Is cash headed for trash?
After China ‘recently’ invented cash (circa 800 CE), every nation replaced its coinage with paper money. No surprise that it lit a global fire. Thousands of currencies later, hundreds vanishing more recently, there are still 180 existing in a ‘borderless’ world! Where are we headed?
Inevitable—that an analogue sector like cash would digitise, resistance from banks and the state notwithstanding. All are now making peace with technology having assertively reared its ‘ugly disruptive head’.
Unimaginable—a ‘today’ without digital money, where cards, pay-on-cell, gateways have totally disrupted cash. Microchips, implants, finger-prints, facial and iris recognition are remote-reading your shopping and settling digitally. No checkout.
The leather wallet is history. A nugget—Swedish banks discourage cash, stores, buses, metro all on e-money. All person-to-person payments are Swish, much like our Paytm. Over 4,000 people have microchips implants, making payment possible with an imperious wave of the hand! PayPal, Apple Pay, Amazon Pay, Samsung Contactless, all on way to chips in wearables-watches, key fobs, bracelets.
In an all-digital world, cash is headed to the trash bin of history, ditched for bits and bytes, with unnerving implications for individuals, businesses, banks, and governments. This global tornado is bewildering. The ‘establishment’ is cross-eyed, figuring its response, but cautiously and wisely, joining ‘em when you can’t beat ‘em. The citizen, fatalistically and watchfully, balancing convenience with personal security.
When is money really money? When the state decrees an assigned value, a physicality, virtuality and backs it with legitimacy, trust, and reassurance. All these are under threat with fintech going exponential and out of the sarkar’s hand.
The Governments’ dilemma? Whether technology is a friend or foe. Depends, really. A friend because it can ensure total tax collection, can keep a hawk-eye on ‘black’ money, illicit businesses,
and counterfeiting. A foe, because tech has very different ideas, is unpredictable on the long arc. Principally, tech seeks to disrupt and deregulate. It becomes a threat when it wrests the power of money creation and control from the government, and heed not legacy institutions such as banks.
We are on the edge of a tsunami, a new form of disruptive finance that will, with AI-driven technologies, change the way we use and manage a fundamental tool of civilisation: money. Unknown currents lurk beneath the surface —risks of market stability, accountability, and compromised privacy.
In the span of very few years, cryptocurrencies—volatile, decentralised, transparent, and borderless—have grown from digital novelties to trillion-dollar technologies. They are being used
to buy everything from software to real estate to illegal arms and drugs, potentially facilitating criminals, terrorist organisations, and rogue states.
A totally digital world that manages our digital money requires foolproof, triple-backed tech. It’s just about getting there, but not quite. The internet is still unstable and vulnerable, and hackers (pickpockets?), and cyber attackers abound.
To protect their turf, the driving forces for safer digi-currencies will be central banks. As more unregulated cryptocurrencies emerge and their acceptability expands, central banks will react by developing their own more stable forms, and simultaneously fight to delegitimise unregulated ones. Not easy. How do you combat ‘illegal’ bits-and-bytes, that too something moving at the speed of light across the internet?
While these developments will certainly energise the global economy, albeit more regulated, it will make transactions frictionless, and release enormous wealth to society. The trade-off is that there will be practically no privacy, every cent under the scanner, state power untrammelled, with full control of the individual.
With cash phasing out and digi-currencies reigning supreme, unlikely that paper money will disappear completely, will remain to be a very small component of the economy Equally seriously, there will be psychological trade-offs in our relationship with money. We are staring at a psychological reset of that visceral sense of security associated with physical money.
Having given up privacy for convenience with few ways to bend rules, we now stand naked with all transactions open to scrutiny, immutably recorded. In recent years, every transaction on the internet is tracked, analysed, and harvested for insights to profit. In this light, cash—and its anonymity is appealing.
In this change to digi-currency, we will suffer from a de-coupling, a ‘lesser’ connectedness to our money, a more distant, impersonal relationship. It is more than likely that with a flood of digi-money, we will be encouraged to spend far more liberally over affordability— and head towards burial by debt.
Our feelings towards cash are more intimate, more real, than electronic money. It is not just an illusion. It is just a very hard habit to shake off.
It is very likely that our kids will grow up without piggy banks, gifts from the tooth fairy, and birthday cards from grandma with currency inside. But they will adapt. Governments and tech aside, we still need the conviction that any wealthy owner can be demonetised by God alone. A cashless society will not be a utopia and will involve serious trade-offs for the individual at all levels of society.
I’m nervous about my money future—that is for sure.
rohtash.mal@gmail.com
Ex-corporate honcho and organisational yoda; now entrepreneur and stargazer