Cashless society

A common measure of how close to a "cashless society" a country is becoming is some measure of the number of cashless payments or person to person transactions are done in that country. For instance the Nordic countries conduct more cashless transactions than most Europeans. Levels of cash in circulation can widely differ among two countries with similar measure of cashless transactions.

Across the 33 countries covered in the European Payment Cards Yearbook 2015-16, the average number of card payments per capita per year is 88.4. In comparison, the average Dane makes 268.6 card payments each year, the average Finn 243.6, the average Icelander 375.5, the average Norwegian 353.7 and the average Swede 270.2. This makes card payments in the Nordics two-and a-half to four times higher than the European average.

— Euromonitor International[9]

Even though a cashless society is widely discussed, most countries are increasing their currency supply. Exceptions are South Africa whose supply of banknotes fluctuates wildly compared to most nations, and Sweden which has significantly reduced its currency supply since 2007. China's currency has decreased from 2017 to 2018

The amount of cash in circulation was much lower in past decades in all countries except Sweden. The oldest comparative figures at Bank for International Settlements were from 1978 and only including the USD and 10 other currencies.

Under a Massachusetts law dating back to 1978, no retailer may "discriminate against a cash buyer by requiring the use of credit".[12] It was the only U.S. state to have such a law until March 2019, when New Jersey passed similar legislation; car rentals, parking garages, and airport stores have carve-outs under the legislation.[13] The bill came shortly after the city of Philadelphia passed a similar law.[14] San Francisco has also banned cashless stores.[15] Similarly, Rhode Island became the third U.S. state to outlaw cashless businesses when its ban took effect on July 1, 2019.[16] New York City banned cashless businesses on November 19, 2020.[17]

Cashless payments eliminate several risks, including counterfeit money (though stolen cards are still a risk), theft of cash by employees, and burglary or robbery of cash.[18] The costs of physical security, physically processing cash (withdrawing from the bank, transporting, counting) are also reduced once a business goes completely cashless, as is the risk that the business will not have enough cash on hand to make change.

Cash provides a good home for disease-causing organisms (i.e. Staphylococcus aureus. Salmonella species, Escherichia coli, COVID-19...).[19][20][21] However, cash has been found to be less likely to transmit disease than commonly touched items such as credit card terminals and pinpads.[22] Such concerns prompted the Germany’s central bank, Deutsche Bundesbank, to state that “Cash poses no particular risk of infection for public”.[23]

Restaurant chain Sweetgreen found cashless locations (with customers using payment cards or the chain's mobile app) could process transactions 15% faster.[24]

One significant societal advantage cited by proponents is the difficulty of money laundering, tax evasion, performing illegal transactions, and funding illegal activity in a cashless society,[25] Many countries have regulated, restricted, or banned private digital currencies such as bitcoin, partly to prevent illegal transactions. Large amounts of value can also be stored in real estate, antiques, or commodities like diamonds, gold, silver, and platinum.

Some have proposed a "reduced cash" system, where small bills and coins are available for anonymous, everyday transactions, but high-denomination notes are eliminated. This would make the amount of cash needed to move large amounts of value physically awkward and easier to detect. Large notes are also the most valuable to counterfeit. The United Kingdom declared only banknotes of 5 pounds or less were legal tender near the end of World War II on 16 April 1945 due to fear of Nazi counterfeiting,[26][27] although a £5 note then had the purchasing power of £217.22 in 2020,[28] over four times larger than the current largest note of £50. On 14 July 1969, the federal government of the United States declared that banknotes of over $100 in value would remain legal tender, but any notes in government hands would be destroyed and that no new notes of those denominations would be printed in the future, although such notes were last printed in 1945, 24 years earlier.[29] Canada did the same thing with the CAD$1000 banknote beginning on 12 May 2000.[30] Sweden printed 10,000kr banknotes in 1939 and 1958, but declared them invalid after 31 December 1991.[31] Singapore announced on 2 July 2014, that they would no longer produce the SGD$10,000 banknote,[32] and it was no longer issued as of 1 October 2014.[33] The European Central Bank no longer issues the €500 denomination euro banknotes as of 27 April 2019.[34]

Rather than conducting "costly and periodic" surveys and sampling of real-world transactions, "real data" collected on citizens' spending can assist in devising and implementing policies that are deduced from actual data. With recorded financial transactions, government can better track the movement of the money through financial records which enables them to track the black money and illegal transactions taking place in the country.[35]

As digital payments are made, transactions are kept in records. Cashless payments facilitate the tracking of spending expenditure and record the movement of money. Having recorded transactions, it can help citizens to refine their budget more efficiently.[36]

In a digitized economy, payment made will be traceable. With traceable transactions, institutions would have potential access to this information.[37] With these digital traces left behind, digital transactions become vulnerable. Such transactions allow businesses a way to build a consumer's personal profiles based on their spending patterns. The issue of data mining also come into place as countries head towards a cashless society. Cashless transactions leave a record in the database of the company as one make payment, and this information becomes a way for prediction of future events. Through large number of records, data mining then allows the organization to compile a profile of an individual through its records in the database.[38]

Going all-digital, these data retrieved from transactions lead to widespread surveillance where individuals can be tracked by both corporations and the government.[39] These records might also be available to hackers and could be made public after a data breach.

