Somewhere in the near future...
...physical money will become like these
Relics of a different age
And will only be found in places like this
In other words...
...hard cash will disappear
It will become electronic...
...transferred by things like these
So what’s the rush to get rid of cash?
And what’s the cost?
Let’s face it money is cumbersome for consumers...
...and banks
You need to mint the cash, you need to print the bills...
...you need to transport them in armoured trucks....
...store it in very secure vaults...
...and you need to sort it at the till as well
Operating in cash costs countries about 0.5% of their GDP every year
But cost isn’t the only incentive to move towards a cashless future
Demand is rising
Primarily demand from the young generations...
...who are looking for fast, easy-to-use means of payments
Digital payments aren’t just easy...
...they are neat
It becomes easier for governments to monitor...
...tax evasion and fraud
So we will have less of that going on, probably
Having every single payment automatically recorded is efficient
But there’s a downside
Let’s assume for example that a country that used to be democratic...
...where people were not paying too much attention...
...about safeguarding their privacy, becomes undemocratic...
...and someone wants to control citizens more closely
They will try to infer from what you buy...
...your political leanings potentially
And generally speaking just monitor what you’re doing...
...in ways that they shouldn’t be doing
The ballot boxes are kept locked and sealed...
Living in a democratic country doesn’t mean you shouldn’t be concerned
There are also worries that private companies perhaps...
...might use this data in ways that are...
...not safe or that you might not like
And for a number of sectors...
...knowing what you do with your money is very important
Electronic-money trails can allow governments and private companies...
...to access and harvest personal data
But there’s another threat that is worrying banks...
...cyber-attacks
It was a high-tech bank robbery
Capital One suffering a massive hack-attack involving...
...a hundred million Capital One customer’s accounts...
...had their personal information stolen
In March 2019 Capital One bank was hacked
A solo hacker managed to steal away...
...106 million people’s personal details...
...in a matter of days
And that attack was noticed just a few months after
You can see that a lot of companies are not very well protected yet...
...against such threats
Pretty much every day we hear of data breaches...
...cyber-attacks that are successful
It’s much harder to prevent an attack than to...
...be on the hacker side because...
...you only need to succeed once as a hacker
Once upon a time you would have two guys coming in...
...they would tell everyone to be on the floor...
...put the money in the bag and then run away with the money
And you would get insurance against that
You knew what the risk was
Nowadays with cyber-attacks...
...they can happen any time, they can take any form
So it’s very hard to insure against
Still many countries are fast moving towards a cashless society
In Sweden the number of retail cash transactions per person...
...has fallen by 80% in the past ten years
The trend is even evident in far more cash-loyal societies
China’s digital payments rose from 4% of all payments in 2012...
...to 34% in 2017
The trend is inevitable but a gradual transition is key
It’s important that we have a sort of control as to how fast this happens
Because if that’s not the case, some people might be left behind
Some people may find it harder to grasp how much money they have...
...without the physical representation of it
Not everyone knows how to use internet-banking technology
And people living in remote areas where internet cover is patchy...
...may find they have to drive for miles for their basic needs
And there is another sector of society that relies heavily on cash
People living on the street don’t carry card terminals with them
So it would be very hard for them...
...well first of all to collect money and to pay for things
They will be among the people who suffer the most from it
Going cashless is just the latest evolution of money in the modern economy
But it raises a fundamental question...
...what is the value of money if it doesn’t physically exist?
Central banks enact monetary policy...
...by exerting control over the amount of money...
...that is created and that is in circulation
And they can do it because...
...they are the only entities that print and create money
The purpose of it is to control the amount of money...
...that is used by the entire economy
In a cashless society obviously this becomes much harder because...
...money presumably can be created by other entities
And so central banks are actually starting to realise this
Especially after Facebook made the announcement...
...that they were looking to launch a digital currency
It shows you the extent to which central banks are already thinking...
...about the future of money
The move towards cashless societies is well under way
But governments need to ensure that, as cash is phased out...
...the vulnerable in society aren’t left behind
They need to navigate carefully...
...the many pitfalls that a digital economy will bring