From paper to pixels: How cash went from king to question mark
Technological breakthroughs and advancements across the spectrum of the digital economy have been challenging the inherent nature and core purpose of money, putting pressure towards reconsidering the issuance of physical money, the impetus of financial transactions
and the role of physical banking infrastructure. Increasing cost of business, climate change urgency, proliferation of alternative digital forms of payment and transactions (especially contactless cards, mobile wallets, and cryptocurrencies) are considered
as the main pressure points in the discussion around the future of cash and most importantly the continuous access to traditional forms of money.
Digital money and virtual financial transactions are associated with convenience, security, hygiene, and efficiency. In this context, digital economy in generating enormous amounts of data. Due to advancements in open banking and data portability, financial
and non-financial institutions can now leverage financial and non-financial data in terms of providing novel and personalised offerings, while fostering entrepreneurial venturing activity and innovative business models. The financial services value chain is
becoming unbundled and disintermediated by non-financial stakeholders, changing the foundational concept of banking and payments. Data-driven economy is augmented by advancements in machine learning, data analytics and predictive analytics, supporting at the
same time calls for drastically reducing fraud and financial crime.
Transactional cash use has been unevenly declining; however, policies remain in place to ensure mandating cash access and acceptance so that cash can remain a convenient means of payment. At the same time, numerous jurisdictions are exploring alternative
models for wholesale cash distribution to maintain efficiency, while reducing cost.
The sensitive balance between digital, alternative means of payments and the cash-driven economy overshadows the critical gap between these two worlds and schools of thought. Diversity of access, technological literacy, demographic and cultural peculiarities
towards cash and access to financial services across different societal verticals, remain key aspects of the discussion that should not be omitted.
The current discourse in relation to the transition towards a cashless economy is defined by the intersectional dynamics of diverse, technological, societal, economic, environmental, ethical, and cultural factors. A forceful transition into a cashless economy
encapsulates inherent risks, manifesting socio-economic disparities, privacy vulnerabilities and challenges in ensuring robust digital infrastructure and uninterrupted access to financial services. Such a transition, if not carefully convened, will amplify
existing inequalities, will raise substantial concerns about data privacy and security, could result in bank run phenomena and will increase the levels of shadow economy. The psychological perception and behavioural impact of the absence of physical cash from
the economy can also lead to increased anxiety and sensitivity to rumours.
In this context, the question whether cash accessibility is indeed a fundamental human right or a fading remnant of an era long gone is more pertinent than ever.
Why cash still matters: More than just nostalgia
Access to cash is considered for many as a fundamental aspect of financial inclusion. The paradoxical co-existence of financial technology advancements and the continuous reliance on cash by billions around the world raise indeed fundamental questions about
financial inclusion, economic autonomy, and the underlying and invisible risks of a fully digitalised monetary system. Moreover, this co-existence reflects another tension: despite the global nature and reach of the financial sector, its underlying mechanisms
and principles do not follow the same global pattern and homogeneity.
The increasing cost of living has been pushing more individuals and businesses into cash transactions as a vehicle of financial self-preservation. Individuals and businesses try to avoid interest charges and transaction fees towards keeping more of their
earnings. In times of financial strain, the informal economy expands with both consumers and businesses seeking ways to cut cost and operate outside rigid financial systems. Intensified financial pressure results in cash being considered as a critical vehicle
for those seeking economic resilience within an increasingly costly and digitally driven world.
Another interesting parameter revolves around the fact that digital transactions cannot replicate the psychological implications generated by the tangible nature of cash, especially in societies and informal economies where cash has, is and will remain king.
The diminishing availability of cash is expected to exacerbate financial inequalities and exclusion especially in regions lagging digital payment infrastructures and digital literacy. The technological foundation supporting a cashless economy is unfortunately
unevenly distributed especially in relation to access to the necessary technological capabilities, resulting in marginalisation within an increasingly cashless world. The elimination of cash options for marginalised communities and historically cash-heavy
economies can increase their vulnerability within the global financial landscape by removing their economic agency and their basic human right to financial participation and accessibility.
Digital-first or digital-only economy?
The shift towards a cashless economy offers numerous benefits, however, it also poses risks. Governments and financial institutions, worldwide, are increasingly going cashless by accelerating the push towards digital transactions. At the same time, digital
transactions depend on digital infrastructures, which can be very fragile and untrustworthy as proven recently. Digital footprints and the right to financial privacy redefine the concepts of data protection and user consent, while allowing for exploitation
and online fraud. Cash transactions can still shield individuals from data-driven financial profiling and when systems are not fully cyber-secure and cyber-resilient.
