Cashless movement makes gains

Coin collectors are looking towards a busy fall season. The general public continues to take not only coins but bank notes for granted as a part of our everyday financial life. Increasingly, people outside the United States are beginning to wonder just how many coins are going to be available in circulation in the near future. The world is changing. We are looking at technology that is moving us increasingly towards becoming a cashless society. Is this for better, or for worse?

The arguments both for and against doing away with coins and bank notes are becoming well known. Likely the most important argument against going entirely cashless is the privacy issue. Any government can easily become “Big Brother” if all monetary transactions are done through electronic transfers. That same government can not only monitor how people spend their money, it can seize assets with a click of a button, this being an easy way to neutralize political adversaries.

The less obvious elephant in the room is that going cashless entrusts our entire monetary supply to the banking system. This is the same banking system that almost went to ruin during the recent Great Recession.

The threat from cashless technology is more ominous than might be expected. Three Square Market in River Falls, Wis., is already offering its employees the “opportunity” to be imbedded with a biochip through which financial transactions can be accomplished. Three Square Market management insists the biochips will not be used to track people or their spending habits. Even if this is true now, will it always ring true? This is the kind of technology we might expect to be embraced by a totalitarian regime such as that ruling North Korea.

The surprise comes from a one-political party governed nation, that being the Peoples’ Republic of China. It is the people of China embracing the cashless concept voluntarily rather than due to the dictates of their government.

According to iResearch Consulting Group, mobile payments in China reached almost $55 trillion U.S. dollars during 2016, about 50 times the U.S. markets’ estimated value. All this is centered on two Chinese companies, Tencent and Alibaba.

Tencent’s system is called WeChat, while Alibaba’s financial affiliate Ant Financial operates Alipay. Both use smartphone payment option technology. Both companies have the capability of providing inexpensive payment capabilities even to small merchants, who can get a printout of a QR code or use their telephones rather than an expensive card reader. Sources indicate both Tencent and Ant Financial are about to surpass both Visa and Mastercard in total daily transactions.

On July 18, the British newspaper The Independent reported “other services” fourth quarter (2016) earnings by Tencent almost tripled to US$93 trillion from one year earlier. These other services are reportedly mostly from mobile payments.

Richard Lim is the managing director of GSR Ventures, a venture capital firm in China. According to Lim, “From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment, it’s only in China.”

While nations including Denmark and Sweden are still struggling with card swipe technology as they try to go cashless, it appears in China all it will take is to use your telephone.

World financial domination could be achieved by a small number of companies rather than by governments if this trend continues, but a cashless society is already proving to be fraught with dangers, not just in China, but in countries such as Greece.

Greece is on a forced austerity program imposed by the European Union due to Greece’s past irresponsible economic policies. Cash transactions greater than 500 euros (about US$500) are already illegal. As of June 1, all salaries are required to be paid to bank accounts using direct electronic transfers. As of July 27, many businesses are being required to install point-of-purchase card readers and also being required to post notice that announce if card payments are either accepted or not. Automatic Teller Machine cash withdrawals are limited to 840 euros every two weeks.

Many banks in Norway are no longer issuing coins or bank notes. Norway’s largest bank, DNB or Den norske Bank, has called on the public to cease using cash.

Belgium is now limiting cash transactions to 3,000 euros, while France and Spain each are limiting such transactions to 1,000 euros. Statistics indicate 93 percent of all payments made in Belgium are cashless.

Denmark has announced it has a goal of eliminating all coins and bank notes by 2030.

Sweden is currently the most cashless society. Swedish bank notes and coins account for just 1.7 percent of its Gross Domestic Product.

The move towards going cashless is also gaining steam in India, Kenya, Somalia, and South Korea. (A “Digital Wealth Fair” was held Jan. 3 in Mumbai, India.) Some of these countries offer tax benefits to consumers using cards rather than coins and bank notes.

Not everyone outside of coin collecting is thrilled with the cashless movement. Germany recently defeated a measure that would limit cash payments to 5,000 euros. The German newspaper Bild recently published an editorial called “Hands off our cash.” Statistics indicate that about 80 percent of all transactions are still made in cash in Germany.

The Bank for International Settlements said there was about $4.54 trillion in cash (coins and bank notes) in circulation in the euro zone and 17 other major economies as of 2015. This represented about 8.9 percent of the Gross Domestic Product of these countries. The United States was reported to be circulating $1.42 trillion in bank notes. Japan had the highest bank note to GDP ratio at 19.4 percent.

According to the American Psychological Association, non-physical cash payments encourage larger amounts to be spent. Both gambling casinos and cruise ships have abandoned using cash or tokens in favor of debit and credit cards for this reason.

As CoinWeekly.com publisher Dr. Ursula Kampmann put it in a July 27 editorial, “Cash isn’t perfect, but it’s far fairer than all the expensive and modern services provided by banks and credit institutions. They’re interested in the wealthy middle class, not in the poorest of the poor with which they can’t make a great profit.”

A July 17 Bloomberg news report asked the question, “Who’s in favor of going cashless?”

According to Bloomberg, those favoring going cashless included governments, central banks, businesses, technology supporters, credit card companies and numismatists.

Why numismatists? The author of the Bloomberg story is likely naïve, since the report reasons: “Their coin collections would be that much rarer.”