Oisin Murphy-Middleton
Student ID: 18921522
Q1. Future of Cash in a time of Coronavirus
Introduction
Money has always been seen as a functional method of payment for a good or service. Be it
gold as a form of currency or in today’s view paper notes and coins which were first used as a
system in 770 B.C China (Beattie, 2020). The year of 2020 has brought forth unprecedented
effects on every aspect of life both socially and economically due to the Coronavirus
Pandemic, significantly in the area of payments for goods and services, potentially turning
some countries to a completely cashless society. Before the pandemic, a study by Experian
found 1 in 10 millennials used ‘a digital wallet for every purchase’ (Lee, 2020). I believe this
demonstrates that a cashless society was on the rise prior to the start of the pandemic in the
year 2020. In this essay I will expand on this statement and analyse the development of
financial technology (Fintech) throughout the years and the impact it has had on the financial
and economic systems in certain societies. An example of this is the development of
contactless payments through fintech companies, such as Revolut, that offer purely digital
banking services. I will then analyse whether or not the coronavirus pandemic has hastened
up the ‘inevitable’ advance to a cashless society as seen in Irish Times Article by Laura
Slattery ‘Tap and Go: how Covid-19 took the gloss off cash’; through the perspective of
how the pandemic is affecting largely populated countries such as the United States in an
economic sense and if it is demonstrating a drive towards a cashless society. Furthermore, I
will examine the differentiation in other countries’ economies and how they have launched
cashless mechanisms, including their implementation, in countries such as Sweden, which is
seen as the most cashless society in the world versus India which has had the greatest issues
presented to them when attempting to implement a cash free structure. The final country I
will analyse in regards to a cashless system, is the Republic of Ireland, and if the concept of a
cashless society is ever-present on a day-to-day basis in the country, or if it has significantly
increased during the 2020 covid-19 pandemic.
I will use these countries’ different perspectives and their levels of cashlessness to
demonstrate the reasons for and against a cashless structure. Additionally, I will investigate if
indeed there is a plausibility for a purely cashless system due to ‘economists seeing great
payoffs in cashless society’. (Sivabalan, 2020). Finally, I will then deal briefly with the
probability of cybercrime in a no cash culture in order to conclude with my own opinion that
if indeed the payoffs or positives outweigh the negatives.
Has Financial Technologies convenience lead the way for a cashless economy?
Money, currency or any method of transaction for a good or service has always been based
off the convenience in nature it provides to society. A physical note or coin is simply
‘symbolic’, ‘its importance is conveyed by what people and society place on it.’ (Beattie,
2020). This essence of finances has allowed for the ever-growing advancements in financial
technology and its increasing presence and importance in day-to-day life. This is shown by
the first real milestone into a cashless economy in the 1950s by American Express
introducing the first widely available credit card to the public.
(https://www.getsmarter.com/blog/market-trends/the-history-of-fintech/)
Since AmEx’ first appearance of the credit card, Fintech has arguably taken large leaps and
bounds to ease the way in which we access our finances today including contactless payments
through smart phones and watches. In 2017, the United Kingdom showed cash payments to
have fallen by 15% to about 13.1bn transactions, contrasted to a rise of 14% to about 13.2bn
transactions for cashless payments (Kollewe, 2018). Such figures demonstrate the
augmentation of a cashless culture in the United Kingdom, however, what must be also
considered is that the use of financial technology may not be as apparent in large areas such
as the United States. In contrast to the UK, the United States Fed 2019 report stated that the
most used payment instrument is physical cash, which accounted for 30% of all transactions
and 55% of transactions under $10; additionally, it stated that the volume of cash was at its
highest in 17 years (Mavadiya, 2019). This demonstrates that though cashless societies are
operational in certain parts of the world, there are clear disparities present, as many in these
societies lack access to cashless resources, which is clearly shown in the US, where 25% of
Americans are currently unbanked or underbanked (Barry, 2019).
