A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.
Cashless societies have existed from the time when human society came into existence, based on barter and other methods of exchange, and cashless transactions have also become possible in modern times using digital currencies such as bitcoin. However this article discusses and focuses on the term “cashless society” in the sense of a move towards, and implications of, a society where cash is replaced by its digital equivalent—in other words, legal tender (money) exists, is recorded, and is exchanged only in electronic digital form.
Such a concept has been discussed widely, particularly because the world is experiencing a rapid and increasing use of digital methods of recording, managing, and exchanging money in commerce, investment and daily life in many parts of the world, and transactions which would historically have been undertaken with cash are often now undertaken electronically. Some countries now set limits on transactions and transaction values for which non-electronic payment may be legally used.
The trend towards use of non-cash transactions and settlement in daily life began during the 1990s, when electronic banking became common. By the 2010s digital payment methods were widespread in many countries,[which?] with examples including intermediaries such as PayPal, digital wallet systems such as Apple Pay, contactless and NFC payments by electronic card or smartphone, and electronic bills and banking, all in widespread use. At this point cash had become actively disfavored in some kinds of transaction which would historically have been very ordinary to pay with physical tender, and larger cash amounts were in some situations treated with suspicion, due to its versatility and ease of use in money laundering and financing of terrorism. Additionally, payment with a large amount of cash has been actively prohibited by some suppliers and retailers, to the point of coining the expression of a “war on cash”. By 2016 in the United Kingdom it was reported that 1 in 7 people no longer carries or uses cash. The 2016 United States User Consumer Survey Study claims that 75% of respondents preferred a credit or debit card as their payment method while only 11% of respondents preferred cash. Since the founding of both companies in 2009, digital payments can now be made by methods such as Venmo and Square. Venmo allows individuals to make direct payments to other individuals without having cash accessible. Square is an innovation that allows primarily small businesses to receive payments from their clients.
By 2016, only about 2% of the value transacted in Sweden was by cash, and only about 20% of retail transactions were in cash. Fewer than half of bank branches in the country conducted cash transactions. The move away from cash is attributed to banks convincing employers to use direct deposit in the 1960s, banks charging for checks starting in the 1990s, banks launching the convenient Swish smartphone-to-phone payment system in 2012, and the launch of iZettle for small merchants to accept credit cards in 2011.
Among the first sociological studies about cashless societies, see Aldo Haesler, Sociologie de l’argent et postmodernité, Geneva & Paris 1995.
Share of payments
|Estimated share of payments done by cashless methods (from studies published 2008-2013)[needs update]|
A common measure of how close to a “cashless society” a country is becoming is some measure of the number of cashless payments or person to person transactions are done in that country. For instance the Nordic countries conduct more cashless transactions than most Europeans. Levels of cash in circulation can widely differ among two countries with similar measure of cashless transactions.
Across the 33 countries covered in the European Payment Cards Yearbook 2015-16, the average number of card payments per capita per year is 88.4. In comparison, the average Dane makes 268.6 card payments each year, the average Finn 243.6, the average Icelander 375.5, the average Norwegian 353.7 and the average Swede 270.2. This makes card payments in the Nordics two-and a-half to four times higher than the European average.
— Euromonitor International
Amount of cash in circulation
Even though a cashless society is widely discussed, most countries are increasing their currency supply. Exceptions are South Africa whose supply of banknotes fluctuates wildly compared to most nations, and Sweden which has significantly reduced its currency supply since 2007. China’s currency has decreased from 2017 to 2018
|Banknotes and coins in circulation at end of 2018|
|Value per inhabitant (USD)||Code||Xchange rate EOY2018||Local Currency||Country|
|$8,471||HK||7.8319||66,346||Hong Kong SAR|
Amount of cash in circulation (historical)
The amount of cash in circulation was much lower in past decades in all countries except Sweden. The oldest comparative figures at Bank for International Settlements were from 1978 and only including the USD and 10 other currencies.
|Banknotes and coins in circulation per inhabitant in USD at exchange rate|
Under Massachusetts law stating back to 1978, no retailer may “discriminate against a cash buyer by requiring the use of credit”.
It was the only U.S. state to have such a law until March 2019, when New Jersey passed similar legislation; car rentals, parking garages, and airport stores have carve-outs under the legislation. The bill came shortly after the city of Philadelphia passed a similar law. San Francisco has also banned cashless stores.
Advantages of a cashless society
Reduced business risks and costs
Cashless payments eliminate several risks, including counterfeit money (though stolen cards are still a risk), theft of cash by employees, and burglary or robbery of cash. The costs of physical security, physically processing cash (withdrawing from the bank, transporting, counting) are also reduced once a business goes completely cashless, as is the risk that the business will not have enough cash on hand to make change.
