6 big myths in the case for cashless
History has shown us that large communities have always relied on cash (or an equivalent, tangible store of value) to maintain social and economic order. So, why are so many people convinced that the prospect of a cashless society is in the near future?
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Therefore, we must review some of the big cashless society myths.
1. Myth: Cash costs more than electronic payments
It should come as no surprise that using cash is cheaper than any power-dependent payment forms. On a person-to-person level, cash does not require a card reader or an online network to process each transaction. The social cost of cash production and distribution does not compare to the economic and environmental costs of running digital payments infrastructures.
In the Currency Research The Case for Cash report, the first myth dispelled challenges the misinformation about the cost of cash:
- The European Central Bank’s (ECB) 2012 occasional paper found cash payments to have the lowest social costs per transaction
- The British Retail Council’s (BRC) 2012 study found that “unjustifiably” high debit and credit card fees are carried over to retailers and consumers, and that the costs of credit and debit card transactions rose while those of cash fell
- The 2012 US Federal Reserve Bank of Kansas study showed that cash and debit cards had the lowest social cost per transaction.
'The mining process is costly. Being a miner requires a lot of computing capacity, and one needs to burn much electricity to have a chance of winning the payment received for successfully verifying a transaction.'
2. Myth: Sweden is basically cashless.
Sweden, home to the world's oldest central bank, enjoys a lot of trust from its citizens and has inspired others to follow its cashless footsteps. However, even though the vast majority of transactions are digital, it doesn't mean the public is ready to give up cash. An overwhelming 68% of Swedish people polled in a survey have stated that they are not on board with a cashless future.
There are two big reasons behind why Sveriges Riksbank announced they had turned back on their cashless plans: the needs of the elderly demographic who rely on cash and the acknowledgment that 'being cash-free puts us at risk of attack'.
3. Myth: Getting rid of cash would stop crime and terrorism
This misinformation is often used by profit-driven card companies and vote-seeking politicians. There is no evidence to support the claim that eliminating high-denomination banknotes or restricting cash payments will prevent terrorist attacks. Targeting cash simply misidentifies the issue at hand. In a cashless society, criminals would simply turn to trading in luxury goods, cars or even people.
4. Myth: With Alipay and WeChat, China will be cashless soon
While two cashless campaigns driven by these two companies hiked the number of China's mobile transactions to a record US$12.8 trillion, China remains one of the most cash-heavy countries in the world. The discriminatory 'cashless overhype' worried officials so much so it drove The People's Bank of China to call for a nation-wide ban on cashless policies whereby all non-online businesses are to resume accepting cash as of mid-August 2018.
5. Myth: Cash demand is declining
Actually, cash production is growing. Reports from the US Federal Reserve, the Bank of England and the Reserve Bank of Australia all show an increase in cash in circulation. While it may decline in a few countries, overall, cash demand continues to grow.
"Banknotes remain the most important contact point for Central Banks with the public and therefore they play a key role in the reputation and public perception of the central bank."
6. Myth: No one uses cash anymore
In 2011, a World Bank survey revealed that over 2.5 billion people around the world to be unbanked. Reasons for this range from poverty to the cost, travel distance, and paperwork involved in opening an account.
As it turns out, all this 'cash is dead or dying' hype is no more than hearsay and not at all based on reality. In terms of the public's relationship with cash, it is clear that it is very much in demand across all continents.
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