Wednesday, March 21, 2012

Who In Their Right Mind Would Want A Cashless Society?

I pay with cash wherever I go. Heck, I would pay in cash online if there was a possibility for it. Doing so has a number of reasons, from privacy over reduced direct or indirect fees to avoiding overspending. It also seems to be a lot faster than paying by card, at least in my country where you often either have to type in your security code or sign a receipt before the money exchanges hands. Nothing's worse than having to stand in line for someone who is buying a pack of bubblegum with a card.
You probably have read that there is a movement in Sweden to make the country the first cashless economy in the world. ZDnet for instance ran the story today, but they have not been the first to do so. It actually dates back at least to 2010, when the New American published Sweden Considers Cashless Society.
society without cash
Before I take a look at why a cashless society is bad for the majority of people, I'd like to take a look at the other side. Who is advocating a cashless society, and why?
As far as Sweden goes, it seems that a group of government officials, celebrities, and unions are pushing towards a cashless society. The core reason mentioned is a drop in robberies ever since the society turned to electronic transactions. According to information posted by the Huffington Post article, bank robberies in Sweden are down from 110 in 2008 too 16 in 2011, and robberies of security transports are down as well.
While that is an impressive drop, there is no study that is linking the reduction to the shrinkage of the cash economy in the northern European country. The same article mentions that bills and coins represent 3 percent of Sweden's economy, a stark contrast to the 7% in the U.S and the 9% in Europe.
How do ordinary people benefit from a cashless society? Some like ABBA's Bjoern Ulvaeus believe that less people will get robbed as a consequence, as robbers can't take away what's not there.
A cashless society however has several other consequences:
  • It is possible to track every transaction that is made electronically. While that in itself is bad enough from a privacy point of view, it can also mean that people change their spending. Some people might not spend money on things that they do not want to be linked to. This can be a donation or a purchase for instance. Some agencies would be tempted to get their hands on those information, for instance for taxes or law enforcement purposes.
  • Overspending is fueled by credit and debit card transactions, as it is more difficulty to keep track of all expenses, and easier to spend more money because it can be done with a card. If you only have cash, you never can spend more than you have on you.
  • Fees for transactions, either indirect by charging the merchant, or direct by charging a fee for every transaction, mean that you will pay more for goods and transactions, and that it is even more of a nuisance to keep track of the spending.
  • Trading could become popular again. While you can't pay your neighbor for painting your house anymore without the tax bureau taking note, you could trade services or goods instead. It is also not clear how you would pay someone else. Would you have to go through a bank to do that? How would you pay that 14 year or girl for baby sitting your kids?
What's your take on the development? Do you think that things are progressing in the right direction?

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