Why do we still use old-fashioned paper money? When everything else in society is going digital, shouldn’t paper and metal cash be consigned to the history bin? Electronic payments are quick, efficient, and don’t weigh down your wallet. In forward-looking Sweden, for example, the proportion of payments made with cash has fallen over the past decade from around 40 per cent to less than 10 per cent.
Proponents of a “cashless society” argue that paper money facilitates corruption, organised crime, and even terrorism. However, critics point out that electronic payments cannot be made without leaving digital traces, potentially allowing the government to snoop into our business even more than it already does. Also, transaction fees for small amounts can be prohibitive, and some people worry we would be making ourselves more vulnerable to cybercriminals and hackers.
What do our readers think? One reader, Nardo, sees only advantages in cashless payments. Among other things, he thinks digital currency would be safer, more convenient, and cheaper for the state (since he says producing money is expensive). Is Nardo right? Are there indeed only advantages to switching to digital payment systems?
To get a response, we put Nardo’s comment to Stefan Hardt, Director General of Cash Management of the Deutsche Bundesbank. What would he say?
I wonder where Nardo gets the idea from that non-cash payments are really safer and more convenient? I think that’s a bit subjective. Maybe others will feel differently. In this respect, I would simply question it critically. But I think one point is very important: that technical disruptions – recently there have been warnings of blackouts – can at least not be ruled out. And we can say that there is actually only one means of payment that works even in the event of technical disruptions. And it doesn’t matter whether it’s a power failure, a hacker attack or whatever. Only cash works in these cases.
It is no coincidence that the German Federal Office of Civil Protection and Disaster Assistance asks the population to have cash at home as a precaution in such cases. That’s why I think that looking only at convenience is perhaps a bit short-sighted. That is one thing. Secondly, yes, of course it costs the state money, there is no question about that. Cash and cash payments are a public good and that costs the state money. All state tasks cost money, whether it is internal and external security or the construction of roads. Public tasks cost the public money. In this context, it would be important for me to simply say that non-cash payments also cost money, obviously. Not for the public purse, but in the end it ends up with the consumer. The costs are borne by the merchants, who certainly pass them on in their price calculations. In this respect, we pay it as taxpayers in the one case and as consumers in the other. So I think you have to go a bit deeper to be able to really judge that. I think Nardo has made it a bit too easy for himself.
We had a comment from Marc on Twitter, wondering why cash should be abolished. Back in 2017, we took his question to Dorothea Mohn, who worked as a team leader on financial services at the Consumer Center, a German consumer protection organisation. Here’s how she responded back in 2017:
We, as a consumer protection society, see no good reasons for the abolition of cash but, of course, there are stakeholders who are interested in such a thing, such as banks. If we imagine there was no cash then, in the case of a financial crisis, consumers could not come up with the idea of simply withdrawing their money and then placing it under their pillow or in a safe… The “bank runs” we have seen in other countries would no longer be possible. Negative interest rates also become more attractive if consumers cannot withdraw cash…
Of course, some businesses also support this idea, because if everything can only be paid digitally – and because digital transactions are not anonymous – you can harvest a lot of important and interesting data, from which you can build advertising and marketing strategies.
There are, therefore, many stakeholders in the economy interested in abolishing cash for their own benefit.
Next up, we had a comment from Martin: “Never ever should cash be abolished! Such a step can hardly, if at all, counter the dangers of terror and crime.”
How would Stefan Hardt respond?
Well, due to my professional role, but not least for personal convictions, I am a fan of cash. But if we are completely honest, we cannot hide the fact that cash is also misused. That’s true, of course. The point here is really just to say: there is no evidence that there is a connection between crime and cash. In other words: If we were to abolish cash today, there would still be crime and terrorism. Anyone who wants to enrich themselves in an illegal way will still want to do so after the abolition of cash and will find ways to do so. In this respect, I share Martin’s opinion.
Should cash be abolished? Does it it help facilitate corruption and organised crime? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!