Going Cash-Free Can Make the World Richer – IEEE – The Institute
Some financial advisors say paying with cash will help you stick to a budget and prioritize spending. I’ve tried that strategy and instead found myself scratching my head about what I purchased with the money I took out of the bank that morning—something I’d have no problem figuring out had I paid with a credit card or even a mobile payment app. Not only is carrying around cash not so financially wise for me but, according to a recent MasterCard report, it’s also not smart for the economy.
Transporting and storing money is expensive for banks and governments. And paying in cash makes it easier for people and companies to avoid paying taxes. Yet nearly 85 percent of all transactions worldwide are still made by cash, according to the report.
Some countries, however, are doing away with cash altogether. Somalia, South Korea, and Sweden are transitioning to cash-free systems such as Apple Pay, which allows purchases to be made with a smart device held near a terminal. Denmark proposed a law that makes it illegal for certain shops to accept cash payments, and automated teller machines and banks have already closed in some small towns. Citizens in developing nations, like Kenya and India, rely on mobile payment systems to make purchases and money transfers. Meanwhile China is leading the way in mobile payments for commerce.
And Greece is taking a different approach to electronic payments. The country is attempting to ditch the euro for a digital barter system in which people pay one another with goods and services instead of money. TradePoints are used to exchange things of similar value, such as my moped for your legal advice.
Although many people might not yet trust electronic payment systems, there are a host of reasons for governments and businesses to replace cash and go digital.
Banks and governments spend a lot of money just to securely store cash and transport it in armored vehicles. The United States alone spends US $200 billion each year to keep cash in circulation, according to a Harvard Business Review report.
Moreover, it costs money to produce money. The 2016 U.S. budget for printing currency is more than $737 million. But the investment doesn’t necessarily pay off. Cash makes it easier to pay others for goods and services “under the table,” allowing earnings and therefore taxes to go underreported or unreported.
Cash also makes it easier to get away with drug trafficking and other crimes. Paper money is difficult to trace, and governments expend financial and staff resources to track down illegal transactions when there are no electronic records to search through.
Going cash-free is also better for business. Cabdrivers, for example, as well as workers at small shops, are robbery targets because they often have a lot of cash on hand. Cash businesses also make it easier for employees to steal small amounts without their employers finding out. Uber and similar sharing services, on the other hand, accept only credit card payments through a mobile app—which not only keeps the workers safer but also makes it difficult to hide earnings from the company.
Soon banks undoubtedly will join the digital payment movement.
Merchants appreciate the immediacy of payments via PayPal or Square Cash instead of waiting days for a customer’s check to clear. JPMorgan Chase, Wells Fargo, and other large banks have only recently caught up to such systems. They now allow their customers to deposit money in a payee’s account by typing in his or her phone number or email address.
Each country is likely to develop its own digital payment services, and it might be some time until paper money disappears completely, but it is safe to say the world is going in the direction of becoming cash-free.
[Somalia has electronic payments because of the insecurity of the country. It is not safe to carry cash. The payment infrastructure is supplied by the wireless phone companies.]