The Push for a Cashless Society: Will Cash Survive?
Let’s face it, many forces are pushing for the abolition of—or at least serious restrictions on—cash. From businesses and governments to credit card companies and economists, the battle against cash is being waged on multiple fronts. But is cash truly losing, or is it showing signs of resilience in the face of these pressures?
Forces Against Cash
Businesses Dislike Cash
Many businesses hate cash because cash transactions take longer to process and large quantities of cash pose a security risk. If you travel by air, you’ve experienced this first-hand. “Cashless cabins” are the rule for most airlines, where you must purchase every glass of wine, cheese dip, or package of mixed nuts with a credit or debit card.
In Atlanta, you can’t even buy a hot dog at a pro football or soccer game with cash. In March of 2019, the operators of Mercedes-Benz Stadium, home of the Atlanta Falcons and Atlanta United, announced it would no longer accept cash at food and beverage concession stands.
Credit Card Companies Want a Cashless Future
Credit card companies hate cash too, for obvious reasons—they get a cut of every purchase through the fees they charge businesses. In 2017, Visa announced its “Cashless Challenge” and gave $10,000 to 50 small businesses that stopped accepting cash payments.
Governments and the War on Cash
Big brother hates cash as well. For decades, governments around the globe have engaged in a War on Cash. The original justification for this war was to fight racketeering. Over time, this evolved into the War on Drugs, the War on Money Laundering, and eventually, the War on Terror.
Numerous countries have placed severe limits on how much cash you can spend at one time. Spain and France, for instance, have banned cash transactions over €1,000. In Italy, violations of the €3,000 cash limit can result in confiscation of up to 40% of the amount paid. Australia plans to ban cash transactions larger than AU$10,000 in 2019.
India took the most dramatic step in 2016 when the government rendered 86% of the country’s cash worthless overnight by withdrawing 500- and 1,000-rupee notes from circulation. The transition caused chaos, leaving millions of unbanked citizens unable to pay for daily necessities.
Global Case Studies in the Push Against Cash
Sweden’s Cashless Society
In Sweden, hundreds of ATMs have been removed, forcing individuals to drive miles to find one. Some economists see Sweden as a model for the cashless future, but even there, concerns are growing. The Swedish government is now considering laws to require banks to process cash transactions.
Negative Interest Rates and the Case Against Cash
Economists like Harvard Professor Kenneth Rogoff argue for the abolition of cash to enable central banks to impose negative interest rates. This would discourage saving, force banks to lend, and encourage consumer spending during financial crises. Citigroup’s Willem Buiter has even suggested negative interest rates as low as -6% in severe downturns. In a cashless world, negative interest rates could effectively flush out any hidden or saved wealth.
Pushback Against the War on Cash
Consumer Advocacy and Legal Protections
Not everyone is on board with the war on cash. Cash bans disproportionately affect the poor and the unbanked. Nearly 7% of American households rely exclusively on cash and money orders to pay their bills. This has spurred legislative action in some regions. In March of 2019, New Jersey banned cashless stores, and Philadelphia passed a similar ordinance. Officials in cities like Chicago, Washington, D.C., New York City, and San Francisco are debating comparable measures.
International Resistance
The Governor of the French Central Bank has affirmed, “The Banque de France will never drop cash.” Even in Sweden, the government is reconsidering its cash policies to ensure individuals retain access to physical money. In the UK, lawmakers are debating protections for cash transactions.
Cash’s Resilience
The $100 Bill Phenomenon
Despite efforts to suppress its use, cash remains resilient. A 2019 study showed that the volume of $100 bills in circulation has doubled over the past decade, with nearly 80% held outside the US. While some attribute this to criminal activities, others cite legitimate reasons, such as avoiding negative interest rates or maintaining a store of value in unstable economies like Venezuela.
Privacy and Security
Many people prefer cash because it offers privacy and security. Digital payment systems are vulnerable to hacking, and databases of card transactions aren’t always secure. In a world where personal data is increasingly commodified, cash remains a refuge for those who value financial privacy.
Preparing for a Cashless World
If efforts to restrict or eliminate cash intensify, individuals can take steps to protect themselves:
- Withdraw and Document Cash: Keep excess cash in a secure location, but document your withdrawals to prove its origin in case of an India-style currency recall. Avoid “structuring” withdrawals to sidestep reporting requirements, as this is a felony.
- Invest in Gold: Convert some assets to gold and store it securely. Consider keeping a portion in a private vault outside your home country.
- Choose Strong Banks: Keep your bank deposits in financially stable institutions to mitigate the risks of bail-ins.
- Consider Cryptocurrency: While still volatile, cryptocurrencies like Bitcoin offer an alternative to traditional banking and could play a role in preserving financial independence.
Cash is far from dead, but the forces against it are formidable. Governments, businesses, and economists see a cashless society as a way to increase efficiency, control, and economic stability. However, cash remains a critical tool for privacy, security, and financial autonomy. The ultimate test of cash’s resilience may come during the next global crisis. Central banks will likely push for even more aggressive measures then.
Until then, staying informed and prepared is essential for navigating the evolving landscape of cash and digital payments. By taking proactive steps, you can protect your wealth and maintain financial independence, regardless of the outcome in the war on cash.