Though an inequality of access to fintech is apparent, it can still be argued fintech is still
ever-growing for a variety of reasons as stated by The Global Advisory and Accounting
Network (GAAN). GAAN states that fundamentally consumer behaviour must be considered
and examined; has the population grown up in a technological era, where one is simply
brought up with contactless payment and takes a view of physical cash as being ‘old
fashioned’. Financial Technology can be seen as an ‘enabler for better financial services’
(Bakkar, 2020), shown by the development of purely mobile online banks such as Revolut
and Monzo, which allow a larger proportion of the population, those who previously did not
have banking services (as shown by Barry, 2019), access to a banking service. The first real
appearance of cashless mobile payments, prior to methods such as these, dates back to 1997
‘when Coca Cola introduced a limited number of vending machines, from which the
consumer could make a mobile purchase. The consumer would send a text message to the
vending machine to set up payment and the machine would then release the product’
(Humbani, 2017). Fast forward to 2019 and companies such as Revolut have a dominate hand
in the mobile financial market due to their ease of access to ones’ finances, which is the
common basis for the most functional means of trade during any historical period. In 2019
alone Revolut had an estimated 4.5 million customers worldwide (1.6 million in the UK) with
an estimated 7,000 customers joining daily in September of 2019 (Russon, 2019). Such
services allow for transferral of finances between 29 different currencies, access to
cryptocurrencies, as well as vault systems for savings, among many other features; arguably
demonstrating the appeal of a cashless market; and the movement to such is growing daily
due to its convenience and ease of how we can access our finances. The flexibility of these
services has been significantly shown in Asia and the southern hemisphere, areas of which
would be commonly seen as economically weaker than the United Kingdom or United States.
Such markets, in areas such as China have reached $5.5 trillion paid through app payments.
This is far greater than the counter part of mobile app payments made in the United States,
which stood at $112 billion in 2016 (Bakkar, 2020). This supports the view of payoffs for a
cashless society, as online banking is shown to be advanced and developed so much so that
access is far easier than it was previously. This is shown by countries in Asia, as mentioned
above in China, which have now established themselves in financial markets by turning to
ease of access provided by financial technology. This shows the ever-growing evolution of
technology displays an arguable inevitability of access to everyone. Though it can be
perceived that these methods are not a means of surpassing the use of physical cash rather
than simply a means to aid society and allow for its growth in convenience and ease of
access.
Is Covid-19 the catalyst for a cashless society in the United States?
Though arguably fintech’s convenience and ease of access alone can be considered as a
societal motive to become cashless in the future, what must also be considered is if the
COVID-19 pandemic has in fact sped up this inevitability. This pandemic brings forth this
question as foreign objects such as physical cash can provide a means for the virus to spread.
A country of large proportion that has demonstrated a variety of figures on the spectrum of
cash use is that of the United States. Prior to the COVID-19 pandemic, the use of cash was
already gradually beginning to decline in the United States as shown below: *
*(Greeley, 2020)
The percentage of cash users significantly drops past that and by 2020 during the Covid-19
pandemic Pew Research found that 34% of Adults under the age of 50 made no purchases in
cash on a normal week (Lee,2020). This can arguably point to a direct correlation to the new
found phobia of cash for its spread of coronavirus and combined with the convenience of
moving cashless this supports the arguments that the payoffs of a cashless society outweigh
the negatives which is supported by the upcoming generation. This is further shown by a
survey conducted by the firm Forrester for the National Retail Federation which found since
the start of January 2020 69% of retailers surveyed have found an increase in cashless
payment’s (Associated Press, 2020). Not only is the consumer basis welcoming of a shift to
cashless but this is also heavily supported by retail as now two-thirds of retailers provide a
form of contactless payment (Associated Press, 2020). This incorporation from both
consumer and retailer demonstrates that cashless is no longer a matter of convenience but
rather a need due to the pandemic, supporting the view that the pandemic in question has
‘taken the gloss off cash’.
However, what must be considered in regards to a cashless society in areas such as the United
States is if it is even in fact a plausibility. As previously stated, in the United States, almost
25% of Americans are either unbanked or underbanked (Barry, 2019). This alone provides a
significant issue as to how a cashless society could exist in such a largely populated country
regardless of advancements in financial technology. This view is echoed by ‘many states and
cities in the U.S (which) have passed laws banning [solely] cashless stores (Lee, 2020). This
political stance demonstrates a political barrier for even the possibility of a cashless society to
be considered or trialled. This shows though the COVID-19 pandemic has created significant
damage in regards to the use of physical cash, the damage is finite, rather than irreversible.
This view is resonated by Aaron Klein the policy director of the Centre of Regulations and
Markets at the Brookings Institution in the United States where he stated ‘a significant
correlation between the use of cash, prepaid, debit, high-end credit and wealth’ (Lee, 2020).
