On cash…
"Cash rules everything around me C.R.E.A.M.." — Method Man, "C.R.E.A.M."
Why is cash still a thing? I recently tried out a new barbershop and only saw the 'CA$H ONLY' signs around the shop after getting my haircut. To pay for my haircut, I had to: get in my car, drive five minutes to the nearest Bank of America ATM — I'm not paying that damn $3 ATM charge; get $20 out of the ATM; get back in my car; drive another 5 minutes to the barbershop; pay for services rendered; wait for the attendant to get a $5 note for my change; and then just leave frustrated after waiting 5 minutes. On my drive back home I couldn't stop thinking about how much effort was expended on an ideally simple transaction because of the barbershop's insistence on cash. So, seriously, why is cash still a thing?!
Now, to be fair, using cash comes easy to everyone, it's easy to understand and barely requires any technology to be used. We've used cash in some form for hundreds of years, we're stuck in our ways and it's hard to change, I get it. I even understand the allure of the smell of freshly minted notes and the comfort derived from seeing hard-earned money. However, I don't think these reasons are sufficient to slow the pace of our weaning off from cash. Moving off hard currency has many advantages like:
Improved security: without cash the odds of getting robbed off large sums of money is greatly reduced because, well, you don't have any cash on you. Also, banks have gotten pretty good at online fraud detection and protection and restoring lost money due to fraudulent activity.
Better spending practices and personal accounting: all your transactions are logged and 3rd party apps like mint can let you know you're spending 75% of your budget at restaurants. All in all, moving off cash and keeping your money in a bank allows for better personal book keeping and provides more robust data for insights into your spending habits.
Providing a paper trail to curb corruption: there's a reason most nefarious activities involve cash — it's because there's no paper trail. Cash can move easily beyond the purview of auditors and most law enforcement agencies. Restricting access to cash reduces the likelihood of tax evasion, makes it harder for criminals to launder money and curbs the ability to bribe government officials among other crimes.
The move toward a cashless world could have implementation difficulty in rural areas and developing countries where people generally don't have access to bank branches and the technology required to live independent of cash. The solutions to these implementation issues will have to be tailored to the local population. For example, online shopping is very popular in North America and Europe and business are able to do business exclusively online because of high internet penetration rates and effective mail delivery systems but this won't be feasible in countries like Myanmar or Chad where less than 3% of their population with access to internet right now. On the other hand, M-Pesa in Kenya allows for money transfer via SMS and has been largely successful because of a high penetration of mobile devices.
I believe enacting policy that incentivizes going cashless and building infrastructure to support this rather than taking aggressive and sudden actions to solve the issues having a cash dependent economy creates is the more prudent approach. For example, India demonetized their highest notes — 86% of the currency in circulation — in early November and allowed people a small window of time to exchange their notes or deposit those notes into bank accounts with no questions asked. This was enacted to curb corruption and expose undeclared money for taxing. This sudden move, while the country is still heavily cash dependent, and the short adjustment period allowed has led to stalled business activity and long, unbearable bank queues. Even with it's pure intentions, the move to demonetize the 1000 and 500 rupee notes in India has led to undue hardship on the people it was meant to help. Conversely, South Korea is incentivizing people to go cashless by allowing them to put value from coin currency on prepaid cards starting this year and plans to go completely coin-less by 2020. I can imagine that over time this policy will also be implemented for all currency and the amount of cash in circulation will taper off. The odds of this policy succeeding in South Korea are high because "electronic payments are commonplace" and it is "one of the most wired nations in the world".
All in all, we should encourage the move to a cashless society and we need to do so by enacting policies that are inclusive and don't shut certain people out of the economy.