A cashless economy narrative also takes for granted that everyone has a smartphone device to participate in the digital economy, along with, the fact that everyone is always digitally connected. Another point of consideration is the environmental footprint
particularly in the form of e-waste due to the proliferation of digital payment systems and devices necessary to support a cashless economy infrastructure.
It is also critical to acknowledge the other side of the spectrum regarding the increasing cost of producing and maintaining cash. Moreover, cash by nature is prone to counterfeiting, theft and illicit transactions. Digital transactions mitigate the operational
costs of handling and managing physical forms of money. Digital transactions are traceable and taxable but can also lead into increased surveillance and control if not the right regulatory, ethical, and societal guardrails are not in place.
From hacking to blackouts: The fragility of a cashless economy
The recent CrowdStrike outage resulted in a global tech meltdown. Such an outage projects the dangers of concentration of excessive power to a limited number of entities over the financial system posing substantial risk of monopolistic practices and problematic
dependencies on specific digital financial services providers. Within such scenarios, economies can become vulnerable to service disruptions caused by technical failures, cyber-attacks, and commercial decisions to cease/withdraw services. Moreover, climate
change is intensifying natural disasters, while geopolitical incidents, autocratic tendencies and armed conflicts have been forcing populations into displacement, financial censorship and loss of financial identity and citizenship; in such cases cash does
serve as an irreplaceable backup.
In an analogous manner, the mounting advancements in artificial intelligence and machine learning can expose populations and financial institutions into a domino effect of quasi-authorised transactions, control of spending, funds transfers, or even AI-driven
and self-governed programmable monetary policies and management of wealth without any human intervention.
Cash accessibility within a multigenerational world
Despite all the problems cash have, cash still acts as a hedging mechanism and buffer against electronic transaction and system failures that can be crucial for protecting individuals' freedoms against authoritarian surveillance. Robust regulatory frameworks
need to be in place to mitigate risks associated with economic equity, data privacy and network security. A cashless economy should entail elimination or significant reduction of transaction fees on digital payments. Such high fees are currently prohibitive
for SMEs or merchants with low-profit margins on everyday transactions especially for lower-income consumers. A critical question remains: who is bearing the cost of transacting?
Cash accessibility is also deeply intertwined with the global generational and societal divide. “Born-digital” generations co-exist with traditional adopters, together with, elderly, financially marginalised and Indigenous populations for whom digital finance
is impractical or even a truly alien concept. Adoption and adaptation are uneven, taking also into account the inherent resistance and cultural denial towards digitalisation. For such contexts, it is not about rejecting progress, but about digital progress
continuously failing to account for their ad hoc realities.
Where do we go from here?
The discussion of transitioning to a cashless economy goes beyond technology factors and it requires a multi-dimensional approach. There are still significant population segments originating from informal or cash-driven economies dependent on continuous
access to cash. Majority of these populations still perceives cash being intertwined with daily economic activities and cultural practices, making an abrupt elimination potentially disruptive and financially exclusionary.
Numerous populations around the world have a deep-seated mistrust towards digital payments. It is crucial to ensure that a transition to a fully digital economy still acknowledges these realities and will keep on providing alternative means of inclusion
and access that respect cultural variances and offer inclusive and equivalent access to a digital economy. Innovation must be balanced with inclusivity, security, ethical and environmental considerations. The shift to a cashless economy should be managed thoughtfully
and equitably.
The world is embedded within parallel economic and financial systems, approach money and financial transactions very differently. The concept and meaning of money varies across economic activities and countries and it is influenced by financial and non-financial
factors, with the latter being more complicated and often invisible. The future of cash existence and access lies in equilibrium rather than extinction. It is critical to strike a very delicate balance between continuous financial innovation and access to
cash for those who still rely on it. Cash accessibility should be protected irrespective of the mounting advancements in digital finance. One question seeking answer remains: does mandating businesses to accept cash, maintaining ATM infrastructure and still
issuing physical forms of money mean treating cash as a premium service with the cost being passed on to the end user?
This discussion is much deeper, it is not easy, and it requires a multidisciplinary approach. To discuss about cashless economy, it is important to properly define what kind of society we envision first and not the other way around.