Reducing transmittal of disease via cash
Cash provides a good home for disease-causing bacteria, according to a study on the bacterial composition in banknotes.
Restaurant chain Sweetgreen found cashless locations (with customers using payment cards or the chain’s mobile app) could process transactions 15% faster.
Reduction in criminal activity by eliminating high-denomination notes
One significant societal advantage cited by proponents is the difficulty of money laundering, tax evasion, performing illegal transactions, and funding illegal activity in a cashless society, Many countries have regulated, restricted, or banned private digital currencies such as bitcoin, partly to prevent illegal transactions. Large amounts of value can also be stored in real estate, antiques, or commodities like diamonds, gold, silver, and platinum.
Some have proposed a “reduced cash” system, where small bills and coins are available for anonymous, everyday transactions, but high-denomination notes are eliminated. This would make the amount of cash needed to move large amounts of value physically awkward and easier to detect. Large notes are also the most valuable to counterfeit. The United Kingdom declared only banknotes of 5 pounds or less were legal tender after World War II because of fear of Nazi counterfeiting. In 1969, the federal government of the United States declared that banknotes of value over $100 would remain legal tender, but any notes in government hands would be destroyed and that no new notes of those denominations would be printed in the future. Such notes were last printed in the USA in 1945. Canada did the same thing with the CAD$1000 banknote in the year 2000. Sweden printed 10,000kr banknotes in 1939 and 1958, but declared them invalid after 31 December 1991. Singapore has recently announced that they would no longer produce the SGD$10,000 banknote. The European Central Bank has announced that the €500 denomination banknote would not be included in the next series of euro banknotes.
Better collection of economic data
Rather than conducting costly and periodic surveys and sampling of real-world transactions, real data collected on citizens’ spending can assist in devising and implementing policies that are deduced from actual data. With recorded financial transactions, government can better track the movement of the money through financial records which enables them to track the black money and illegal transactions taking place in the country.
Easier consumer budgeting
As digital payments are made, transactions are kept in records. Cashless payments facilitate the tracking of spending expenditure and record the movement of money. Having recorded transactions, it can help citizens to refine their budget more efficiently.
In a digitized economy, payment made will be traceable. With traceable transactions, institutions would have potential access to this information. With these digital traces left behind, digital transactions become vulnerable. Such transactions allow businesses a way to build a consumer’s personal profiles based on their spending patterns. The issue of data mining also come into place as countries head towards a cashless society. Cashless transactions leave a record in the database of the company as one make payment, and this information becomes a way for prediction of future events. Through large number of records, data mining then allows the organization to compile a profile of an individual through its records in the database.
Going all-digital, these data retrieved from transactions lead to widespread surveillance where individuals can be tracked by both corporations and the government. These records might also be available to hackers and could be made public after a data breach.
Problems for the unbanked
Cashless systems can be problematic for people who currently rely on cash, who are concentrated in certain populations such as the poor, near poor, elderly, undocumented immigrants, and youth. Electronic transactions require a bank account and some familiarity with the payment system. Many people in impoverished areas are underbanked or unbanked. In the United States, almost one-third of the population lacked the full range of basic financial services. According to FDIC data, of households that earn an annual income of less than $15,000 per year, almost 25.6% do not have a bank account. Nationwide, 7.7% of people in United States do not have bank accounts, with levels over 20% in some cities and rural counties, and over 40% in some census tracts.
As part of its Smart Nation initiative, Singapore has been moving towards a cashless economy. 14.4% of the country’s population is over 65 years old, and the majority of seniors still use cash as their only mode of payment. Not used to digitized payment methods, troubleshooting issues such as managing lost cards or passwords and managing their expenses can create potential trouble for anyone transitioning from cash.
When payment transactions are stored in servers, it increases the risks of unauthorized breaches by hackers. Financial cyber attacks and digital crime also form a greater risks when going cashless. Many companies already suffer data breaches, including of payment systems. Electronic accounts are vulnerable to unauthorized access and transfer of funds to another account or unauthorized purchases.
Attacks on or accidental outages of telecommunication infrastructure also prevents electronic payments from working, unlike cash transactions which can continue with minimal infrastructure.
Opponents point out that an entirely cashless system, in addition to tracking all transactions, would enable a central government to:
- Enforce a transaction tax on every person-to-person payment
- Eliminate storage of cash as a means to escape nominal negative interest rates, which are used to fight deflation by discouraging savings (most effective if combined with bans on barter, private currencies like bitcoin, and storage of precious metals like gold). Certain types of money could be set to “expire” and be worthless if not spent in specific ways or by specific times.This is also possible with cash, if the government allows high inflation or lets its currency undergo a devaluation.
