Diana Meyer · Follow
5 min read · Nov 29, 2023
Over the years, the dominance of cash has waned as physical notes and coins see declining use across many countries. The shift towards cashless payments through cards, phones, or QR codes is driven by the undeniable convenience they offer. Notably, several nations globally have actively encouraged citizens to embrace cashless transactions.
However, the transition to a cashless society raises concerns about the potential erosion of financial freedom. In this article, I aim to unravel the concept of a cashless society, identify its proponents, explore the nations at the forefront of this transition, and provide insights on how to navigate potential pitfalls to avoid a digital dystopia.
The idea of a cashless society isn’t a recent development; it has rooted that trace back centuries. While the origin of the term is uncertain, American author Edward Bellamy was perhaps the first to envision such a society in his 1888 book, “Looking Backward.” In his portrayal, a socialist utopia emerged where the government exerted comprehensive control. Cash, including coins and paper banknotes, has been part of human transactions for thousands of years. The first coins were minted over 2,700 years ago in Lydia (Lydia is an ancient kingdom located in modern-day Turkey), while paper banknotes originated in China during the 7th century.
The advent of digital payments, initiated by Western Union in 1871, gained momentum, with credit cards leading the way in 1958. However, the concept of a cashless society, as envisioned by Bellamy, replaced cash with credit cards resembling today’s debit cards. Fast forward to the present, various cashless payment methods exist, ranging from cryptocurrencies to central bank digital currencies (CBDCs). The key distinction lies in the spectrum of centralisation, with CBDCs offering centralised control and cryptocurrencies striving for decentralisation.
In the contemporary landscape, credit and debit cards dominate the middle ground of this spectrum. While users have the flexibility to switch banks or card providers, evolving monopolies among some institutions have increased the potential for control over customer transactions. Notably, instances like the freezing of protesters’ bank accounts in Canada and the tracking of specific purchases by major card providers underscore the control issues associated with centralised financial systems.
The push toward a cashless society gained momentum in the early 1970s, aligning with the widespread adoption of debit and credit cards. This coincided with the abandonment of the Gold Standard by the United States after the 2008 financial crisis, central banks intensified efforts to stabilise the financial system through restrictive regulations. These regulations, purportedly aimed at fighting crime and corruption, mirrored the justifications put forth for transitioning to a cashless society.
The central banks’ full embrace of the cashless society concept materialised around 2019, catalysed by Facebook’s announcement of the Libra stablecoin project. The subsequent COVID-19 pandemic and associated restrictions provided governments with an opportune environment to promote cashless transactions further. Searches for CBDCs surged on Google, indicating a growing interest in these centralised digital currencies.
Contrary to expectations, cash usage has rebounded in many countries post-pandemic, with some businesses reverting to cash payments. This trend challenges the narrative that cashless transactions are universally accepted. The motivation for a cashless society often cites enhanced control, crime prevention, and improved tax collection. However, the implications of centralised control raise concerns about potential abuse and restrictions on financial freedom.
Sweden stands out as a pioneer in the journey towards a cashless society. The country’s centralised banking system and strategic initiatives, such as the Swish phone payment system, contributed to a significant reduction in cash usage. The dismantling of ATMs, coupled with a government mandate to exchange all coins and banknotes, further accelerated the decline of cash transactions. Despite an expected complete transition to a cashless society by 2023, recent developments suggest that Sweden’s progress may not be as rapid as anticipated.
Trust in government plays a crucial role in the success of a cashless society transition, as seen in Scandinavian countries like Sweden, Norway, Denmark, and Finland. The Netherlands follows a similar trajectory due to a prevailing trust in government institutions. However, global trends indicate a decline in trust in governments, posing a challenge to the sustained adoption of cashless transactions.
The question arises: which countries will be the first to achieve a fully cashless status? Scandinavian nations, starting with Sweden, seem to be leading the way. Sweden’s gradual shift to cashless transactions began in the early 2000s, driven by a centralised banking system and the introduction of user-friendly products and services. The decline in cash usage accelerated after the 2008 financial crisis, and by 2015, Sweden’s central bank mandated the exchange of all coins and banknotes for new ones, citing crime prevention.
While Sweden’s transition to a cashless society faced controversies and challenges, including technical issues and bankruptcies, it provides a playbook for other countries. The key elements include finding a justification (such as a financial crisis), introducing appealing cashless solutions, and making it harder to access cash through measures like currency exchange and ATM removal.
To safeguard against a dystopian cashless society, two primary strategies are suggested. First, advocate for the enshrinement of access to cash in law, ensuring both the right to pay in cash and the accessibility of physical currency. However, this approach may face social and political challenges, with potential backlash and labelling from mainstream media.
The second strategy involves embracing utopian cashless payment systems, particularly decentralised digital currencies that prioritise privacy. While cryptocurrencies offer decentralisation, their traceability poses a threat to financial privacy. Striking a balance between decentralisation and privacy is crucial to avoid restrictions imposed by governments and central banks, who may favour centralised digital currencies.
In conclusion, the path towards a cashless society is inevitable, driven by technological advancements and perceived benefits. However, the trajectory can lead either to a utopian or dystopian outcome, depending on the level of centralisation and control.
Vigilance, advocacy, and informed choices can contribute to shaping a cashless future that preserves financial freedom and privacy. As individuals, understanding the nuances of this transition and actively participating in the dialogue can influence the direction society takes in embracing digital financial systems.
