Cashless society or not?

In 1966, World Future Society magazine forecast that “credit cards will virtually eliminate currency by 1986.”

A Sept. 26 Professional Numismatic Guild online post was quick to point out that “the recent hurricanes that hit Texas, Florida, and Puerto Rico showed what happens when electrical power is knocked out to ATM machines and there are widespread mobile phone and wifi service outages leaving storm victims with no quick access to cash or cyber currency.”

And, what about former U.S. Federal Reserve Chairman Allen Greenspan’s statement, “If in the words of British economist John Maynard Keynes, gold were a ‘barbarous relic?’ Central bankers around the world would not have so much of an asset whose rate of return, including storage costs, is negative.”

Are we heading for a time when coins and bank notes will be archaeological curiosities? A 2013 MasterCard survey indicated that about 90 percent of consumer payments value in Canada were transacted using non-cash instruments.

A May 2017 study of 20 of the world’s top economies conducted by the global travel site Forex indicates that Canada leads the world in embracing cashless technology. About half of all Canadians are “ready to get rid of bank notes and coins.”

According to the Forex study, right behind Canada in adapting a cashless economy is Sweden, followed by the United Kingdom, France and the United States, in that order. About 900 of Sweden’s 1,600 banks no longer accept or allow the withdrawal of cash. There was an increase of about £7.75 billion (about US$10.27 billion) in cashless financial transactions in the United Kingdom between the first half of 2015 and the same period during 2016.

According to the Federal Reserve, the average American owns three credit cards, with only about 32 percent of all retail transactions involving cash during 2015.

At the same time, the Internet research company YouGov.com found that about 56 percent of American adults fear that electronic payments increase the chances of fraud or theft.

The argument against high denomination bank notes is also part of the argument. Peter Sands, former Standard Chartered Bank PLC president, said in an Oct. 14 The Guardian newspaper article that such notes should be scrapped because they are more likely to be used in crime. Bitcoin, which is a virtually untraceable electronic cryptocurrency, was not addressed.

It is true that in recent years Canada dumped its $1,000 bank note, while the European Union has considered dropping its 500-euro, sometimes dubbed “Bin Laden,” notes due to a suggestion these notes fund terrorism. It also appears to be true that shredded 500-euro notes were for some yet unknown reason found in a UBS bank sewer system in Switzerland in early September.

The world may or may not be ready for a totally cashless economy, but we know there are a substantial number of electronic payment systems already in existence. While perhaps the best known among them is Bitcoin, which bypasses traditional payment processes, there are many others.

Ethereum is the second largest cryptocurrency. As with Bitcoin, Ethereum uses blockchain technology.

While governments lament over large denomination bank notes being a way to avoid detection, they should be looking more closely at Digital Wallet, where money can be “parked” outside the banking system and for that reason becomes non-detectable.

Another challenge to physical currency is Apple Pay and Android Pay, each being forms of contactless payment that uses smartphones for financial transactions.

In March 2007 Safaricom, an associate of Vodafone in Kenya, introduced the mobile phone-based money transfer system M-Pesa. M-Pesa has been particularly successful in Afghanistan, Albania, Egypt, Kenya and Tanzania, all being places where traditional banking services are limited. In this case, the electronic payment systems fill a genuine need.

If you can’t beat them, join them goes an old phrase. The latest entry appears to be CrypotRuble, an electronic national currency system being considered by Russia’s central bank. If Russia follows through, they will follow Japan, the Philippines and others that are also considering electronic national currency systems.

Where does this put coins and bank notes? There is no way to predict, but if it is any indicator the U.S. Mint produced more business strike coins in 2015 than in any other year since 2001, backing off a modest six percent during 2016. World Future Society didn’t appear to get it right, but the debate goes on.