An increasing number of Scandinavian countries are moving towards a cashless society, in favor of using bank cards exclusively. In Sweden, almost no stores accept cash, and even banks are suspicious when a person makes a large cash transaction. The same is largely true in Denmark, where 40% of all purchases are made on smartphones, using a bank app known as MobilePay.
Many people have long envisioned a cashless society, and now it is finally becoming a reality. However, it isn’t just Scandinavian countries that are embarking down this relatively new road. Sub-Saharan African countries are also experimenting with the practice.
In Scandinavian countries, going cashless is a matter of convenience. But in Africa, it is more of a matter of survival. Thanks to a massive upsurge in communications, virtually everyone in many of these Sub-Saharan African countries has a smartphone. Additionally, many of the citizens do not have bank accounts, and the mobile app in these countries is not tied to a bank account. Africans simply load money onto their phones and conduct transactions in that manner.
Many groups have gotten involved in the practice, including Citi, MasterCard, Visa Vodafone and USAID. Even the charity for Bill Gates has started working with banks and phone companies in order to replace cash.
The practice has become so popular that in Kenya, the mobile transaction app M-Pesa currently accounts for more than 25% of the total GDP for the country. Meanwhile, the country of Nigeria has launched an ID card that also doubles as a payment card through the MasterCard network.
Other countries have also started to take notice. In India, an organization called the Unique Identification Authority of India (UIDAI) is working to establish a centralized voter enrollment system for the country’s 1.2 billion population. If successful, this will become the single largest identity platform in the entire world. The system will also make use of an electronic payment system that could very well put an end to cash.
However, India will face some challenges. Cash is still widely used in India, as less than 5% of all payments in the country are conducted electronically. Informal cash transactions are still extremely commonplace. Even if the country’s capital city of Delhi, about three out of every four transactions are completed using cash. Still, the government of India has said that it is working to change this. It will likely get banks and credit card companies involved as partners.
But these transitions have some people concerned. Many people are fearful that the move away from cash means that banks have a stronger ability to obtain important information about their clients. Some wonder exactly how involved banks should become. Indeed, bank surveillance is starting to develop into a major concern. If every transaction you make is tied to a card, there is no hope for anonymity.
Additionally, with banks getting involved, they will also take a small piece of the finances in every single transaction. Anytime a person makes a purchase, there will nothing to stop banks from conducting their own taxation as well. Even if it’s just 1%, that will certainly add up over time. It won’t be long before the banks are the real winners of such a transition.
But perhaps most concerning is that a cashless society would theoretically enable banks to institute a negative interest rate policy. Instead of watching finances held in banks grow, people would see their holdings decline over time. And without a way to convert one’s money into cold hard cash, people would watch helplessly as the banks take their money.
So while some people embrace a cashless society for the convenience factor, the reality of it could soon lead to serious trouble.