Social distancing regulations and the fear of microbes-ridden surfaces have pushed physical shopping and transactions in cash to the backseat. In a recently conducted poll, 82% of Master Card’s global users favored contactless payments as a cleaner alternative to cash. The e-commerce giant Amazon saw a staggering surge of more than $570 billion USD in its value.
With all these exciting stories of growth and expansion comes the question, is the trend towards cashless going to sustain? Even before the outbreak of the pandemic, Sweden had started implementing a well-concerted strategy to go cashless. So much so that even during early 2018, only 1% of Sweden’s entire GDP was circulating in cash. Yet, 9% of the Swedish supermarkets still allow their customers to pay by cash. Sweden’s policy is also seen as an ideal example of a country “dangerously sleepwalking to a cashless society.”
Why are the efforts to drop cash from the system facing such severe doubts and concerns? Because, for many people, cash still means greater control over their funds. Cash makes them feel empowered. They can keep the cash with themselves in case their access to banks is throttled in some way or another.
Wilful Adoption is the Key
It appears that to meet a sustainable cashless society, the willingness to change should come from the population. Humans have remained tied to physical currencies for a long time. At the same time, the global usage of cash did reduce from 58% to 23% between 2009 and 2019. It is better not to hasten up this gradual trend of wilful adoption with forceful, authoritative measures in the garb of the pandemic.
A wilful adoption of cashless transaction systems will only be possible when people experience the benefits of a digital economy for themselves. To deliver that, the world should become fairer in internet access. According to the latest estimates, a little more than 62% of the world population has access to the internet. Yet, when it comes to the geographical distribution of users, only 42.2% of the population has access to the internet in Africa. Whereas, the share is as high as 90.3% in the affluent geography of North America.
The proponents of a cashless society should be mindful of the divide between the high-income countries and low-to-medium income countries. The distribution is currently skewed towards the high-income segment. They should take part in fixing the distribution. A cashless society should not remain constricted within the boundaries of a handful of affluent regions.
There is a silver lining in the increasing adoption of DeFi, too. The emergence of decentralized finance, where P2P crypto transactions are governed by self-executing digital contracts, very little is dependent on the intermediaries. The absence of large financial corporations or the state as regulators makes this field inherently equitable. Between September 2017 and August 2020 the combined worth of decentralized finance contracts increased astronomically from $2.1 million to $6.9 billion USD. The value of all tradeable crypto tokens used for these contracts reached a value of $15 billion USD.
A Strong Global Internet Infrastructure is Must
Also, from a practical perspective, the digital economy can not grow unless the internet infrastructure is equally robust in all parts of the world. A cashless society is the safest bet to wipe out financial transactions. The International Monetary Fund recently endorsed this view as well. They committed a significant part of its 2020-2022 budget to propagate the benefits of digital modernization.
The IMF (International Monetary Fund) believes that a greater spread of digitization initiatives in the domain of public financial management would result in improved efficiency, productivity, cost-savings, and increased tax revenues. In hindsight, a digital economy would also mean increased intervention from the government.
In the aftermath of the COVID-19 outbreak, China is all set to launch its digital Yuan. People’s Bank of China is planning to introduce this currency to the market by the end of this year. With this news, the concerns of increased surveillance from the state have surfaced. Although the government of China has promised to feature options of ‘controllable anonymity’, fears are ripe that the state would use this currency to keep a check on personal transactions. One of the largest banks in Sweden is also planning to launch a digital currency named e-Krona.
A cashless society can never be about increased control and surveillance. Rather, it should promote the exact opposite of that notion. The removal of cash should mean the removal of the evils associated with cash. It should end counterfeiting, unaccounted transactions, and tax evasions.
The Way Ahead
The paradigm of decentralized finance could be an example to follow. The world of cryptocurrencies offers intrusion-free peer-to-peer transactions. Governed by self-executing smart contracts, these transactions do not need intermediaries.
Striking the right balance between convenience and self-control should be the aim of an ideal cashless society. The benefits should reach everyone. And at the same time, no one should feel that they are compromising with their privacy. Only then the travel from a society with less cash to a cashless society would be a smooth sail.
Guest post by Raoul Milhado from Elitium
The Elitium core team comprises expertise across luxury, digital marketing, mobile applications, blockchain, legal and finance. Further, Elitium’s business model is based on 3 well-known companies that have been active across our target industries for more than 40 years.