What is currently stopping the most developed states from completely abandoning cash?

  • Countries such as Sweden have debit card adoption rates close to 100%. The governments of the developed world frequently talk about moving to a completely cashless society, but so far not a single territory has made the switch.

    So what's currently stopping the developed states with very high credit/debit card adoption numbers from completely abandoning cash?

    Well, how would politicians, etc. take bribes? I doubt they would want to leave a massive paper trail behind such transactions. (Tongue-in-cheek...not to be taken too seriously)

    @FixedPoint the people at the very top rarely take cash or straight up gifts. Instead they get campaign donations and cushy multi million dollar jobs after they retire.

    Does a cashless society imply that the govt is mandating that you have a bank account?

    @Nacht not necessarily. There are prepaid cards still.

    @JonathanReez how do you purchase a prepaid card?

    @Nacht your salary can be given out that way.

    Trade with the less developed states?

    @JonathanReez If anyone can buy or be paid with prepaid cards, what's to stop people from getting a stack of 'em and using *them* as cash (to buy drugs etc.)?

    @Maxim traceability. Police stages a buy with a "marked" card, after which they're able to trace the completely lifecycle of the money.

    @JonathanReez That doesn't prevent people from using them as cash. If I get my prepaid card at work, then use it to buy to drugs, say, there is no way for police to know *why* I passed the card to another person, no matter how marked is, at best they'll know that dealt with them. And they'd have to suspect me in the first place to force my employer to pay me with marked cards.

  • Panda

    Panda Correct answer

    4 years ago

    It's mainly because there will always be people who do not have credit cards and still uses cash, for example, 96% in Sweden in the article that you cited. 4% is still a relatively huge number.

    This article by BBC addresses Sweden, noting that not everyone welcomes the move:

    Like the Netherlands and its Scandinavian neighbours, Sweden is among the front-runners in the race to eradicate cash. But not everyone is welcoming.

    One of the reasons the article mentioned is that many people are reluctant to give up using cash, including Germany, as they believe that "cash gives them better control over their spending".

    The Guardian mentioned that some are not quite ready for this drastic change, so it will still take sometime to convince those who still prefer cash. And it's also a political decision and thus it will need to be popular with Swedes before the government can abandon cash.

    Old people’s organisations also fear that those who prefer cash, out of a reluctance to use new technology or simply because they find it easier to keep track of their spending, will be disadvantaged, while educators worry that young people will be tempted to spend money they do not have.

    For these and other social reasons, Arvidsson said, cash is not dead quite yet. “Even if, in the next few years, Swedes use almost no cash at all, going 100% cashless needs a political decision,” he said.“The idea of cash, even in Sweden, remains very strong.”

    (emphasis mine)

    Totally abandoning cash will also result in problems with interest rates, since one could no longer keep cash at home and have to always be subjected to the bank's interest rate, unless governments introduce reforms regulating this but it will take time.

    A central bank by all means can adopt a negative rate, charging retail banks to hold their surplus funds on deposit ... But in their hordes, customers would up and leave, withdrawing their cash and locking it up at home. Unless they no longer could.

    Unless there were no longer notes and coins to withdraw, and they were confined to a digital ecosystem, free to move their money between banks but not away from them.

    (emphasis mine)

    Some other challenges include privacy concerns, since electronic payments leave a trace and can be possibly tracked back by companies. So, without cash, anonymous payments will not be possible.

    This is something most of us have taken for granted as a huge advantage of the old Greenback. It is the most private, and direct way to transmit value. If you use a debit card, Bitcoin, or a wire transfer, you are creating a massive paper trail that can compromise your identity or security, both now and in the future. Some are just now realizing how important these benefits are today.

    (emphasis mine)

    @DenisdeBernardy I haven't watched the video you linked, but that appears to me to be very much related to the issue of both keeping track of your spending and not spending money you don't have, which are both discussed in the second block quote in this answer.

    @MichaelKjörling: Actually, it's not exactly that (and highly recommended if you've 20 min and kids). It basically highlights, among other things, how kids change attitude towards money when it's physically in their hands rather than virtual. And it raises the interesting educational question of "should I give my kids a (physical money) allowance as early as I can do so?" to give them a better sense of _what_ they are spending - something they won't necessarily grok properly with a debit or credit card. It also raises the interesting societal question of whether we're losing track of value.

    @DenisdeBernardy And even that is ignoring the issue of whether they'll be able to get a payment card *of any kind at all*. I'm not sure whether this qualifies as an answer on its own, but certainly few banks are likely to give your average five-year old a card and expect them to be able to use it responsibly and correctly. Sweden did for a while have what was termed a "cash card" a decade or so ago (yes, literally "cash", the English word) -- basically a prepaid bank card intended for small electronic transactions -- but it flopped *massively*. I don't know what the age limit on that was.

    Afaict most banks in the UK will give kids debit cards from about 11 (obviously with restrictions blocking transactions where the balance cannot be verified at the time of transaction). There are some companies who will let kids have prepaid cards younger than that but fees can be onerous.

    Also, 96% of people can have credit cards, and 89% of all transactions can be non-cash, and you could still have 100% of people use cash regularly. The study is not saying 96% of people don't use cash.

    @MichaelKjörling you could make a law saying banks aren't allowed to use age limits for debit cards. Problem solved.

    @DenisdeBernardy it doesn't matter if people really grasp the concept of money. At some point reality will hit them hard (when they run out) so they'd have no choice but adapt.

    @JonathanReez "it doesn't matter if people really grasp the concept of money. At some point reality will hit them hard" That is a strange formulation. If it hits them hard, then it does matter I would say. What is meant by "it doesn't matter"?

    @Trilarion economically speaking the market will always adapt to the changing conditions. People who fail to grasp the concept of money will either learn or would spend it all and would then face the negative consequences.

    @JonathanReez *"you could make a law saying banks aren't allowed to use age limits for debit cards. Problem solved."* Well, if you're willing to go that deeply into the issue of limiting market participants' mutual agreement on terms of an exchange. (Which is a possible approach, and also a rather different question.) Next issue, as I already pointed out, is that said child will need to be able to use the card *responsibly and correctly*.

    @JonathanReez Instead of fully grasping or not grasping at all there could be many shades of grey, like some things work better or worse and so you do not learn enough or you do and spend something or a bit more and facing consequences, don't we always face the consequences of what we do? I'd say it's somewhat bad if people do not grasp the concept of money as good as possible early on and making it easy to grasp is important.

    As for your last point, some cryptocurrencies are mostly anonymous.

    "Make a law. Problem solved". How often that's uttered, how rarely that works.

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