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Cashless Society: Is It Possible?

“Ik wil graag pinnen”, which means in Dutch “I will pay by debit card”, has been the most frequently used sentence while I go shopping. And I noticed that I barely carry any cash with me since all the transactions can be done by digital payments via card or mobile app. The trend of going cashless seems unstoppable, especially in Northwest Europe and in the US, where the financial system is rather stable and have the population highly technology savvy. For example, Sweden is leading the race to become a cashless economy, where cash counts for only 2% of the value of all payments made in 2015. Furthermore, about 96% of the Swedish population possesses a debit card. Therefore, it is said that the last area in which a Swedish must need cash is either the purchase of illegal items or the financing of terrorist activities. With more and more shops not welcoming cash payment, even street vendors and homeless are now accepting device-based payment; a rule of thumb in Scandinavia is: “If you have to pay in cash, something is wrong.”

As contactless and mobile payments are thriving, the retailing industry is also actively innovating new technology to provide more pleasant and convenient customer experience. Even more so, many stores encourage their customers to make use of self-checkouts machines: Amazon has even created a store called “Amazon Go”, where check-out is no longer required — as long as you have your smartphone with you. While convenience is commonly agreed to be the greatest upside, what are the other reasons why people advocate for a cashless society? Firstly, a very important benefit of going cashless is that all the transactions are traceable and the anonymity of cash payment is eliminated. Therefore, governments are able to constrain black market activitie,s such as drug dealing and financing of terrorist activities, since a new medium of exchange for illicit markets will be less liquid and riskier. Besides that, illegal activities and financial crimes such as money laundering, tax evasion and fraud can be more effectively prevented. Secondly, as we can already observe, the process of going cash-free foster many ongoing technological innovations. Financial technology, also known as “Fintech”, has been one of the hottest venture capitalists investment areas in recent years, reinventing the way we do payments, lending and investing. Moreover, an indirect result is the decline of bank robberies, since banks now keep less currency; similarly, if people no longer bring cash with them, and stolen cards can become invalid as soon as people report it via mobile banking, robbery-related crimes can also be reduced.

Despite several above-mentioned powerful arguments, which explain why we should support and embrace a cashless economy, there are still some disadvantages that the governments need to take into consideration. First of all, traceable transaction activities and the extension of surveillance are actually two sides of the same coin. For example, the use of mobile banking is more secure in terms of enabling us to disable the lost card instantly and remotely. On the other hand, the opponents state that privacy is the foundation of a free society, going totally cashless will, therefore, deprive us of our basic rights. Another disadvantage is that, unless the government can guarantee every citizen a bank account and an electronic device to access it, the unbanked population is excluded from the cashless society. In fact, increasing numbers of banks’ branches and ATM machines are shut down in countries where non-cash payment is thriving. For instance, in the U.K. more than 600 high street bank branches closed in 2015, due to the fact that most people interact with banks only online. For people who live in rural area, mainly elderly people who still use over-the-counter banking frequently, the trend brings negative impact since it is getting tougher for them to withdraw cash. Thirdly, latest the escalation of cyberattacks on financial institutions indicates that cyber security threats are huge hurdles that keep people from trusting banks. In my opinion, we should be able to regulate and detect the abuse of the system and fraud before even the start of discussion about going cashless. If a bank cyber-attack occurs, which happens from time to time, the financial and reputational losses are often immense. Two recent cyber-attack examples are Tesco bank loss of £2.5m on 9000 accounts and the Russian central bank loss of 2 billion rubles ($31.3 million) from correspondent bank accounts.

It seems we are moving forward to a less-cash economy, but we are still a long way from becoming a cashless society. As far as I am concerned, there is some sacrifice to be made in order to achieve a cashless economy; it requires citizens’ trust in the financial and regulatory institutions and the willingness to give up the freedom to conduct a transaction anonymously. As for concerns regarding security and cyber-attacks, there is a new technology underlying Bitcoin that can ultimately change money and business transaction — block chain. Block chain was invented as a security system to keep track of online transactions of the virtual currency Bitcoin if required, and it is a distributed, secured, immutable, time-stamped and transparent database. To explain how block chain works briefly – a party who initiates the transaction will set up a block, and the block is then verified by at least thousands of computers. The block will be linked to the previous blocks once it is verified, and after this, any alteration of the block will be documented. This means that if someone wants to hack into one block, he needs to successfully hack into millions of blocks that are linked to this specific block — thus we can say that block chains are unhackable. With the extraordinary features of block chains, it definitely has the potential to be the solution, which will facilitate cashless economy. The realization of going totally cash-free now still sounds unrealistic and certainly requires a great amount of effort and expense, but with the emergence of future-proof technology, it will be possible.


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