A Cashless Society, What Could Go Wrong?

From the beginning of time humanity has conducted commerce with physical goods and assets. Humans would securely store their wealth and carry daily amounts of assets such as copper, bronze, silver, gold, or gov’t issued notes such as the Dollar or Yuan in order to participate in the economy. This form of commerce carried on until the 1960’s when the very first magstripe charge card was created by Forrest Parry at IBM allowing individuals to carry a plastic card and conduct commerce with local businesses. This technology forever changed how we conduct commerce.

Fast forward to today where our global economy has shifted to an electronic first approach to commerce (Debit/Credit Cards, eCommerce, Apple Pay, etc), leaving traditional means of commerce (physical exchange of assets and services) as the tortoise to the hare. If you went back in time even just 50 years ago, the concept of a cashless society, in which physical currency is no longer used in our global economy and all transactions are conducted electronically would have sounded ridiculous. However with the rapid pace of financial technology the concept of a cashless society has gained tremendous traction leaving me to wonder what are the pros and cons of introducing this type of commerce based society for the very first time to humanity?

My question to you is, when it comes to your financial security and freedom, is a cashless society something you should care about as an individual participating in our local and global economies? Let us dive in and see if this is in fact a topic you should pay greater attention to.

What once was brushed off as speculation and nonsense, recent narratives have shifted from our global financial institutions such as the European Central Banks, Federal Reserve, IMF, World Economic Forum, and other global financial organizations around the concept of a cashless society powered by central backed digital currencies (CBDC’s). These organizations have now begun to introduce their plans for replacing physical currencies (Dollar, Yuan, Euro, etc) via CBDC’s. This has sped up the speculative timelines for a global cashless economy. You may ask yourself, why does this matter to me? I already don’t use cash and solely use my debit or credit card as it’s easier and more efficient. Sounds like a cashless society is progress and could be a good thing right? Well this topic is getting a lot of attention now and it’s become controversial at all levels of conversation from coffeeshop debates to legislators at the state, federal, and global level.

Proponents for a cashless society would say this economic move brings numerous benefits, including increased efficiency, reduced crime, and greater financial inclusion. However, critics raise concerns about the potential downsides of such a society, including privacy concerns, cybersecurity risks, and the potential for exacerbating economic inequality. In this article, we will examine the arguments for and against a cashless society, and evaluate the potential costs and benefits and how it weighs on our future commerce experience.

Proponents of a Cashless Society

While there are concerns about individual privacy in a cashless society, there are also several potential benefits. Here is how proponents such as leaders at the European Central Bank, World Economic Forum, and IMF are promoting a cashless society and it’s progress for individual privacy and the global economy:

1. Reduced Crime: One of the most significant benefits promoted of a cashless society is the potential to reduce crime. Cash is often used in illegal activities, including money laundering, tax evasion, and illicit trade. In a cashless society, electronic transactions are much easier to track, which could help reduce these illegal activities. This will also help reduce petty crime as there will be less motive if people no longer carry or store cash at their homes. This could lead to a safer and more secure society for individuals as it puts stricter controls around illicit activity.
2. Increased Efficiency: Electronic transactions are much faster and more efficient than cash transactions. This could lead to a more streamlined and efficient economy, which could benefit individuals and businesses alike. Electronic transactions and money transfers can also be conducted remotely, which could reduce the need for physical transportation and storage of cash (bye bye Brink trucks), leading to cost savings and reduced carbon footprint.
3. Financial Inclusion: A cashless society could lead to increased financial inclusion for individuals who are currently unbanked or underbanked. Electronic payment systems are often more accessible and cost-effective than traditional banking systems. Think of new digital wallets like Venmo and CashApp, users can sign up in minutes and begin having access to banking tools like checking accounts and debit cards. This could help bring more individuals into the formal financial system removing unnecessary high cost financial services for cash checking from their finance lifecycle.
4. Greater Transparency: Electronic transactions are much more transparent than cash transactions. If every transaction is electronically recorded and stored then it becomes far easier to track all your spending and harder for illicit activity such as money laundering to cheat the system.
5. Improved Data Security: Electronic transactions can be more secure than cash transactions. Cash can be easily lost or stolen from both individuals and businesses. While there are concerns about data breaches, electronic payment systems often have advanced security measures in place to protect individual and businesses’ financial information and security.

