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The Challenge of Going Cashless

Apparently Sweden is so close to being a cashless society (cash represents only 3% of the economy) that even churches have card readers for taking donations. Hmm.

I have to admit to mixed feelings about the impending death of cash. While my left brain recognizes that the evolution from cash to "cashlessness" is inevitable, my right is having trouble with the idea.

This got me thinking. If someone who makes a livelihood from financial technology could feel this way, imagine how the average consumer might react! Will the adoption of electronic money create discontent especially in countries like India, which still run on cash for a variety of reasons?

Not outright rebellion, but more like a tug of war between two factions... One faction, which has everything to gain from a cashless economy: banks and financial services providers, which will make a fee on every transaction; regulators, which are trying to bring in transparency; mobile networks, which will carry all the traffic; governments, which will find it easier to control financial malpractice and the counterfeiting menace; and technology vendors, who will make and sell new solutions. The other, a group of reluctant customers and merchants, with their own reasons for resisting the change, ranging from a mistrust of technology to an unwillingness to take on the initial investment and ongoing effort and charges involved in card or non-cash payments. Of course, money launderers and others subverting the law would be part of this group, but they can hardly make their reasons public!

There's no doubt which side will win. However, banks, regulators et al must prepare to face new challenges and allay public concern even as they push ahead with the transition. The obvious challenge is ensuring the security of transactions: for instance, in Sweden, the decline in bank robberies has been countered by a sharp rise in cyber theft. But there are other, less obvious issues as well. For instance, will consumers in savings-oriented cultures begin to overspend and eventually fall into a debt trap they can't get out of, and take the economy down as well? Will they protest loudly when they find that non-cash transactions actually cost more once smartphone, connectivity, data and bank costs are thrown in. Considering how impactful consumer activism has been in the past (U.S. debit card fees and Bank Transfer Day protests...), the authorities had better be prepared.

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