Hmm, it is difficult not to sound like a grandfather when writing this kind of post. The world is evolving – no question about it. It is evolving at a mind-blowing speed. That evolution brings about fascinating improvements to our lives, such as more comfort and less time wastage through advanced technology. But as evolution takes place, none of us are ever fully safeguarded from the malicious actions of human beings in our life. After all, evolution and life go hand in hand. Recent gossip tells us that the world is headed towards a fully digital currency. Soon, cash may not exist. Surprising? Not really. Something to be worried about? Well, maybe…
Up until I became hooked on the convenience of using a payment card for everything everywhere, I swore I would stick to cash. “Banks will not track me,” I declared! And looking back, I am simultaneously fond of the old me and disappointed in the new me. I have lived the last decade thoroughly enjoying card payments. Then, two weeks ago, I first used Apple Pay – the one payment method I always mocked whenever I would see someone take their iPhone out to pay for something. “Look at this guy – paying with his phone,” I would say, “looks completely ridiculous!” Fair enough, I only used Apple Pay out of necessity. I forgot my card at home. But still, I had to join that club.
Why bother sharing my story? It is quite plain. Throughout all these ‘personal’ challenges, at least, I always had a choice. I could decide whether or not I could use a payment card, cash, or any other payment method in existence. But as the news story develops, it appears increasingly possible that we will soon not have any choice between cash or digital whatsoever. Digital will prevail, and the government will make sure that you find it increasingly difficult to even think about using cash payments. Locking you in the system this way will mean it will be harder to ‘escape the matrix.’ Think I am exaggerating? France and Spain, for example, have already restricted permissible cash payments to 1,000 Euros. Violating this amount in cash payment and getting caught could result in a hefty fee of up to 25% of the amount in some jurisdictions. In fact, this violation could get you to be considered a ‘terrorist’! Wow.
Undoubtedly, there are certain benefits of a digitalized global payment network, such as these:
- Higher convenience of payments (no need to carry around papers and coins in your wallet)
- Easier payments when traveling (no need to exchange the physical cash of one currency for another during your trip)
- Less physical contact (less spread of ‘diseases and viruses,’ like COVID-19)
- Less cash theft (just because there is no more cash)
- Lower production costs of paper money and coins (and normally, this saved money could be used to improve other things in our economy)
- Across the board: prevention of ‘illegal’ activity paid for in cash to avoid paper trails (including drugs, terrorism, money laundering, etc.)
But as we know, no benefits come without costs. Are you willing to pay the price for the benefits listed above? Let’s discuss why a cashless society could be a bad thing.
1. Challenging for the technologically distant
You would be wrong to assume that everyone actively uses online banking. In fact, globally, only about 30% do. Going cashless will negatively affect the elderly and the rural, as well as others who may not even use the internet. A worldwide digital currency is bound to put such people completely out of the economy! Life is possible without the internet. People used to live without it for many generations before. By removing cash, the government is forcefully pushing you online. Sure, they will hold a different point of view: “Nobody is forcing you. You are free. If you want access to the economy, you will go online. But otherwise, you do not need to.” But, is there any other way to live in the modern world without having access to money? I do not think so.
2. Easy to overspend
Cash is good for your spending habits. You have a limited amount of it. You automatically budget based on that limited amount. You cannot spend more than that amount either. That extra bit of friction in your spending phase helps you maintain control. On the contrary, the ease of spending money with a payment card or phone often leads to more spending. Why? All you have to do is press a little piece of plastic or your phone to a payment terminal. You do not see your money being taken. You do not see your remaining balance. And if you are using a credit card, you do not need to even worry about the amount of money you have left. You can always go ‘in the minus.’
I know people who are addicted to spending money. It is in itself a psychological issue. Now, imagine giving the same flexible spending convenience to those who are not used to it. Suddenly, everybody hops online and gets bombarded with spending opportunities. “Not enough in your account for this item you want? No problem! Here is a loan!” Sooner than you know it, you end up living to cover your debts that you never had before.
3. Prone to cyber-security risks
When you hold a physical 100-dollar (or Euro) bill in your hand, you feel its value. The feeling of it to the touch, its unique texture, its special markings, and even its smell all help you link the monetary value you possess from this object in physical form to its spending power. The worst that could happen is for someone to steal that bill from you, but that too is not a simple physical action that tends to happen rather rarely. Now, imagine not being able to ever hold your money in physical form. Imagine having to strictly trust a bunch of numbers you see on your screen in your bank account. “Are they even real?” Finally, imagine those numbers suddenly reducing to zero and you having no idea why!
