Surviving the cashless cataclysm
InSweden, just 3% of the economy is powered by coins and paper money. Public buses don’t accept cash, churches have installed card readers to take donations, and there are even some bank branches that refuse to take your money, opting instead to deal with electronic transfers only.
The European average is 9%, and in theUS, the credit card motherland, the percentage is still more than twice that ofSweden: 7%. If you stop and think about it, though, none of these figures are particularly surprising. With the rise of credit cards and store cards (and card readers everywhere), PayPal, online shopping, iTunes, Netflix, and app stores, cash is feeling more outmoded by the day. When was the last time you used an ATM, anyway?
The trend is very clear: Cash is on its way out. It might take another 10 or 20 years forSwedento get there, and longer for theUSand other economies, but eventually so few businesses will accept cash that it will be relegated to jangling jars and cruddy sofa crevices. Governments will have no choice but to halt the fresh minting of coins and printing of bills, and eventually non-electronic money will dry up all together.
This will mark one of the most significant paradigm shifts in modern history. At some point in the future, probably within our life times, you will wake up and your cash will be worthless. After centuries of use, we will no longer have a fungible currency. Gone are the gold sovereigns and silver dollars and nickel-alloy pennies — it’ll all be encrypted, digital bytes, stored in programs like Google Wallet. Instead of handing the shop attendant some cash, you will swipe your phone across a card reader; if you need to lend your friend some money, you’ll just key in a number, bump your smartphones together, and NFC will take care of the technicalities.
I think this will all happen naturally and fairly painlessly. Just 50 years ago, cash (and gold bullion and shares and bonds) would have represented the entire economy — and nowSweden’s on the cusp of killing cash off entirely. It’s just a matter of convenience — and if consumerism has taught us anything it’s that convenience is king. When we’re fast moving towards a world where your smartphone replaces just about everything in your wallet — from cash to tickets to ID — how can clunky coins and grubby banknotes really compete?
Sentimentalists will mourn the demise of bills and coins with national figureheads emblazoned on them, I’m sure, and there will also be an issue with older people, who in general haven’t made the leap to electronic money and would be lost at sea if cash was no longer accepted anywhere. Beyond that, though, there’s a far more pressing question that governments (and societies) will have to answer: Will we let private corporations track, collate, and cross-reference every single one of our transactions?
You see, in a cashless society every single payment is digital, which means that every transaction must be confirmed by the bank or institution that governs your money. In turn this means that every move you make will be recorded in a huge database. Your bank will know where you get coffee in the morning, the route you take to work, and if there’s a vending machine at your office it might even know where you work. Likewise, your bank will know that you like to buy things on Amazon while you’re at work, that you enjoy watching X-rated movies when you’re on the road, and that you always leave it until the last moment to buy your wife a birthday present.
At this point it’s commonplace for self-respecting libertarians to leap up and decry the awful, privacy annihilation that I’ve just described. How could you live in a world where the Rockefellers can track your every move?! they cry. Well, get this, every credit card company, bank, and sizable corporation already tracks your transactions.
Have you ever had a call from your bank, asking if a purchase you just made was fraudulent or not? Banks employ incredibly complex software (on beefy computers) to analyze billions of transactions — ostensibly to detect fraud (which costs banks millions of dollars a year), but of course other patterns can be detected as well. Just as one example, BillShrink has worked with 2,000 banks to analyze your buying habits, and then to provide targeted coupons on your monthly statement. Obviously it’s rather cool to automatically receive a $5 voucher for McDonald’s if your bank detects that you spend $100 under the greasy shadow of the Golden Arches every month, but it’s a little bit creepy too. It is, after all, exactly the same as Google or Facebook’s targeted advertising — but possibly even more accurate.