From electronic payments and credit cards to mobile payment services and peer to peer money transfers, today’s society displaces money in more ways than one can keep track of. Add to these the outstanding rise in the use of cryptocurrencies like Bitcoin, and there may be only one conclusion to be drawn: the future is cashless.
Digital alternatives have replaced physical ones in industries like music, photos, and entertainment. It’s only natural for some to wonder if physical money will go the same route. Is it possible for cash and ATMs to completely disappear?
CASH USAGE TODAY
Reliance on physical and alternative cash is uneven across the world. While the United Kingdom, France, Singapore, Canada, and the Netherlands are the least cash-reliant countries, only one percent of Saudi Arabia, Malaysia, Egypt, and Peru’s transactions are cashless. Some advanced countries, such as Japan, are also still reliant on cash.
In the US, cash usage remains high relative to EU countries. In 2015, the country’s cash usage represented 13.1% of its Gross Domestic Product (GDP) — a big difference from Finland’s 7.7, the Netherland’s 7.4, and Switzerland’s mere 4.5%.
Despite half of the world still being on the fence about whether to go cashless, the movement for cashless alternatives continues. Lawmakers in favor of a “less cash” society offer multiple reasons for the change: social equity concerns, imposed regressive taxes, and prevention of using cash to fund illegal activities.
Digital initiatives are slowly threatening the global predominance of cash. In fact, some countries are on the cusp of going completely cashless.
China, for example, combines ancient tradition with technology. In 2014, messenger app WeChat launched Lucky Money, a digital version of the “red packets,” which holds the physical money given during the Chinese New Year. Since its launch, the app has seen the exchange of 40 million red packets between its users.
Since the 1960s, Sweden has been promoting alternatives, such as digital bank transfers. Cards also rose to prominence in the 1990s as a form of payment when banks began to charge fees for checks. Swish, an app developed by major Swedish banks, is the country’s choice platform for digital money transfers. Also, a number of businesses discourage cash – retailers have the right to refuse cash payments.
Canada also joined the cashless revolution. In 2012, the Royal Canadian Mint launched the MintChip Project, which offered a secure way to spend money online. Consumers can use the MintChip platform to send money via text message, social media, or e-mail.
WHAT THE FUTURE HOLDS FOR CURRENCY
Will cash be made obsolete in favor of these digital alternatives?
Cash maintains its position as a unique form of payment that anyone can use anytime, anywhere. There’s no need for third parties to use it. This freedom offers another benefit: strong protection of privacy. Currency doesn’t care where transactions happen or who holds it. As long as you are paying with legitimate cash, your transaction is valid.
Cash and currency will, of course, evolve as society becomes more digitally native. Old perceptions and habits, however, might take a longer time to turn over. Digital alternatives will have to wait longer before they can completely replace currency. For now, the human connection with cash still remains.
Originally published in FXStreet