Surviving the cashless cataclysm
By Sebastian Anthony on March 21, 2012
In Sweden, just 3% of the economy is powered by coins and paper money. Public buses don’t accept cash, churches have installed card readers to take donations, and there are even some bank branches that refuse to take your money, opting instead to deal with electronic transfers only.
The European average is 9%, and in the US, the credit card motherland, the percentage is still more than twice that of Sweden: 7%. If you stop and think about it, though, none of these figures are particularly surprising. With the rise of credit cards and store cards (and card readers everywhere), PayPal, online shopping, iTunes, Netflix, and app stores, cash is feeling more outmoded by the day. When was the last time you used an ATM, anyway?
The trend is very clear: Cash is on its way out. It might take another 10 or 20 years for Sweden to get there, and longer for the US and other economies, but eventually so few businesses will accept cash that it will be relegated to jangling jars and cruddy sofa crevices. Governments will have no choice but to halt the fresh minting of coins and printing of bills, and eventually non-electronic money will dry up all together.
This will mark one of the most significant paradigm shifts in modern history. At some point in the future, probably within our life times, you will wake up and your cash will be worthless. After centuries of use, we will no longer have a fungible currency. Gone are the gold sovereigns and silver dollars and nickel-alloy pennies — it’ll all be encrypted, digital bytes, stored in programs like Google Wallet. Instead of handing the shop attendant some cash, you will swipe your phone across a card reader; if you need to lend your friend some money, you’ll just key in a number, bump your smartphones together, and NFC will take care of the technicalities.
I think this will all happen naturally and fairly painlessly. Just 50 years ago, cash (and gold bullion and shares and bonds) would have represented the entire economy — and now Sweden’s on the cusp of killing cash off entirely. It’s just a matter of convenience — and if consumerism has taught us anything it’s that convenience is king. When we’re fast moving towards a world where your smartphone replaces just about everything in your wallet — from cash to tickets to ID — how can clunky coins and grubby banknotes really compete?
Sentimentalists will mourn the demise of bills and coins with national figureheads emblazoned on them, I’m sure, and there will also be an issue with older people, who in general haven’t made the leap to electronic money and would be lost at sea if cash was no longer accepted anywhere. Beyond that, though, there’s a far more pressing question that governments (and societies) will have to answer: Will we let private corporations track, collate, and cross-reference every single one of our transactions?
You see, in a cashless society every single payment is digital, which means that every transaction must be confirmed by the bank or institution that governs your money. In turn this means that every move you make will be recorded in a huge database. Your bank will know where you get coffee in the morning, the route you take to work, and if there’s a vending machine at your office it might even know where you work. Likewise, your bank will know that you like to buy things on Amazon while you’re at work, that you enjoy watching X-rated movies when you’re on the road, and that you always leave it until the last moment to buy your wife a birthday present.
At this point it’s commonplace for self-respecting libertarians to leap up and decry the awful, privacy annihilation that I’ve just described. How could you live in a world where the Rockefellers can track your every move?! they cry. Well, get this, every credit card company, bank, and sizable corporationalready tracks your transactions.
Have you ever had a call from your bank, asking if a purchase you just made was fraudulent or not? Banks employ incredibly complex software (on beefy computers) to analyze billions of transactions — ostensibly to detect fraud (which costs banks millions of dollars a year), but of course other patterns can be detected as well. Just as one example, BillShrink has worked with 2,000 banks to analyze your buying habits, and then to provide targeted coupons on your monthly statement. Obviously it’s rather cool to automatically receive a $5 voucher for McDonald’s if your bank detects that you spend $100 under the greasy shadow of the Golden Arches every month, but it’s a little bit creepy too. It is, after all, exactly the same as Google or Facebook’s targeted advertising — but possibly even more accurate.
The fact is, cash is anonymous — and humans love anonymity. It’s not that we require it all the time, but a free society demands that the option is there. Whether you’re paying for something embarrassing, like a prostitute, or privately funneling money to a charity, it’s nice to have theoption of paying with a currency that cannot be directly tracked back to you.