Cashless systems can be problematic for people who currently rely on cash, who are concentrated in certain populations such as the poor, near poor, elderly,[40] undocumented immigrants, and youth.[24] Electronic transactions require a bank account and some familiarity with the payment system.[41] Many people in impoverished areas are underbanked or unbanked. In the United States, almost one-third of the population lacked the full range of basic financial services.[42] In 2011, an FDIC survey found that approximately one-quarter of households whose annual income was less than $15,000 had no bank account.[43] Nationwide, 7.7% of people in United States do not have bank accounts, with levels over 20% in some cities and rural counties, and over 40% in some census tracts.[44]

As part of its Smart Nation initiative, Singapore has been moving towards a cashless economy. 14.4% of the country's population is over 65 years old,[45] and the majority of seniors still use cash as their only mode of payment. Not used to digitized payment methods, troubleshooting issues such as managing lost cards or passwords and managing their expenses can create potential trouble for anyone transitioning from cash.[46]

When payment transactions are stored in servers, it increases the risks of unauthorized breaches by hackers.[47] Financial cyber attacks and digital crime also form a greater risks when going cashless.[39] Many companies already suffer data breaches, including of payment systems.[48] Electronic accounts are vulnerable to unauthorized access and transfer of funds to another account or unauthorized purchases.[38]

Attacks on or accidental outages of telecommunication infrastructure also prevents electronic payments from working, unlike cash transactions which can continue with minimal infrastructure.[49]

Opponents point out that an entirely cashless system, in addition to tracking all transactions, would enable a central government to:

• Enforce a transaction tax on every person-to-person payment[50]
• Eliminate storage of cash as a means to escape nominal negative interest rates, which are used to fight deflation by discouraging savings (most effective if combined with bans on barter, private currencies like bitcoin, and storage of precious metals like gold). Certain types of money could be set to "expire" and be worthless if not spent in specific ways or by specific times.[50][51][52] This is also possible with cash, if the government allows high inflation or lets its currency undergo a devaluation.
• Totalitarian regimes could conduct more effective mass surveillance and quickly prevent certain individuals from buying anything or earning any money[53]
• Restrict the type of consumer goods that can be purchased with a certain amount of money (and parents might be able to do the same with allowance money)[54]

Consumers are less aware about the amount of money they are spending day-to-day when swiping their card to complete a transaction than if they budgeted money into a wallet and paid in cash.[55]

Sweden is one of the best examples of the results of efforts to create a cashless society. Sweden is exceptional in that the amount of cash in circulation has reduced substantially. Swedish society changed profoundly from 2000-2017 due to attempts to replace all cash with digital payment methods. The concept of cash-free bank branches began in Sweden between 2000-05, with a cashless branch being a step towards an upcoming closure of that branch. From around 2008, Swedish banks began giving special hardware to their customers which could be used to process financial transactions (like digital payments of invoices) from home. People still had the choice to use cash, however, and those who so wished could still do business in cash at the bank offices that remained.

This trend began around 2008, and peaked in connection with the 2015-17 exchange of all Swedish coins and banknotes (with the exception of the 10 kronor coin).[56] According to the banks' head offices, cash was no longer required as withdrawals and deposits were possible (in limited amounts) through machines. But for "safety regulations", the maximum amount a bank customer could withdraw was about 5,000 to 10,000 SEK per week, and similar "security rules" for deposits were established as well. Later, all the major regular banks with branches began an enforced process of either closing down branches or making them "cash free".[57][58][59][60] Today very few cash handling bank branches still exist.

The limited availability of cash in Sweden has caused difficulties for smaller boutiques, shops, and convenience stores, which depend on cash, as they can no longer deposit their daily takings or obtain any change. Non-profit organisations, which are very common in Sweden, have also experienced an outsized impact. In response, Swedish banks have introduced a mobile telephone payment system known as Swish. But this system has suffered from many problems.[61][62]

The banks (and initially media as well) have dismissed complaints about the change as "a problem for elderly people" only, essentially claiming that some were only struggling to learn a new technology, rather than being unhappy with a totally new transaction method. Opponents of the change, however, contend that the technological excitement has changed too much too fast, saying that many dangers lurk in the reeds. Concerns have been expressed about a rising number of fraudulent transactions, and the fast development of Quantum Computers contributes to fears of hacking within the system. The debate about a cashless Sweden became more complicated when the Swedish authority Myndigheten för Samhällsskydd och Beredskap—MSB[63] or "the Authority for Community Protection and Preparedness" in their writing "Om Kriget eller Krisen kommer" ("If war or crisis comes") contained a list of items to store permanently at home in order to be prepared, which includes "cash in small denominations".[64] A wave of negative criticism followed in Sweden from experts outside the banking sphere expressing their concerns.[65] The former head of police, Björn Eriksson, started a movement in the spring of 2016 known as Kontantupproret or "The Cash Petition". This movement has quickly grown to a considerable size, with many contributors describing troubles caused by the increasingly hostile attitude expressed by banks against cash.[66] The range of complaints covers a wide variety of issues.[66] For instance, the well-known TV3 figure Robert Aschberg got mad after having paid at a chemist with the Swish system via his mobile telephone, because he almost immediately received an advertisement from the same pharmacy, raising privacy concerns.[67] Svante Linusson, professor of mathematics, claims that "the liquidation of cash is slowly destroying our democracy".[68] A billiard club in Malmö was almost forced to close after their bank of 20 years refused to acknowledge them as a customer after the billiard club refused any other payments but cash.[69] A traditional summer market in northern Lycksele went into bankruptcy after a computer error. Because people had been required to pay with phones (Swish) and cards, there was not enough money available for them to conduct business in their market.[66][70]