Should We Fear Or Embrace A Cashless World?

Is convenience more important than privacy?

A cashless world — is it a fantasy, a real future or a step back into the pre-Phoenician civilisation? As we move farther and farther into electronic payments, the need for cash is slowly vanishing. Cash is uncomfortable, old fashioned and either way ends up as digits in banking IT systems. There is almost no reason for it to stay — but ‘almost‘ is the keyword explaining why we still have it.

What A Wonderful World

The most obvious real-life example: you go to a shop, buy something, want to pay with cash. After handing out a high note to the cashier, you hear “sorry, got no change”. Or you have to wait for change for hours and hours. On the other hand, payments with cards, especially the contactless ones, are quick and effortless.

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Soon, even cards will be replaced by something more ubiquitous — smartphones with an NFC feature (there are also payment systems and banking apps for phones without an NFC module), so you can still forget your wallet, but you will not be left without your money as long as you remember to take your phone, which is more likely.

Paying merchants for goods is one thing, though, and paying other individuals — friends, private sellers, servicemen etc — is a totally different case, where using a card is not an option, since we, the common people, simply don’t have card readers. But, again, smartphones with or without an NFC feature are on their way to help us go cashless. Today you can use hardware (NFC) or software (payment systems, banking apps) solutions to send or receive money without even knowing the other party’s or your own bank account.

Cashless life means less trouble with money itself: no need to look for an ATM, no heavy coins in your pockets, no cash to be lost or stolen. It’s simply more comfortable not to worry about having enough money with you for your needs. When you go abroad, this becomes even more apparent, because you don’t bother with currency exchange — you just pay with your card as usual.

From the perspective of companies, a cashless environment equals lower operating costs as it eliminates all the burden related to handling physical money. Cash storing, transport and counting would no longer be an issue.

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The same applies to government agencies as well, with the state treasury being the most prominent beneficiary: no more money making/recycling or prosecuting of forgery. The tax controlling and law enforcement agencies will also be happy to see every transaction, the flow of money and the dawn of the grey and black market.

Welcome To The Matrix

Unfortunately, there is another side to this story. A cashless world, although comfortable, poses many risks, especially to our privacy.

Electronic flow of money translates into full control of the state and the third parties — banks or payment service providers — over the process. Every transaction will be transparent, so it will be very hard to make peer-to-peer payments for products or services without taxes, regulations, contracts and so on. Want to lend your friends some money or buy something from them? The authorities will know about it and if there’s any opportunity to tax it, they will certainly do that.

The grey market will be gone or severely limited, the criminals will find money laundering difficult, but the legal second hand market could also face tough times.

Since cashless operations need the infrastructure, someone has to pay for its maintenance. We pay for bank transfers and it’s hard to believe banks would not charge for using their systems in peer-to-peer transactions. Of course, there could be solutions with no fees — some are already present on the market — but the general rule of thumb says nothing is for free. Try paying with a card for something in foreign currency or make an international money transfer to see for yourself how simple operations can be so expensive.

Another problem: big data. Banks already know too much about us and a cashless world gives them another source of valuable information. Are we prepared for this scenario of an infinite peeping into our lives, so that they can sell us more products?

All Hope Is In P2P

What is the future for cashless world then? If we want to preserve the last instance of privacy in economy, we have to build systems based on e-wallets totally independent from banks or governments. We don’t even have to invent them as they already exist: a so-called cryptocurrency with blockchain infrastructure is the perfect example of an absolutely anonymous, low-cost, decentralised, independent and easy to use peer-to-peer system, which could be adopted by individuals around the world.

The problem is, we don’t really need another currency. We just need a way to use our electronic money with full respect to our privacy and no additional costs.

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