The SearchVoat Forum

If you visit China today, however, there’s a strong chance you’ll see people paying for things using facial recognition on their phones.

This is a radical shift, but it’s just the beginning of the cash revolution.

The new global payments ecosystem, including both physical cash as well as mobile wallets, is the result of the convergence of three large and powerful industries: telecommunications, banking and retail.

And if the private and public sector can work together to harness the latest technology and realise the full potential of a cashless society, there will be enormous benefits.

Eliminate the middleman, close the financial inclusion gap

It’s important to first reflect upon where we are on the journey toward a cashless society.

Thus far, the shift is basically a move from physical cash to cash-replacements. With private companies involved in processing those transactions, there is inevitably a cost. And that means there is a loss of value when the transfer occurs.

This is my vision of a true cashless society. There is an exchange of value in its entirety – just like cash. And it requires a national government – rather than banks or the like – to act as the payment provider, effectively becoming a state-backed utility.

The savings from avoiding the processing costs could then be used to benefit those in need, such as by being transferred to a fund to rejuvenate economically depressed areas, as one example.

This might sound counterintuitive, but I would argue just about everyone has access to capital. However, for the poorer members of society, there’s often a prohibitively high cost to accessing it. If you have a great business idea but can’t afford start-up capital, then your venture is unlikely to get off the ground.

A cashless society – along with the transformation of the last mile of money transfers, payments and banking services – will help to close the financial inclusion gap.

Cashless technologies could be some of our greatest assets in the fight against corruption and organised crime, too.

And, once again, the people who stand to benefit most are those who are most in need.

There are 1.4 billion people in the world who have to make do with less than $1.25 a day. At the same time, around $1.26 trillion is effectively stolen from developing countries, due to corruption, bribery, theft and tax evasion. If we could reclaim that money for those countries, we could lift those 1.4 billion people above the poverty threshold and keep them there for at least six years.

If everyone were connected to an end-to-end e-payment infrastructure – a cashless environment – there would be transparency in money flows. Whether it’s international aid or private investment, if everyone in the chain were connected digitally, you could see where the money went and how it was spent.

Any sums appearing outside of that framework could immediately be flagged and investigated. This would narrow the focus for law enforcement and forensic accountants, making it easier to target and recoup hidden money.

The enabling factors

There are, of course, many challenges to overcome as we embrace this level of disruption. And governments will need to take preemptive and proactive action in areas such as identity management and the protection of security and privacy.

However, the underlying support structures to make it all possible – the building blocks, or e-plumbing – are already in place. We already have secure, enabled ecosystems and the next generation of infrastructure.

At Finablr, we have four decades of experience in regulatory alignment and cross-border compliance, with a network spanning 170 countries. We also have proprietary technology, which enabled 150 million transactions at a total value of $115 billion in 2018 alone.

There’s no going back – which means we need to face the risks and deal with some of the difficulties of going cashless in order to unlock the benefits.

In developed countries, a cashless society will deliver transactions that are seamless, frictionless and low-cost. And in developing nations, it could deliver life-changing socio-economic benefits.

This easily accessible exchange of value will create a more equal world, and strengthen the bond between people, regardless of where they live.

Potential problems with a cashless society

Digital transactions are easily tracked and recorded, raising concerns about surveillance and who has access to these data trails. There are also worries that the rich may be better equipped to buy themselves privacy, while the average person with a traditional bank account receives no anonymity.

Relying on modern technologies built around banks’ old, existing infrastructures also carries risk. Many established banks’ IT systems date back to the 1970s and with no cash as a back-up, people are often depending on systems that are faulty. Technology is vulnerable to glitches, outages and mistakes leaving people without the ability to make transactions at potentially crucial moments.

Furthermore, as payments move online, there would be an increased risk of crimes such as identity theft, account takeover, fraudulent transactions and data breaches, due to the higher volume of cashless transactions and more points of exposure for the average consumer.

A cashless society also poses risks for those without bank accounts finding themselves further marginalized and without support. Those less financially stable may lack the technology for making payments and would thus have no method of getting paid or receiving financial aid. To tackle these issues, several charitable organisations are experimenting with contactless ways to give donations to charities or to those in need.

Looking ahead, it is evident that society could benefit from changes to the way money is spent and businesses would enjoy reduced costs without the need for cash infrastructure, as well as increased efficiency and productivity. However, integration and implementation of new digital payment technologies would need to be carried out gradually.

Those in favor of a cashless society, including credit card networks and issuers like Visa and Amex, argue several advantages, including reduced tax evasion and money laundering crimes, fewer violent crimes and less resources consumed to produce and handle physical currency.

(It’s important to remain skeptical of the role that companies like Amex and Visa play in pushing consumers toward digital and card payments as ultimately, this shift leads to more revenue for them.)

