Cashless society : the untold disavantages

Cashless payment systems offer increasingly more opportunities. But are we doing the right thing relying on them entirely? And is it worth betting everything on only one form of payment and refuse alternatives?

The modern society is becoming ever-more uncomfortable for those who prefer to pay in cash. ATMs and retail bank branches are disappearing, stores are refusing cash payments, and hygienists keep saying that paper money carry bacteria and fungi.

These statements are gradually turning into some kind of ideology. On the one hand, the idea of a cashless society is supported by cryptocurrency enthusiasts, on the other hand - by banking and financial institutions. Each of them holds their own arguments in favor of a world without paper money and coins. Let's hear them and try to take their reasoning with a pinch of salt, because our future depends on our today’s choices.

The limits of cryptocurrency

Let's start with cryptocurrency. The Bitcoin’s ideology of money without governments and intermediaries has already attracted well-known oppositionists in many countries. Some of them consider the current distribution of wealth unfair and hope to change it; others believe in the possibility of a bank-free monetary system.

At first glance, these ideas seem quite interesting. However, a closer inspection reveals some inaccuracies that can further grow into big problems.

First, it’s about fair wealth distribution. Bitcoin mining now requires huge computational power. Equipment costs a lot of money, but often does not even pay off. Recently, analysts with JPMorgan Chase & Co. found that the cost of mining a single Bitcoin outweighed the actual value of the Bitcoin itself, and there’s a very little chance that a poor software engineer can go from rags to riches by mining at least one Bitcoin. In addition, all cryptocurrencies are not cheap and are subject to strong price fluctuations, which makes them not the best tool for investing the last money. It turns out that cryptocurrencies now provide an opportunity to increase wealth only for those who have enough fiat money to buy or invest in equipment. It hardly looks like an egalitarian society.

There’s also a question of freedom. Bank-free money turnover was one of the original goals of Bitcoin’s creators. However, banks now are actively stepping in the process, and are trying to use the blockchain technology for their own purposes. Agustín Carstens, Chief of the Bank of International Settlements, recently said that “many central banks are working on it [development of digital currency]; we are working on it, supporting them. And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”

Apparently, digital currency issued by the central bank is no longer a hypothetical free coin, but the conventional public money in its digital form. Isn’t that a path that we are on? Right now, non-cash payments are gradually crowding out paper money and coins. At Visa's 2018 third-quarter conference call, the company’s chief Al Kelly boasted Visa's 20% payment volume growth and control of 50% of the market place, and let’s not forget that there are many other digital payments operators in the market.

The banking system and its agenda

Now it’s not about cryptocurrencies only, but about very real and prosperous banks, financial operators and many intermediaries. Unlike Bitcoin fanatics, they don’t care much about prosperity of the society. They work in the money industry, and work for money, sometimes forgetting about living people. Payment processing companies such as Visa and Mastercard want to increase the amount of digital payment services they sell, while banks want to cut costs.

Consumers pay for these goals from their own pockets, usually in the form of fees or bank charges. These expenses are small, but make up a significant amount altogether. Financiers are convincing us that this money is paid for convenience and safety, but is it really so? In the real world, your card may be debited with a double amount, your account may be blocked unexpectedly, or your savings may be stolen. Depending on size of your account, it may be a small piece of your salary, your retirement savings or your emergency fund. What if you need this money right now? And what about emergencies? Patrick Daniels, director of financial planning at Precedent Asset Management, says that it’s better to keep a small amount of cash at home to avoid the risk of losing all your money. The same opinion is shared by the American Red Cross and other disaster-preparedness organizations. Is it really worth depriving yourself of the opportunity to avoid unpleasant or dangerous situations by going fully cash-free?

In general, an honest look of the situation shows that neither online payments nor cryptocurrencies can fully replace cash. The system of cashless society is positioned as simple, fast and easy to use. However, it hides many flaws. Some of them have already manifested themselves. Others are only assumed, which, however, does not make the threat less real.

In addition, we should not forget that a cashless society cannot function without the Internet, and this makes it the giant with feet of clay. Remember how often your computer froze, failed or lost the Internet connection? No one is immune from this, be it a small bank branch in a provincial town, or an Internet king like Google. Perhaps we should not bet everything on the tech-dependent cashless society, but keep cash as slightly old-fashioned, but still reliable emergency exit.


By: Sierra Rogers (12.00)

Tags: cashless, cashless society, banking system, cryptocurrency