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Cash Is King: A public interest paper on the future of cash in a digital world

May 14, 2017 Share Source

Executive Summary: Over recent decades several leading financial analysts have predicted the disappearance of physical cash, notes and coins, arguing for their replacement by an electronic payment system using debit/credit cards, Bitcoin, or other crypto-currencies and electronic wallets. This, they believed, would create an increasingly cashless global society.

In 2014, Sweden announced its aim of going cashless and more recently Denmark followed suit. Yet even as the Swedish government pronounced the death of cash, it also announced the introduction of a new series of bank notes which began circulating in October 2015.

In August 2015 the frequency and severity of cyber-attacks on financial institutions prompted the US Federal Financial Institutions Examination Council (FFIEC) to instruct banks to enhance their information security programs. This move was designed to better defend customers against attacks that might compromise user credentials and deploy destructive software.

Furthermore, recent reports suggest bank information systems have indeed been compromised, resulting in the theft of large volumes of user credentials, including passwords, usernames, and other forms of authentication information. In the UK during 2015 Royal Bank of Scotland (RBS) faced regulatory scrutiny after a technology failure resulted in the disappearance of thousands of customer payments.

“...even as the Swedish government pronounced the death of cash, it also announced the introduction of a new series of bank notes ”
" Cash Is King: A public interest paper... UK's Cambridge Security Initiative The Cambridge Security Initiative

Some cyber analysts believe that a cashless society would require the elimination of not just cash but also credit cards. They argue that this would reduce the number of bank robberies and attacks on ATM machines and therefore reduce crime rates. Although these assertions make for good headlines, they do not take into account recent improvements in cash protection systems, and the severe cyber attacks taking place.

In fact, cyber hacking of ATM machines and electronic bank accounts remains a growing but largely silent problem. It often goes unrecorded by police and crime agencies and bank customers are usually left unaware of the crime. Banks choose not to advertise the number of electronic attacks taking place on their systems but instead prefer to pay back the lost amount and then raise the general service charges.

Furthermore, the police in almost all jurisdictions find they are losing many of their most experienced IT people to commercial employment because of the greater need in the sector and higher salaries.

“The stark warning that what many think is tomorrow’s problem is already with us in the world of the hacker and the cyber-criminal.”
" Rt. Hon. Lord McNally Minister for Data Protection 2010-2013 Parliamentary Group on Internet [...] Treasurer

This environment seems a long way from the old ways of money being backed by gold. And so we have reached a point where existing technology allows us to make electronic money, removing it from the physical world altogether. Nevertheless, many central banks continue to print money faster than ever and to protect it they employ sophisticated anti-counterfeiting printing security making it far more difficult to replicate or corrupt than electronic currency.

This turbulent environment highlights the strength of bank notes and suggests that they will not disappear anytime soon. In fact, a recent Euromonitor International report found that $14.4 trillion in consumer payments were made with cash worldwide, compared to a consumer payment card transaction value of $9.6 trillion. This in turn tells us that, despite the rise of plastic cards and electronic money transfers, globally, cash remains the principal means of payment.

Download paper here


UK's Cambridge Security Initiative, 2017 "Cash Is King: A public interest paper from the UK's Cambridge Security Initiative on the future of cash in a digital world."International Currency Association PDF http://www.currencyassociation.org/resources.aspx

Last Updated: Jan. 2, 2019

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