On the flip side, though, corruption, tax avoidance, and many other crimes are all linked to the fact that cash is very hard to track. Taking Sweden as an example again, in 2008 there were 110 bank robberies; in 2011, there was just 16, the lowest since records began 30 years ago. In Italy, where cash is alive and kicking and graft and tax evasion are rife, the Prime Minister recently announced that he plans to limit cash payments to 1000 euros ($1300), down from 2500 euros. It is not a coincidence that Italy and Greece, two of the most volatile economies in Europe, both have strong cash cultures.
It would seem that you can’t have your cake and eat it too. Money is either accounted for by a central authority (electronic transactions), or it isn’t (cash). You are either protected (and snooped on) by the auspices of governments and mega corporations, or you’re not. There is another option, however.
Saved by technology, again
The important thing to remember is that untraceable, anonymous cash isn’t dead yet. Bills and coins might be on the way out, but that doesn’t mean that they can’t be replaced by an electronic equivalent. If Bitcoin has proved anything it’s that you don’t need a central authority to manage electronic trades — and just look at iTunes gift cards and pre-paid Visa and MasterCard credit cards; they’re not quite as anonymous as cash, but they’re close.
Bitcoin has failed because it doesn’t have the backing of a central bank, but there’s nothing to prevent national governments from issuing irreversible, cryptographic cash that could then be stored on “credit chips” (i.e. your smartphone, or even a coin-sized piece of solid-state memory). This digital cash would act just like its physical counterpart: You could deposit it in your bank, pay for groceries, or even lose it down the back of your sofa. You could pay people by physically giving them a credit chip, or by transferring them via smartphone. Digital cash would still have the same issues as normal cash — graft, tax evasion, robbery — but that’s the price we pay for freedom.
The benefits of a purely digital economy are massive. If you think about it, dealing with physical cash is incredibly difficult. You need cash registers (which aren’t cheap); you have to constantly monitor employees for theft; you need a safe to keep the money in between collections, and collections themselves are expensive too. A wholeindustry revolves around the safe handling, transportation, and counting of coins and bills. With digital currency, all of those difficulties disappear. With PayPal, you can set up an online business in minutes. With Square, your iPhone or Android smartphone becomes a point of sale.
And then there’s the analytics! If you think you have problems managing your money, imagine if you could plug your credit chip into your computer at the end of the month and find out exactly how you spent (and wasted) money. You wouldn’t have to give up this info to a third party — but if you did, there would be even more advantages. Imagine a group buying website (like Groupon) that analyzes your credit chip and matches you to 10 other local Coke drinkers; instead of each buying a 12-pack from the supermarket, you could club together and buy a case from the wholesaler.
Anonymous, digital cash isn’t a given, though. We will probably have to fight for it. Conspiracy theorists are exceptionally talented at conflating fact and fiction, but they’re not wrong when they say that totalitarian governments and megacorps really want monitor our every move. The demise of physical cash is the perfect opportunity for governments, under the sway of powerful lobby groups, to transition to trackable currencies that are governed by a central computer. This will probably be one of the biggest hurdles that we will face in the twenty-first century.
Swedes, when the referendum to abolish paper money finally rolls around, be sure to vote for the creation of a digital, anonymous equivalent. The rest of the world will watch and take its cues from you.
- Surviving the Cashless Cataclysm (news.slashdot.org)
- Will Sweden Be the First Cashless Society? (bigthink.com)
- Sweden moving towards cashless economy..even at church! (seeker401.wordpress.com)
- Who In Their Right Mind Would Want A Cashless Society? (ghacks.net)
- Sweden moving towards cashless economy (cafewitteveen.wordpress.com)
- Sweden goes cashless, the world may soon follow (theextinctionprotocol.wordpress.com)
- As Sweden Goes, So Goes the World: The Beginning of the End of Cash (blogginghounds.wordpress.com)
- Sweden Going Cashless: Pros and Cons of Paper Money (ibtimes.com)
- Sweden moving towards cashless economy (disclose.tv)
- Swipe Your Card for the Lord (patospapa.wordpress.com)