Critics of a Cashless Society

The introduction of a cashless society has raised concerns about individual privacy, and centralized control of your finances, as electronic transactions are much easier to track and control than cash transactions. Here are some of the reasons critics believe a cashless society could be a bad move for our individual privacy and monetary control.

1. Increased Surveillance: In a cashless society, all transactions would be conducted electronically, which would make it easier for governments and corporations to monitor individuals’ financial activities. This could lead to increased surveillance and a loss of privacy, as financial transactions could be tracked and analyzed in real-time. Governments and corporations could potentially use this information to monitor individuals’ behavior, track their movements, and even predict their future actions. With cash transactions there is no way to track where, when, or how you spent your hard earned money giving you freedom of choice.
2. Centralized Control: A cashless society would remove your freedom to move money freely without oversight or limitations. Today you could walk into your bank take out as much money as you so chose and spend it on whatever your heart desires giving you complete freedom and control for how you spend your money. Critics believe in a world where cash is replaced by CBDCs, central banks will ultimately always have control over your money and where / how you could spend it. This is currently happening today in China as they roll out their cashless society and social credit system.
3. Lack of Anonymity: In a cashless society, it would be much more difficult to conduct anonymous transactions. Cash transactions are often used for legitimate purposes where anonymity is desired, such as donations to political campaigns or contributions to nonprofits, or to support those in need. Critics believe in a cashless society, these transactions could be tracked and analyzed, which could lead to a loss of anonymity and potentially even censorship.
4. Vulnerability to Data Breaches: Electronic transactions are vulnerable to hacking and other forms of cybercrime. We have seen it happen time and time again, which could lead to the loss of sensitive financial information. In a cashless society, individuals would be required to store their financial information on electronic devices, which could be vulnerable to data breaches. If this information falls into the wrong hands, it could be used for identity theft, fraud, and other malicious activities. Proponents would argue this already exists today in our global economy given the shift to digital first payment methods.
5. Discrimination: A cashless society could lead to discrimination against individuals who do not have access to electronic payment systems. This includes individuals who do not have access to smartphones, internet access, or traditional bank accounts. These individuals could be left behind in a cashless society, which could exacerbate economic inequality and lead to a further widening of the digital divide.

Closing Thoughts:

The move towards a cashless society is a complex issue with both potential benefits and drawbacks. While increased efficiency, reduced crime, and greater financial inclusion are all potential benefits, the loss of privacy, increased cybersecurity risks, and exacerbation of economic inequality are all potential drawbacks. Ultimately, the decision to move towards a cashless society will depend on a number of factors, including the level of public support, the readiness of electronic payment systems, and the ability of governments and corporations to address the potential risks and drawbacks.

The question now is where do you stand on this topic? You may look at your current day to day lifestyle and feel you’re already living in a cashless society, one where you pay your rent or mortgage electronically, use a credit or debit card for all your transactions, and never desire to carry cash or coins around (that’s me). On the other hand ask yourself what if cash went away and there was no other option other than electronic payments and currency. How much power would financial institutions and governments then have over you and how you spend your money given there is no other alternative than the one they make available to you.

Physical assets create freedom from control in our financial markets. If we are to give up physical assets as a form of currency and payment we may be stepping closer to an Orwellian nightmare. What appears to be harmless progress in our global financial markets may very well be a slippery slope.

“Freedom means you are unobstructed in living your life as you choose. Anything else is a lesser form of slavery” – Wayne Dyer.