In 2016, the European Central Bank announced that it would stop printing €500 notes in order to fight money laundering. Back then, this proposal seemed shocking for some. Nowadays, the fight against cash in general is an ongoing quest for governments all around the globe.
From the United States to Europe, governments are implementing plans to reduce their cash printing or even to ban its use. The main arguments for the use of digital money are fighting against fraud and informal economy, being more environmentally-friendly or decreasing government expenditure, among others.
A controversial plan
However, some believe that this global obsession to attain a ‘cashless’ world has hidden intentions. It goes without saying that digital or cashless payments entail less privacy and thus, enable an increasing control over transactions between citizens, which could be used not only in order to prosecute criminal activities, but also to control population in general. Henceforth, banks will have much more data regarding transactions than ever before in history, and it is a matter of public knowledge that data is the most valuable commodity these days.
Moreover, having to pay through either transfers or biometrical or contact-less modes of payment will compel all citizens to open a bank account. Therefore, digital payments will entail a huge gain for banks.
If banks are to be the big winners of this cash elimination process, why are governments so interested in this transition? In most cases, election campaigns are funded by banks and this measure shall also be beneficial from a political point of view.
Furthermore, some among the new digital kind of payments include biometrical security features such as facial recognition or digital fingerprints -this is a subject of debate itself, regarding the increasing control over individuals that it entails. It is worth mentioning as well that the contact-less feature, which has become a part of our daily lives, was firstly implemented with the aim of increasing transactions, since it enabled small payments to be made by credit card. What is more, according to a study carried out by RBS, people tend to spend more money when using this contactless feature.
Where are we?
In recent years, this process has developed exponentially. Several countries within the European Union have almost become cashless economies -namely Sweden, where 95% of transactions are cashless and even homeless people receive social security disbursements in the form of digital payments. Other examples are Norway, South Korea, or Canada -whose aim is to become a cashless country by 2023.
The global pandemic has speeded up this process, by making it harder to pay in cash at public transports or in some restaurants, as it increases the chances to contract the virus.
Seeing all the financial profits that this process offers, Silicon Valley is aiming to seize this opportunity, perhaps in order to preserve its supremacy over Big Data. Hence, banks won’t be the only ones to develop new modes of digital payments. Multinational companies like Facebook or eBay are already coming up with several payment platforms and services, which reflects the loss of power of Nation-States over money and in general.
What is at stake for businesses?
Although the new ways of money transfer have helped enterprises all around the world to carry out transactions easier, specially between different countries, a future without cash also has its drawbacks for them.
As the development of internet and digitalized data increased efficiency, it also exposed businesses to cyberattacks and data stealing, which has jeopardized them countless times. A world where cash is also exclusively virtual increases the danger of being hacked, as it could mean losing all of their money.
However, overall, a cashless society will encourage people to consume more -as it has been proven that it reduces psychological barriers to spending money.
All in all, banks and high-tech enterprises will be the big winners of this quest to eliminate cash, politicians could also benefit from this, even though nation states’ sovereignty would suffer. This could also be generally positive for business. Nevertheless, it would damage little businesses who are sometimes part of the informal economy, as well as illegal organizations. But the bigger losers will be the consumers, who will, once again, be tricked into consuming more, and whose data will be bought and sold, being left with not much privacy.
SOURCES
De Barran, A. (2020, 14 junio). El BCE advierte de que no esta permitida la eliminación del dinero en efectivo en la eurozona. El País. https://elpais.com/economia/2020-06-13/el-bce-advierte-de-que-no-esta-permitida-la-eliminacion-del-dinero-en-efectivo-en-la-eurozona.html
BBC News Mundo. (2017, 10 diciembre). ¿Por qué los poderosos quieren un mundo sin dinero? https://www.bbc.com/mundo/noticias-42272362
BlogRed. (2020). Países sin dinero en efectivo. https://blogreds.es/medios-pago/paises-sin-dinero-en-efectivo
Hi Belén,
ReplyDeleteYour article is very interesting. I have some questions regarding the digital economy. Since banks are going cashless, the threat of cyber-security hacking has increased. If the digital systems are compromised, will people lose their accounts or money etc. ? Should the old method of paper money still be preserved ?
Thank you.
Myriam F.
Hello Myriam,
DeleteFirst of all, thank you for taking time in reading my article and for this fantastic question!
Regarding cyberattacks is difficult to know the answer to your question, it mainly depends on the objective of the hacker, if its objective is to steal bank accounts or even destroy them, people could lose their accounts.
Therefore, concerning your second question, I believe that paper money should never disappear. Although the use of digital money has many advantages, paper money should still be legal so as to protect freedom and preserve a certain level of security.
I hope I answered your question, let me know if you have any other question!
Best regards,
Belén :)
Hello Belén,
ReplyDeleteI find your article very interesting, especially since it is a process that is becoming more and more current. I would like to know your opinion on cryptocurrency: Do you think it will have a significant role in the coming years? That it will become our only means of payment?
Thank you in advance for your answer.
Célia P.
Hi Célia!
DeleteThank you for your question and your support! :)
I believe that cryptocurrency has come to stay. However, I don't know how important is it going to get.
In the last few years we have seen its rise -specially the rise of Bitcoin. And the diverse uses that it has been given. For instance, El Salvador accepted Bitcoin as an official legal tender, which I find unbelievable.
Moreover, more and more commerces accept payments in bitcoin these days. So, answering to your first question, cryptocurrency has already a significant role nowadays and I don't see a reason why its importance could decrease in the coming years.
Regarding your second question, I find it hard to believe that it could become our only means of payment.
However, States could eventually eliminate all physical currency and maybe create their own cryptocurrency in the future to trade with, but I don't think that Bitcoin, for instance, could become the only legal means of payment worlwide. All in all, I believe that the currency system would be similar to our current system but digitalized.
I hope I answered to your question, but I must say that this is a mere opinion, it doesn't mean that what I am saying is the ultimate truth.
Thanks for your question once again, it was really interesting.
Best regards,
Belén :)