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Money made of gold has always been the most trustworthy. Cooperation between China and Russia may create a new gold-backed payment medium that will eventually replace bills and notes.
Australia tipped to move away from Cash by 2024 to 2025
A Cashless Society Looms!
According to several analysts, the end of money might come as early as 2024. The annual Global Payments Report projects that by 2025, cash will only represent 2% of the value of all point-of-sale transactions in Australia, as contactless payments are replacing cash at the quickest rate in history.
What do we gain and lose when cash is no longer king?
You may get a sense of the numerous impacts becoming cashless can have on money and banking as you know it from the pros and cons listed below:
Pros for Cashless Society
- Lower Crime Rates, as there is no tangible money to steal.
- Decrease in Money Laundering.
- Less time and cost associated with handling, storing, and depositing paper Money.
- Easier Currency Exchange
Cons for Cashless Society
- Potential Data Breaches may expose Personal Info (see Medibank Hacking).
- Hacking Risks; no alternative source of money (see later in this article).
- Technological issues could impact access to funds.
- The temptation to overspend may increase.
What is a Cashless Society
Although a world without currency may seem like something from science fiction, it is now a reality. Many financial activities and transactions in the modern world occur without cash, and many financial institutions, service providers, and even governments support the transition.
A society that doesn’t use paper or coin money for financial transactions is known as a cashless society. The only form of payment accepted is by electronic means, such as PayPal, Apple Pay, Zelle, or credit or debit cards. Although many nations are headed this way, it is difficult to predict which ones will completely phase out cash.
Before a community can completely give up on money, there are a number of social concerns that must be resolved in addition to practical difficulties.
Benefits of a Cashless Society
People with the technological means to take advantage of a cashless world will probably find it more practical. You can immediately access your cash holdings with your card or phone. The advantages extend beyond convenience. Here are some other benefits.
Lower Crime Rates
You become a convenient target for crooks if you carry cash. Once the cash is removed from your wallet and placed in a criminal’s wallet, it will be challenging to locate it or establish your ownership. In one study conducted by German and American experts, it was shown that Missouri’s crime rate decreased by 9.8% when the state switched from cash welfare handouts to Electronic Benefit Transfer (EBT) cards.
Automatic Paper Trails
Similarly, a cashless society should also see a decline in financial crime. Cash is usually used in unlawful activities like illegal gambling or drug dealing so that there is no transaction record and the money is simpler to launder. If the source of the cash can always be determined with certainty, money laundering becomes considerably more difficult. When every payment you get is documented, it becomes more challenging to conceal income and avoid paying taxes.
Imagen, when all is on electronic transactions, a transfer tax might be used to collect taxes instead of a yearly Tax Return with the Tax Department. The accounting system would be more straightforward, and there would be no Tax Returns, monthly GST Returns, or Business Activity Statements (BAS). Since every transfer will be taxed, businesses would no longer be able to conceal any offshore money. It would entail that even tourists pay taxes in the country they travel to.
Cash Management Costs Money
Going cashless is more than simply practical. Both minting coins and printing currency are expensive. Businesses need to hold the cash, replenish it when it runs out, deposit it when they have too much on hand, and occasionally hire companies to move the cash securely. To safeguard branches from actual bank robberies, banks use large security teams. Moving big amounts of cash around and securing them might become things of the past in a cashless society.
International Payments Become Much Easier
You might have to exchange your dollars for physical cash when travelling. However, you should not be concerned about how much local currency you will need to withdraw if you are going to a nation that recognises cashless transactions. Instead, everything is taken care of by your mobile device.
Disadvantages of a Cash-Free World
Going cashless can be more troublesome than helpful, depending on your viewpoint. Here are a few of the most significant drawbacks of a cashless banking system.
Digital Transactions Sacrifice Privacy
Cash payments are more private than electronic ones. It’s possible that you have nothing to conceal and that you trust the companies handling your data. But the more information you have online, the more probable it is to fall into the wrong hands. You may send and receive money anonymously using Cash.
Cashless Transactions Are Exposed to Hacking Risks
Hackers are the digital equivalents of robbers and muggers. In a cashless society, you are more exposed to hackers. If you are targeted, and someone drains your account, you must find a way to recover it. However, the possibilities are limited, and even if you are protected by federal law, reestablishing your financial situation following a breach would be difficult.
Technology Problems Could Impact Your Access to Funds
Glitches, outages, and innocent mistakes can also cause issues, preventing you from purchasing items when needed. Similarly, when systems fail, businesses are unable to take payments. Even a simple dead phone battery might leave you “empty-handed” in some ways.
Economic Inequality Could Become Exacerbated
Unless specific outreach efforts are made, the impoverished and unbanked will struggle much more in a cashless world. For example, those who cannot afford smartphones would be left behind if smartphone purchases become the norm. The United Kingdom is experimenting with contactless methods of donating to charity and homeless people, but these efforts may not be sophisticated enough to replace cash donations just yet.
