Business Essentials for Professionals


The distant dream of a cashless society

In the past decade, cash has been attracting a rising number of attacks, from various governments as well as from private businesses, or even journalists. All are throwing many arguments against hard currency, slowly tainting its image for what could be the preparation phase to the outright banning of notes and coins. While some inch patiently and try to ease it out of economies, some have promoted far more radical and rash moves. Are cashless economies truly a potential development or are they just wishful thinking?

Australia, in the past 6 years, has diminished its use of cash by a third, purely out of market movement, and not by government regulation. Australia's firm push on national digital infrastructures has simply spread the availability of non-cash payment methods, which more and more Australians have adopted under constraint. So, the next step is killing off cash, now that it wounded – something which now seems less and less unrealistic to some. Richard Holden, from the Financial Review, says “The benefits of a cashless Australia would be significant – and go well beyond not having to stand in line behind someone counting out ten cent coins to pay for coffee (although one shouldn't underestimate how frustrating some of us find that)”.  The main advantage to him would be to end fiscal evasion, as cash tends to go around untapped.  It would also reduce the cost of cash maintenance and help fight crime. In the mainstream of cashless-society supporters, Holden suggests a gradual phase-out “given our payments system, the introduction of the NPP, and mobile phone penetration, Australia is perfectly positioned to carefully but deliberately phase out cash. Starting with $100 and $50 bills and the moving to smaller denominations would be a sensible and practical approach.
Nigeria is on the step above Australia, while shying clear of drastic measures. The Cashless Policy led since 2012 by the Central Bank of Nigeria, has capped withdrawable amounts to about 2000 dollars for individuals and 12 000 dollars for companies, made it mandatory for registered and licensed professional cash transporters to collect proceeds from shops, and fiscally sanction excessive cash transactions. In fact, the Nigerian government is trying to gain control of its own economy, which has eluded its command for decades.
However, the problems it faces in the implementation of this policy reveal the inherent risks of any cashless economies. “The financial infrastructure in Nigeria is not adequate to carry the load of a cashless society; ATM’s, Point of Sales system, mobile banking and other mediums have to dramatically expand to touch at least 40 per cent of the whole economy before any meaningful effect can be achieved,” said Ernest Simeon Odior and Fadiya Bamidele Banuso, lecturers at the University of Lagos. Mark Smith, who develops business in Africa for Travelex group, advises “a mixed purse is the best solution and the percentage of cash to card transactions will change with time”, indicating the move will be slow and gradual. If the policy succeeds, Nigeria hopes to stem its most endemic problems : corruption, theft, violence and inability to steer the economy on a national scale.
India, however, has gone from push to shove in the war on cash. Wade Shepard wrote for ForbesOn November 8, India’s Prime Minister Narendra Modi announced that 86% of the country’s currency [the most common banknotes, the 500-rupee and the 1000-rupee one] would be rendered null and void in 50 days. It was posited as a move to crackdown on corruption and the country’s booming under-regulated and virtually untaxed grassroots economy, but is also being used as a driver to get millions of Indians onto the country’s official economic grid — many for the first time.”  The news shattered the earth, left many dumbfounded with the unpreparedness and sheer economic violence of the decision, and sent shockwaves through the country. India’s Ministry of Finance, Narendra Modi, said that the purpose was tocurb financing of terrorism and any other subversive activities through the proceeds of fake currency notes. It also aims to restrain the shadow economy in India, the major driver of inflation that adversely affects the poor and deprives the government of its tax revenues. In addition, it is hoped that the move will reduce cash circulation in the country – as most corrupt activities and illegal dealings are done through cash.
However, ordinary citizens were the ones who suffered the most impact, not criminals. Prasad, an author for Indian newspaper Alochonaa explained how500 and 1,000 rupee notes were the bedrock of the grassroots economy, being the primary drivers of most everyday monetary transactions, such as the payment of wages or in real estate deals.Diego Maiorano added : “Street vendors and shops are unable to buy provisions, which is causing shortages of basic goods in certain areas. Taxis, rickshaw drivers, barbers, maids and doctors are all facing the difficult choice of either accepting the old notes, or providing their services on credit […] Normal life has been thrown out of gear since the 8th of November.
The war on cash isn't won yet, and it's hard to say whether one battle will come through or not. Some countries have come close, only to back down before citizen's resistance. However, the nature of States tends to suggest that the war will keep on raging until victory is achieved. Governments are self-aggrandizing entities: they only grow, never recede. And given that suppressing cash is ultimately a matter of gaining absolute governmental control of economies, for better and for worse, it seems rather unlikely that States will stop trying, no matter how slim their chances of coming through. 

Christopher J. Mitchell

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