Last May, new 100-krone and 200-krone banknotes (worth roughly €10 and €20) were set into circulation in Norway. At the time of writing, however, a lot of younger Norwegians are still unfamiliar with the new bills—ourselves included. Not because they are rare, but because we simply never use cash anymore.
The Nordic countries are leading the way towards becoming cashless societies. According to Sveriges Riksbank (the Swedish central bank), cash transactions made up barely 2 % of the value of all payments in Sweden in 2016. By 2020 that figure is expected to be a mere 0,5 %.
Similarly, here in Norway, even in settings that would traditionally be cash-only—say, the hot dog stand at your kids’ soccer-game, or a pop-up market—you can now easily pay with an app.
Apps like Vipps (in Norway) and Swish (in Sweden) connect your bank account to your phone number, so all you need to transfer money is a phone number or business ID. Settling bills among a group of people in these apps is no more complicated than starting a group chat. It’s easy to use, it happens in real time, and there are no transaction fees. In some ways it’s even easier than trading in cash.
“Some Nordic countries are already cutting back on cash”, Benoît Cœuré and Jacqueline Loh, from the Bank of International Settlements (BIS), write in the Financial Times—adding that “the iGeneration is more likely to reach for a payment app than a purse. To their children, bank notes and coins may look like museum exhibits”.
Indeed, when we look at the Nordics, it’s not far-fetched to think that the first child that will never touch a bill or a coin, might already have been born. However, when we take a step back and look at the rest of the world, we see a rather different picture.
Transparency and privacy
There are many good reasons for championing a cashless society. For one thing, it’s convenient.
Also, a society where monetary transactions are digital is a society where corruption and criminal activities will be easier to monitor and prosecute. Using the black market and avoiding taxes will be much harder.
But there are, of course, also some looming issues. If money is reduced to numbers on a screen, and not something we can physically control, then how can we be sure that it’s safe—or even real? And if digital transactions are more transparent and traceable, doesn’t that also mean that we can be surveilled, and that information about us can be used by a company or a state in the wrong way?
Some do, indeed, see this as a threat to our right and need to privacy.
As Rainey Reitman, activism director at the Electronic Frontiers Foundation, says to The Fast Company: “When all our payment transactions are tracked, it creates a trove of data we have no control over. It’s easy to imagine a daring divorce lawyer or a government agent trying to gain access to our financial history to try to build a story about who we are.”
These days we are seeing how people are quitting Facebook after the revelations that Cambridge Analytica exploited data it got from Facebook to influence and manipulate actions and elections. It may not have been Facebook’s doing, in any direct sense, but they did allow it to happen. Following that same logic, even if we trust the state with our money, that doesn’t mean we should trust those who can access data about our payment transactions.
And indeed, globally, people are increasingly not trusting the banks, either.
Trust is at a record low
Looking at the Nordics is like looking into the future. In most rest of the world, however, cash is not about to disappear. On the contrary, following the financial crisis of 2007-2008, the demand for cash has actually increased. Reports of the death of cash are exaggerated, according to the Bank for International Settlements (BIS).
It’s not because of small day-to-day transactions that cash is now in demand. It’s the larger bills that account for a current resurgence of cash—an increase from 7 % to 9 % as a share of GDP in a large sample of countries studied by the BIS.
As with so much else in today’s politics, the issue is about trust—or rather, the absence of trust—in the “system”. It seems that people are again sowing cash into their mattresses, as it were, as they fear that their savings may otherwise disappear in the blink of an eye.
In the last two decades the amount of U.S. currency in circulation has tripled, now counting around $1,6 trillion. In 2016, according to a story in The New Yorker, the average American carried thirty dollars in her wallet at all times, and one in twenty Americans had a stash at home of more than twelve hundred dollars.
One of the most cash-dependent economies in the world is India, where around 98 % of transactions are made with cash. The huge differences between these countries—India, the U.S., the Nordics—can be credited to two things: digital maturity, and maybe most importantly, trust.
The Nordic countries are societies with, traditionally, a relatively egalitarian population who enjoys state sponsored schooling and equal opportunity, and a population with a great trust in the state and its institutions. In the US, on the other hand, trust in the government has fallen nearly every year since 1964 and is now at 19 %, a record low.
If we are to champion a cashless society, either we need to increase trust in the states that issue the money. Or we could eliminate the importance of trust in the first place.
Bypassing “trusted intermediaries”
A technology that could eliminate or reduce the importance of trust is the blockchain. If you don’t trust the government who issues the money, or the bank that keeps the money for you, you might still trust a global network that keeps proof of all your transactions and the validity of your assets.
The last couple of years have seen a surge of the use of cryptocurrencies in third world countries. When the local currency faces trouble, as in Sudan, Kenya and South Africa, the cryptocurrencies are a great and safe alternative. Or if your country is suffering from corruption, the blockchain can actually offer a way out.
Alex Tapscott—co-author of Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World—believes that blockchain is going to benefit the world’s poorest people in a big way.
“We’re seeing a big problem where the world economy is growing unabated, but fewer and fewer people are benefiting, and we think blockchain could hold solutions to that,” he says in an interview with The Fast Company. It’s possible because the blockchain allows peer-to-peer relationships without “trusted intermediaries”.
A Nordic-style cashless society not only needs a high level of trust, but also need a high level of digital maturity, and advanced infrastructure. In developing countries, it could, however, be possible to take a “shortcut”—bypassing bank-based payment systems and heading straight toward a blockchain-based digital economy.
It is beyond question, in any case—whether you think reports of the death of cash are exaggerated or not—that money, and our relationship with it, is changing. What will the future of money look like? To what degree will traditional bank-based systems be challenged by cryptocurrencies? Will the banks themselves adopt blockchain technology?
It’s not just about technology, either: When money loses its physicality and becomes completely digital and intangible, how will that change our perception of money? How will it change our relationship to payments and transactions, and what will it do to our societies?
It’s not for us to say. We can, however, explore the inherent possibilities that arise together with these issues—and aim to create better solutions, that benefit the disadvantaged and the privileged alike.