THE WAR ON CASH: A CLOSER LOOK AT ITS FAR-REACHING IMPLICATIONS
THE WAR ON CASH: A CLOSER LOOK AT ITS FAR-REACHING IMPLICATIONS by Claudio Grass
Much has been said and written over the last years on the topic of the gradual elimination of cash that we witness in our economic activity and everyday transactions. The massive and widespread political campaigns and practical measures geared at making cash a thing of the past and encouraging the use of electronic money instead have been a deeply divisive issue, especially as the institutional pressure intensifies.
The push for a cashless society
It is true that the rise of plastic money, online payments and electronic transactions has been to a large extent the result of technological progress, faster and more reliable processing systems, as well as consumers’ familiarity with the online world and automation that increased exponentially in the last decades. However, it wasn’t just progress alone that fueled this move. Significant political and institutional pressure on consumers to adopt these methods and abandon cash altogether has been building up for years. And while the arguments might have varied in the past, the goal has always been a cashless society.
As Manfred Gburek outlined in his recent article on the matter, the quality of the debate that reaches the average citizen is particularly poor, as most arguments are emotional and largely lack any kind of rational or factual basis. This is also compounded by the scare tactics employed by political figures and institutional voices in their efforts to justify anti-cash measures and legislation. While the usual sales pitches in favor of electronic money once mainly focused on convenience, the advantages of modern technologies and the elimination of the burden of having to carry physical notes, they largely failed to convince citizens of cash-loving countries with a tradition and strong preference for spending physical money over plastic. This is particularly relevant in Europe, where the adoption rates of electronic money have been especially diverse. Nordic states have been eager to make the transition from cash, while others have shown fierce resistance, like Germany and Switzerland, where over 70% of all transactions are still in cash, according to a recent study by the SNB.
Hence, a very different message was adopted. Instead of exalting the virtues of electronic transactions, the focus shifted to demonizing cash. The new narrative now aims at stoking fear, security concerns and casting suspicions over those who insist on retaining the choice to use cash. Doubts over the motives of the cash-loyalists are widely dispersed, as the choice of physical notes is increasingly intertwined with having something to hide.
An all too common example of this sort of rhetoric is the argument that physical paper notes of a high denomination are used by criminals and terrorists, to facilitate their nefarious activities and help them conduct their evil business untraced. Thus, the narrative goes, it makes sense and it is absolutely worth it to bar all citizens from using these notes for legitimate purposes, if it means making the operational processes of the bad actors a little bit more complicated. It is obvious that the argument is seriously flawed, as criminals notoriously use all kinds of goods and transaction vehicles, from art pieces to illicit drugs, and are therefore very unlikely to be severely affected by such a move; at best, it would cause some annoyance and temporary inconvenience. Nevertheless, this still acted as the main selling point for the 2016 ECB’s decision to scrap the EUR 500 note, a move that was finally completed at the end of April, when the central banks of Germany and Austria stopped printing the note, the last ones to do so in the Eurozone.