practice in the country when mobile bills are paid by the employer and in this situation, people, of course, want to separate their personal payments from workers. It is also worth noting that we are talking about older payment schemes, when money was withdrawn from your account at a mobile operator. New ways, like Apple Pay, provide for linking to the user's credit card, so there are no such problems with them.

The Swedish experiment in real conditions shows that freedom from cash is not only possible, but can also be very attractive and gives many potential advantages. However, as in the case of any technological revolution, all practical changes are very dependent on details.

It can be argued that a large part of the United States is already living a cashless life. When you arrive in the country, you may be surprised when you see someone paying with a credit card for a single cup of coffee, often without a signature or PIN. Cashless payments are popular with many now, and with the advent of new ways such as Apple Pay, which allow you to use your iPhone and fingerprint to make payment even safer, this trend is likely to only increase. However, as is the case with most new technologies, the fruits of these changes will not be equally distributed among the entire population. Already, there are situations where instead of traveling coffee at the corner, people have to go to Starbucks simply because they have no small money. Services like Square, which allow anyone with a smartphone or tablet to accept credit cards, can give the autocoffe guy a chance to get back in the game, but it will take a long time until this method gets to other similar vendors.

Perhaps, the refusal of cash may seem to someone just a stormy fantasy. However, think about how much money has changed since credit and debit cards began to take away their popularity from cash. Already today we send money to various places directly from our tablets, pay for Uber services through a convenient application on a smartphone and travel abroad without even thinking about buying foreign currency in advance. Well, the first electronic non-cash money transfer system PayPal is 18 years old this year.

It can be said that the process of withdrawing cash from circulation has already begun. The only question is how much time will pass until they turn into a niche product, such as vinyl records or film cameras. It is possible that they will not disappear to the end, but they will be used to buy fruits in roadside shops or hipsters as “traditional money”.

Maybe cash will be considered as a means of payment for low-income people, and their use will indicate the total income level of their owner. Due to higher fees or no bank account, poor people will pay more for the privilege of using cash.

“If tomorrow the government banned cash,” says Reitman from the Electronic Frontier Foundation, “I have no doubt that some people would find a way to continue to exchange goods and services without the need to constantly use digital currency. Unfortunately, this approach is much more risky and complex than using legitimate cash. ”

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