Many nations, particularly Scandinavian countries, are currently trying to embrace a cashless future where physical money is replaced with digital. RT talked to experts about the upsides and downsides of such a move.
While some see a cashless society as the future, it will take years or maybe decades to get rid of paper money, according to Nafis Alam, director of Postgraduate Research Studies and associate professor of finance at Henley Business School.
“Definitely, the world is moving away from physical cash due to increase usage of E-wallet, Apple/Samsung pay,” he said, adding that the upside of cashless payments is “the unparalleled convenience it offers in the form of time, efficiency and security.”
However, he noted that “the biggest upside is for the regulators, who can have records for each and every transaction which makes law-breaking more difficult for tax evaders, money launderers, and black marketers.”
Printing of physical money is a big cost for central banks and it can cost governments up to 1.5 percent of GDP, he added.
Being a cashless economy can be a double-edged sword for any nation, according to Alam. “While it does control the illegal activities surrounding money, such as money laundering and fraud, at the same time it reduces the privacy of individual usage.”
“Every single transaction can be recorded and monitored by the government which will become like a communist setup rather than a libertarian society,” he said.
Meanwhile, Steve Worthington, adjunct professor at Swinburne University of Technology has argued that the world is moving towards a less-cash society. “We will never get to a cashless society in my lifetime because cash has its own triple ‘A’. It is accepted nearly everywhere, it is anonymous and it is authentic,” he said.
Talking about the downsides of a cash-free push, Worthington said that “we will then live in an even more ‘controlled’ and ‘observed’ society.”
The crime-fighting characteristics of cashless societies have been largely overestimated, according to another expert.
“Currently most money transactions happen through banks and are controlled but this has not stopped criminality from flourishing,” said Sergio Focardi, a professor and researcher in finance at ESILV and EMLV at the Pole Universitaire De Vinci in Paris.
Talking about the cash-free push as an anti-crime measure, he explained that it depends on the situation of each state on the willingness of governments to really fight criminality.
“It’s difficult to believe that a technology will change the crime situation. I think it is the government willingness to fight crime that makes the difference.”
Bernardo Batiz-Lazo, professor of business history and bank management at Bangor University, says he prefers “to think of the downsides” of a cash-free future “such as the number of vulnerable people (poor, young, elderly, single mothers, non-urban) that can be left out.”
“Then, there is the fact that digital systems are binary: they work or they don’t,” he added. “A small problem with electricity (such as a hurricane in NY), internet supply or even in the IT systems of a bank (such as TSB or NatWest in the UK) bring the whole system to a halt.”
Going cashless does little to eliminate corruption or the “black economy,” but it does help governments increase their tax base, according to Batiz-Lazo.
But ultimately there are independence issues, according to the expert, as “people are entitled to a level of privacy and choice in payments.”
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