The idea of a cashless society is not a new one. The widespread use of debit cards and recent explosion of digital payment options have given the average person little reason to touch cash. And the launch of innovative cash-free (and cashier-free) stores like Amazon Go make it seem as though we’re headed for a truly cashless environment soon. The pandemic has only intensified the need for cashless payment tools. “In the time of COVID-19, going cashless is safer and more hygienic because it allows for less contact between a cashier and a customer,” said Bobbi Rebell, a certified financial planner and expert for Tally. In theory, a cashless society would be faster, more convenient and less likely to spread germs. But for the less privileged, it could sever the important lifeline that cash provides.

“Although the potential law enforcement benefits of a cashless environment are real, it is also important to understand how the constant tracking of transactions gives financial institutions and banks surveillance capabilities that have far-reaching consequences,” said Ray Walsh, a data privacy expert at ProPrivacy. He explained that the flow and liquidity of capital, as well as the purchase decisions that people make, are information that institutions can use to judge individuals. “Ultimately, this gives institutions massively invasive powers that can lead to prejudice and discrimination,” he said. There are deeper consequences to this type of financial surveillance, too. In countries like China, Walsh said, the potential for financial surveillance to be used to censor and restrict the freedoms of people who express dissenting opinions against the state raises very serious concerns. “This serves as a warning for other countries, including the West, where it is possible that similar actions could be taken to crack down on any transactions considered discordant to the authority of the state.”

When the World Health Organization earlier this year recommended that people move to cashless transactions to eliminate the spread of the coronavirus that causes COVID-19, a number of governments and retailers across the world heeded the advice. In China, where cash was already becoming a thing of the past, banknotes have been destroyed or disinfected with ultraviolet light to stop the SARS-CoV-2 coronavirus from spreading. And in the U.S., some business owners have banned the use of cash in their stores to keep employees and customers safe, while those at home have turned to online shopping. Bill Winters, chief executive of Standard Chartered Bank, believes that not long from now, we'll all be going cashless. And it couldn't happen quickly enough, he told Joseph E. Aoun, president of Northeastern, in an interview last week on Facebook."There's one very practical reason," said Winters, who was previously an executive at JPMorgan Chase. "The coronavirus lives on banknotes; why would we continue to handle these things if it's inconvenient and adding risk?"

"But I do think we'll get there because it's convenient, it's safe, and ultimately I think governments will want to know where the money came from and where it's going," he said.

Shelle Santana, a marketing professor at Harvard who has closely studied the cashless trend, wrote in the Harvard Business Review that her research shows a “less cash” society is more likely – and that a fully cashless society is not to be expected anytime soon. “When people talk about a cashless society, even though a small coffee shop may literally be zero cash, or some place like a Sweet Green — from a macroeconomic standpoint, I don’t think the vision is for the Treasury to never print money ever again,” Santana told USA TODAY. (Sweet Green is a fast-casual restaurant chain.) Who would control digital currency in a cashless society? Central banks, which are financial institutions given control over the production and distribution of money for a nation or group of nations, are leading the charge toward cashlessness. About 70% of central banks globally have looked at issuing their own digital currency, according to a BIS report. “It starts with the central banks,’ said Kevin Rutter, market intelligence lead at R3, a blockchain software firm. “They’ve kind of been on a five-year journey now, writing papers, exploring the pros and cons and benefits and disadvantages of issuing a type of central bank-issued digital currency, which is what they call it – essentially a digital form of the dollar.” Without the government issuing its own digital money, it's unlikely it will be able to control an individual's finances. “If the government was issuing (digital currency), then the government could actually see where money is flowing through the system and how it's being used,” Santana said. “But that would require the government to actually be issuing the digital money, which I don't know that there is any impetus to do that writ large, although there may be instances of it.”


The government is, however, in charge of taxes, and it’s true that under a fully digital payment system it would be easier to tax more efficiently. Santana pointed to Nigeria, which she said doesn’t have a great banking infrastructure but is a highly mobile-payment society. “One of the reasons why (Nigeria wants) to digitize their payments is so that they can actually begin collecting taxes in a more efficient way,” Santana said. “Without visibility into how much money is actually flowing through the system, you can't properly tax people. And without properly taxing people, you know, you have to have a society – an economy – that is trying to support tens and tens of millions of people on the tax revenue of like dozens of millions of people. And that math just doesn't work.” Then, there’s the issue of privacy. “The more that things become digitized, the more a digital footprint gets left behind, and then there’s visibility into everything that everyone is doing,” Santana said. “That also leaves you more susceptible to data breaches, hacking of systems – you know, your data being leaked.” But it doesn’t have to be that way. Rutter said the systems can be designed in a way that protects people’s information from the start, and at some central banks, those conversations are already happening. For example, allowing for privacy of certain transactions under $50 could be coded into systems in advance, he said. “The concern is not on the technology, but more on the intent of the people building the systems and whether they’re going to respect individual privacy with certain types of transactions,” Rutter said.

“(The pandemic) definitely had a huge effect because as these brick-and-mortar stores closed down in order for any, you know, any of them to really stay in any kind of business, they had to convert their business to an e-commerce operation,” Santana said. “So, you know, you just see like this huge bump in consumers now having to pay digitally for things that they may have paid for in cash before.”