Hacking will always remain a threat and no matter how many safeguarding promises you get from your financial institution, they will all sound foreign to you. Unless you know cyber-security well, you will not understand how safe your digital money is. Even if you do understand, you have no choice. A worldwide digital money transition will make it a field day for hacking. Armed bank robberies will no longer take place – yay! But now we will have a prevalence of non-armed surprise personal robberies, where you will not even know who was the robber and where the hell did your money go.
4. Questionable for small businesses
This may be disputable, but there is no doubt that the more flexible small businesses can be at the start of their existence, the better chances they will have at scaling. If their being is pinned to the banking system from day one, there is little wiggle room, if any. Starting, it may be especially difficult to validate and test your business model if you have to engrave your existence to receive any money. On top of that, in comparison to taking cash, online payments include processing fees.
Remember that if you are a chaotic startup, you are more likely to succeed when you spend as little as possible while managing to collect money from your customers. It is no secret that a lot of small businesses try not to worry about taxes at this early stage, at which point cash comes in handy. A digitized economy, however, will have the tax authorities on you from the moment you call yourself a company. No transaction will ever go unnoticed. You may be in a choke-hold.
5. Over-reliance on technology
Having your money displayed to you as a bunch of numbers on a screen means you need that screen to access your money. And what if that screen breaks? Or runs out of battery? That will be equivalent to forgetting your wallet of cash at home. “That does not seem like a frequent or significant case” you may say. Fine, it would be your fault; that is true. But what about the case of your online banking app having technical issues? Can you confidently say that will not happen then when you desperately need to pay?
Once again, you will need to rely on the online financial system and its vulnerability. How resilient is it? What guarantee do you have? For small amounts of money, this may still sound OK. But imagine you hold millions and suddenly lose access to them. Not to mention that this entire digitized financial system relies on the Internet and the Internet is not accessible everywhere!
6. Less privacy due to a higher level of monitoring
All your transactions will be monitored. Where, how much, and for what your money was spent will be tracked in your account history. There will be an unbreakable paper trail – a digital footprint. And who is to stop the government from harvesting data from individuals for its own ‘ruling’ purposes? What is to stop financial institutions from selling that data to commercial entities? “Regulations!” I hear you say. Right. We can certainly believe those are followed.
Some of you may argue that this is already possible. So many of us already do not even bother cashing out, using our payment cards for everything we do. It is not the same, however, as the data collected is not fully reliable since it only includes a segment of the population. Also, right now we have a choice. If we do not feel safe with online payments, we can still take out cash. Once that option is canceled, you will be at the mercy of the financial sector and its decisions. And how do you feel that the government can stop you from spending your money on things you want? Or that companies can push you to spend your money on specific goods or services according to your past expenditure?
7. Prone to abusive government control
Once you are locked in the digital economy, all you can do is watch as it is being changed by governmental decisions. If they feel you are saving too much, they can set a negative interest rate on your money. This means you will be paying them a part of the money you want to save (and that usually works the other way around). If they feel you are not saving enough, they may forcefully lock a part of your monthly salary (by deploying a new policy, for example). And these are just 2 examples out of many possibilities.
Trust but verify. I love this expression. As you agree to and sign off on countless pages of digital paperwork known as contracts when you enter the digital economy, there will be a ton of ‘legalese’ (meaning legal language that sounds too complicated). Do not fast forward. Study those documents (if this day comes) to understand what can be done to you and what leverage you have. Hire a lawyer to ‘translate’ them if you have to. Otherwise, all the nasty surprises you come across in your experience will be addressed like this: “You were asked to read the contract and sign it, and so you did.” Yet I do hope that day never comes, for your own sake.
8. All eggs in one basket
Multiple events could cut you off from your access to money in a digital economy. We spoke about hackers and technical issues above. What about natural disasters? Or wars? Boom! The Internet is off. All your money is inaccessible. Try and live then. If your country is invaded, so may its bank accounts including yours. The last few decades have shown us how unpredictable the world can be. Putting your faith into one financial system is stupid, to say the least.
Have you not heard of the expression “Never put your eggs into one basket”? It is well known among investors and for a good reason. You would not be a wise investor if you spend all your money on a single stock, fund, or asset. Why would this expression not apply to a single global digital economy then?
Look, a digital economy already exists. The problem is not with it in particular, but rather, with the possible enforcement of it. The problem is with the forceful lack of choice. Why is it not a sane decision to question who is in power? They must always be questioned if you want to believe that we truly live in a free society. And they should only welcome those questions as opportunities to build trust.
May you not be restricted in choice with anything. Stay driven. Peace out.
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