‘Cash is used more frequently in low-income households; 47% of transactions in households
with less than $25,000 a year are made using cash’ (Andjelic, 2020). This demonstrates that
many countries are not set for a cashless society irrespective of a pandemic or not, due to the
great disparity between the wealthy and the poor. This disparity would only be worsened by a
cashless society as low-income households, many of whom are solely reliant on cash due to
their lack of banking and living pay-check to pay-check, could not access the alternatives.
This social divide crosses over into the realm of financial technology creating a sort of
‘digital divide’ (Greeley, 2020)
What also must be considered in the possibility of a cashless society, is the push for such by
the current younger generation. Generational gaps in countries such as the United States can
arguably prove problematic due to the ‘old fashioned’ mentality of the older generation and
their reluctance to advance to cashless. In the United States it is estimated that the senior
population (65+) is estimated to increase by 84% between the years of 2010 to 2030 (Frey
2018). Due to a cashless society being very dependent on the younger generation, a society
older in age may prove to be counterproductive for advancements to such areas. Indicating
that even if the payoffs of a cashless society are greater than the negatives, it may still not be
applicable due to societies lack of support.
What must also be considered on the side of societal behaviour as shown in the United States
is that of an unpredicted societal behaviour. In 2020, though cash has been seen to have
diminished in use, it has been found that a large proportion of the population is ‘hoarding
cash’(Greeley, 2020):
*(Greeney, 2020)
As shown by the graph above, the physical cash in circulation has almost doubled between
2015 and 2020. The reason this presents an issue is the great disparity between rich and poor
in countries such as the United States. The federal reserve in the United States gradually
becomes more expensive to operate the less physical cash is used. This puts a strain on the
cost of government, in turn the cost on taxation for the population, and hence a domino
effect. The disparity between rich and poor previously mentioned will be part of the reason
that the production of physical cash can not be stopped altogether, resulting in an ever
growing disparity, as it costs more for lower income people to obtain such cash. This
demonstrates that in application, even with the advancements of fintech and the catalyst of
Covid-19, the termination of phyisical cash is not as simple as one might think with many
economic factors to be considered both on the side of government and population.
Have other countries had more success in implementating a cashless society?
Prior to the Covid-19 pandemic, many countries were already encouraging and advocating
for a cashless society. Even without advocacy, many countries were already steering in such a
direction. In the United Kingdom, in 2020 ‘half of all payments are now made by card and in
less then ten years time it is predicted only 10% of transactions will involve cash (Lewis,
2020). A country that is seen as the most cashless is that of Sweden. As of 2020, only 1% of
there GDP is in the form of cash (Meaker, 2020). Also only 1% of payments in 2016 were in
the form of cash and coin in Sweden (Savage, 2017). Such statistics greatly support that even
without the current pandemic a cashless society is conceivable; with many positives such as
ease of transactions, tracing ones finances and even aiding in areas such as the illegal drug
market which operates heavily in the form of cash due to the incapability or lack of tracking
in such form.
Such advancements in the direction of cashless has also led Sweden to move forward in the
development of other means to ease the facilitation of such a goal. According to the Riksbank
Governor Stefan Ingves in 2018 , a Swedish currency e-krona is indeed feasable (The Local,
2018). He believes the cryptocurrency to be in the realm of ‘around three to four years’ away.
However, rhetoric of a cashless society in Sweden, arguably presents issues as much as it
does positives. Stefan Ingves makes it clear such an introduction should not eliminate all
forms of physical cash as such means are needed ‘in a time of crisis’ (The Local,2018) or
example, that of losing functionality of electronics or electricty, leaving access to cashless
finance impossible. This thought process is reiterated by the Swedidh Civil Contigencies
Agency, a branch in their Ministry of Defence, in which they have stated physical cash
should still be kept ‘in small demoninations’ due to the possibility of crisise such as
cybercrime or natural disasters (Meaker, 2020). This clearly signals that even with the level
of cashless nature Sweden presents, arugably the most cashless society in existence today, on
a sense of logic, a purely cashless society could be detrimental if a country were to face a
situation in which they could not access physical finances of value. Showing that, even
though a cashless society is plausible and creates greater ease of functionality, it is arguably
not credible for a completely cashless society to exist. The ‘gloss’ of physical cash may not
exist but it is still needed for a functioning economy.