Payment Service Providers Might Charge Fees
If society is forced to pick only a few payment options, or if one app becomes the default payment app, the companies who produce these services may not be able to provide them for free. Payment processors may profit from the large volume by charging fees, offsetting the savings that should result from reduced cash handling.
Overspending may become more tempting.
When you spend cash, you physically remove the money from your pocket and hand it to someone else. On the other hand, electronic payments allow you to swipe, tap, or click without realising how much you’re spending. Consumers may need to reconsider how they handle their money.
Customers may be liable to negative interest rates.
Negative interest rates may have a more direct impact on consumers when all money is electronic. Negative interest rates have already been tried in Denmark, Japan, and Switzerland. According to the International Monetary Fund, negative interest rates diminish bank profitability, and banks may be motivated to raise client costs to make the difference. Banks’ ability to pass on such expenses is restricted since clients can withdraw their cash if they don’t like the fees. Customers may have to accept any additional costs in the future if they cannot withdraw money from the bank.
How Would a Cashless Society Look?
Payments are made electronically in the absence of cash. Instead of exchanging value with notes and coins, you approve a money transfer from a bank account to another individual or business. The technicalities are still being worked out, but there are some indications of how a cashless society may develop.
- Credit and Debit – Cards are among the most popular currency alternatives today, but they may not be sufficient to enable a completely paperless world. Instead, mobile devices might become a significant payment tool.
- Electronic Payment Apps: – Person-to-person payments are facilitated through apps such as Zelle, PayPal, and Venmo (P2P payments). Furthermore, bill-splitting applications make it simple and equitable for friends to share their costs. Fintech businesses such as Stripe, Adyen, and Fiserv provide dependable and timely assistance for business-to-consumer (B2C), business-to-business (B2B), and account-to-account (A2A) online payments.
- Mobile Payment Services: – These services, together with mobile wallets such as Banks Apps, and Apple Pay, enable safe, cashless transactions. Many countries that use cash sparingly have already seen mobile devices become popular payment instruments.
- Virtual Currencies: – Cryptocurrency is already being discussed. Crypto is utilised for money transfers, bringing competition and innovation, which may reduce cost. However, hazards and regulatory obstacles make cryptocurrencies unsuitable for most consumers, so they may not be ready for broad usage just yet.
Examples of Cashless Societies
Several countries are already moving to remove cash, with consumer and political pressure driving the initiative. Sweden and India are two famous instances with opposing results.
Signs that indicate “No Cash Accepted” are frequent in Swedish stores. According to the European Payments Council, cash transactions amounted to about 1% of Sweden’s GDP in 2019, and cash withdrawals have been progressively dropping by roughly 10% each year. Consumers are generally pleased with the situation, but some who cannot keep up with technological advances continue to rely on cash.
Sweden is preparing to become the world’s first cashless nation, with a fully digital economy by 2023.
To arrest criminals and people operating in the informal sector, the Indian government outlawed 500 and 1,000 rupee notes in November 2016. The implementation was controversial because these notes constituted 86% of the money in circulation. On the other hand, criminals were not penalised for stockpiling untraceable cash, which was the goal of the move.
According to the Economic Times, the Reserve Bank of India revealed that while electronic transactions soared briefly, cash recovered to pre-demonetization levels by the end of 2017.
The Bottom Line
Cash currency is becoming increasingly rare due to technical and sociological shifts towards digital and virtual financial transactions. However, the transition to a cashless society has many potential pitfalls, and only time will tell if the currency will continue to have a particular place in society.
Some people may start using 1g, 2.5g, 5g, 10g, or 20g gold pieces as payment; who knows, and gold may return as a form of money and a medium of exchange.
It is not accurate to say that gold is the new cash. While gold has been used as a store of value and medium of exchange throughout history, it is not widely accepted as a form of currency in modern day transactions. In most countries, the official currency is issued and backed by the government, and its value is determined by factors such as inflation, economic stability, and monetary policy. On the other hand, the value of gold is determined by market demand and supply dynamics, as well as its use in various industries such as jewelry and electronics.
In recent years, there has been a growing interest in gold as a hedge against economic uncertainty and inflation, but it is still not considered a replacement for cash. Furthermore, gold is much less liquid and portable compared to cash, making it less practical for daily transactions.
In conclusion, while gold has its own advantages and disadvantages, it is not the new cash of today. The role of gold still is as a store of value and investment asset is distinct from that of cash as a medium of exchange.
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SCS Media Owners or its employees are not registered investment advisors and do not provide financial advice. Comments on this page are only an expression of opinion. While we attempt to illustrate the potential benefits of investing in precious metals, remarks, links, or advertising on this website should not be interpreted as advice to purchase or sell a commodity at any time. While SCS Media makes every effort to ensure that all of our comments are genuine and correct, we employ third-party data and rely on our reputable sources’ credibility. Before making any investment decisions, SCS Media suggests you contact a knowledgeable investment advisor.
Securities disclosure.: I, Beat Süess, have no direct investment interests in any of the companies mentioned in this article.
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Latest Update on January 6, 2022