- Totalitarian regimes could conduct more effective mass surveillance and quickly prevent certain individuals from buying anything or earning any money
- Restrict the type of consumer goods that can be purchased with a certain amount of money (and parents might be able to do the same with allowance money)
Consumers are less aware about the amount of money they are spending day-to-day when swiping their card to complete a transaction than if they budgeted money into a wallet and paid in cash.
The Sweden example
Sweden is one of the best examples when it comes to efforts in order to abandon cash. From the perspective of replacing all cash with digital solutions, Swedish society has changed profoundly during the 2010s. Beginning around 2008 and peaking in connection with the 2015 to 2017 exchange of all Swedish coins and banknotes (with exception of the 10-kronor coin). All the major regular banks with offices began an enforced process of either closing down offices or making them “cash free”. The concept of cash free bank offices began in Sweden around 2000 to 2005, but it was by then more or less just a symbol for an upcoming closure of that office. From around 2008, the Swedish banks began giving special hardwares to their costumers, in order to make digital payments of invoices (etc.) from home. People still had the choice; however, those who so wished could make payments and other business in cash at the bank offices that remained. Today very few cash handling bank offices still exist.
According to the bank’s head offices, cash was no longer required as withdrawals and deposits were possible (in limited amounts) through machines. But for “safety” regulations, the maximum amount a bank bank customer can withdraw is about 5.000 to 10.000 SEK per week. And there’s similar “security rules” for depositing as well. But this has resulted in severe blows to lots of smaller boutiques and shops, and even to many minor convenience stores. As they no longer can deposit their daily takings and neither get any change. Not to speak of non-profit organizations, which are very common in Sweden. For such matters, Swedish banks have introduced a mobile telephone payment system known as Swish. But this system has suffered from many problems.
The banks (and initially media as well) addresses this more and more obvious problem as “a problem for elderly people” only. Like if it just is a matter of learning a new technology, and not a totally new principle on the subject of money. Whilst others mean the technological excitement has gone way to far too fast, and that many dangers lurk in the reeds. Such as an increasingly rising number of frauds, and the fast development of Quantum Computers. The Swedish monetary waters suddenly became muddier as the Swedish authority Myndigheten för Samhällsskydd och Beredskap—MSB or “the Authority for Community Protection and Preparedness” in their writing “Om Kriget eller Krisen kommer” (“If the crisis or war is coming”) in the “Home preparedness advice” list includes “cash in small denominations” among things to always store at home. And lately a wave of negative criticism have affected Sweden, from purely subjective thinking to experts outside the banking sphere expressing their concerns. The former head of Police, Björn Eriksson started in the spring of 2016 a movement known as “Kontantupproret” or “The Cash Petition”. This has grown fast and considerably. Many contributors have helped to expose lots of unnecessary troubles caused directly by the banks increasingly hostile attitude versus cash. The scale cover more or less everything.
For instance, the well-known TV3 figure Robert Aschberg got mad after having paid at a chemist’s through his mobile telephone and the Swish system, almost immediately received an advertise from the same pharmacy. Svante Linusson, professor in mathematics claims “the liquidation of cash slowly destroy our democracy”. A billiard club (for pool and some other games) in Malmö was almost forced to close as their bank (during 20 years) “lacked knowledge” of their customer. The actual reason was that the billiard club refused any other payment but cash. The digital Swish system increases money laundering. A traditional summer market in northern Lycksele went in bankruptcy after a digital failure somewhere unknown, and as the people have been used to pay with phones (Swish) and cards, too little cash was available during the market.
Further not so few people that have savings, have especially during the last two years began to exchange their Swedish krona to other currencies like Euro, US dollar, Swiss franc, Danish krone and Norwegian krone. During the last two years Swedish krona has fallen versus the Danish krone with 11.5 per cent. Naturally there are more than one factor in such equations, but it is a fact that when large amounts of Swedish money is exchanged to Euro, also the Danish krone will follow, as it is tied to the Euro. Also investment gold has become far more popular in Sweden during the latest years. But as gold as an investment was next to unheard of in Sweden twenty years ago, “XX times more” doesn’t say much. However the number of gold selling shops and exchanges have increased notably in Sweden, during the latest decade. After the introduction of Euro in 2004, the opposite development was expected.
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- ^Nordea bank themselves 
- ^Svenska Dagbladet on Swedbank 
- ^Svenska Dagbladet on SEB 
- ^Svenska Dagbladet on Handelsbanken ; Nordea, Swedbank, SEB and Handelsbanken are all banks that have offices in Sweden, only very few local savings banks remain
- ^the entire folder is available in English; PDF-page 6, folder page 10 at 
- ^ Jump up to:ab c http://www.kontantupproret.se
- ^Dagens Nyheter -
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.