Not all countries that have aimed to go cash free have had as succesful an implmentation as
Sweden. One such example is that of India which have found many issues to have ensued in
there economy due to the push for a cashless economy. In 2017 India withdrew 87% of their
paper money in circulation as a bid to fight against tax evasion. Prior to this between 90% to
98% of India’s transactions were completed in the form of cash (Hearne,2017). What
followed,was an influx of people attempting to convert cash holdings, which resulted in a
shortgage of physical cash and causing many parts of societal India to be unable to do
anything in regards to ones finances. It brough the country to a halt that it even affected
peoples’ ability to work as many jobs were paid in cash. It was estimated by the Centre for
Monitoring Indian Economy (CMIE), that around 1.5 million jobs were lost in the first
quarter of that year (Chowdury, 2017). Arguably, this abrubt immediate withdrawal of
physical cash would result in economic chaos no matter the country.What also needs to be
considered is the wealth gap is not as large in a country such as Sweden as it is in India, in
which there are extrmely high rates of both poverty and wealth. For a cashless society to
effectively occur, it must be done by a gradual process rather then by such a method. This
shows that as much as a cashless society reaps a wide variety of payoffs, it could be
detrimental if not introduced correctly, such as India has shown.
The Republic Of Ireland is another country, similar to Sweden, though not as extreme in
cashless nature, that has shown a growth towards the direction of a competely cashless
society. A study conducted by One4All in 2020 found half of Irish adults use a form of
cashless finance to complete a transaction for a good or service. It was also found that 2 out
of 3 adults use contactless payments several times a week and 43% believe cash will cease to
exist soon (Pope, 2020). During the covid pandemic the use of cashless has been heightened
in this country as now many establishments have increased the contactless spend limit from
€30 to €50 (Kennedy, 2020). This further supports the ideology that a cashless society is on
the horizen with almost half of this country maintaining a similar belief. As previously stated,
the value of currency is created by society, if a society is to back cashless it creates value
needed for it to occur.
Cybercrime as a threat to a cashless society
An underlying issue that is found to not be considered enough, is that of cybercrime. It can be
argued the severity of such crimes has not been fully perceived by society, as stolen physical
cash is a lot more apparent rather then an arbritrary number on a screen. This societal view
can also lead to complications presented by the consumer rather then the producer of the
software. A common example is that of India. As previously mentioned, a large proportion of
physical cash was removed from circulation in India. What is not considered in such
situations is lack of education in regards to technology can lead to consumers leaving
themselves vulnerable to cybertheft. An article by Clint Witchalls emphasises this point when
saying ‘adequate measures have not been taken to ensure that the hard-earned money of
ordinary Indians is secure from the cybercrime that will inevitably follow’ (Witchalls, 2017).
As technology advances to provide ease of access to one’s finances, so does the technology
that provides the ability to steal such elecronic currency. This issue has been shown to still be
ever present in recent years with large theft occuring in the cryptocurrency world. In 2018, an
estimated $400 million was stolen from one of Japans biggest cryptocurrency exchange sites
Coincheck (Liptak, 2018).
I believe this shows that not enough attention has been paid to both educating people on
cyber security as well as advancing cyber security enough to the degree that fintech is a
secure enough space to provide an entirely cashless economy without placing consumers in a
detrimental position of losing their finances.
Conclusion
In conclusion, I believe that both the neccesity and value placed on physical currency is in
fact dwinddling, though not to a degree where a fully cashless society can exist and function.
I also believe that the figures alone show that Covid-19 has affected many countries and
encouraged a more predominantly cashless society, as shown in Ireland. Countries such as
Sweden have shown the decline of physical cash at a faster rate then others (e.g: United
States). However, I do believe there is still a value in the economy and socially for physical
cash; Sweden has also demonstrated this and been politically backed by this. As previously
described many are still reliant on such a form of currency in areas such as India and also
lack the education to function in a purely cashless society, proving a cashless society can be
as detrimental as it can be a significant aid. The payoffs of a cashless society do outweigh the
negatives, though only to a certain degree, as such factors as crisises, lack of education and
the poor must be considered for an efficient society such as this to exist. A 100% cashless
society today is improbable, though countries such as Sweden are close and functioning at a
significant level of cashlessness. I believe not all countries have the ability to achieve this at
the moment, though the pandemic of 2020 has clearly encouraged and sped up the proccess in
many areas of the world.
References
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