How to create a cashless economy quickly
Have you noticed a lot of banks are reducing opening hours and there are fewer ATM’s around? Perhaps you have found that the banks are even making it difficult to bank money at all. It’s becoming a common occurrence in many towns throughout NZ. Cash is, if you listen to the mainstream media lately, rapidly going out of vogue and we are told it is us the consumer who is leading the country down the path to a cashless economy.
Whereas cash can be the lubrication; the oil and grease that keeps smaller communities operating and functioning, cash can also be a cost to banks and financial institutions.
In my world there are two financial communities; one is local the other globalised. One is small, the other industrial in scale. One is as much social as it is economic the other digital and about consumption.
These two communities both rely on monetary exchanges in order to survive. To date the local and the globalised economic systems have co-existed relatively harmoniously. Yet these methods of monetary exchange are based upon starkly different ideologies. The ideology of localisation is based on local production and consumption of local goods and most importantly about local community. Globalised communities in contrast are based on deregulation, market control and monoculture. Ultimately globalisation moves towards a digital currency and cashless economy.
At a local level cash by its very nature can mean independence; once its spent its gone and it is convenient. It means we trade, sell, share with people we know, save, pay our taxes, keep within our budgets, meet with community, socialise, help out, offer kids part time work, pay our taxes again and for some of us just get by so we don’t have to rely on welfare or go mad because we are lonely. On a global level cashless means convenience too, its quick, instant, it means choices we might not otherwise have, and a dependence and reliance on a system that can ensure our safety at the expense of some privacy and surveillance maybe. There are pros and cons to both sides of the argument. But it is hard to see how excluding cash won’t damage local culture, unless that is the point.
So who is really making the push for a cashless economy?
The Reserve Bank of New Zealand regulates banks. Its primary responsibility ‘is to ensure independent management of monetary policy to maintain price stability.’ But as Peter Northcote Senior External Relations Advisor for the Reserve Bank of NZ informed me ‘ One of the issues RBNZ has is that it has little statutory power in respect of cash – other than to issue it to meet the needs of the public. There is a Reserve Bank Bill before parliament which will broaden and strengthen our role in the cash system, including establishing the stewardship role mentioned in many of the documents’. Sadly this Bill dated 20 July 2020 did not make it past the submission process due to pressure from the independent Banks.
There also seem to be some contradictory statements being made on their website.
Retailers it says, are ‘not obliged’ to accept cash, and yet the Reserve Bank of NZ will ‘preserve the benefits that cash provides’ and ‘build capability and potential for a Central Bank Digital Currency (CBDC)’ . The RBNZ urges banks to ’consider their role in supporting the needs of their customers’. It is unclear how reducing hours of use, increasing the obstacles in order to bank cash and reducing the proximity of ATM’s is supporting the needs of their customers. When asked if the Reserve Bank wants to get rid of cash the answer is no. The Reserve Bank believes that cash will be around for some time. Yet ‘The Reserve Bank wants to build a strong and shared understanding of what any problems with less cash will be, and then what – if anything – should be done about that’. The worrying thing about this last statement is by the time the cash runs out what will have been lost in the interim? Despite claims that Reserve Bank of NZ has undertaken and is undertaking extensive and wide ranging public consultations with consumers on their money usage and preferences; the results may well be more about the conditions participants have had to adapt to rather than what they would have preferred.
This looks like a self-fulfilling prophecy of going cashless. The writing is on the wall and the signs have been here for some time.
Reducing bank hours with the obvious conclusion that they will finally close as opposed to renting space they don’t use, and closing down ATMs simply makes using cash difficult. If it is hard to get and use we will have no option other than to use our cards and online money systems more often. Then we will be told ‘consumers choose cashless instead of cash’.
There are convincing arguments from the financial institutions why we should embrace the virtual world of money exchange. It is modern and no one wants to be otherwise. It is convenient too. We also spend more online and with our cards as opposed to using hard cash so banks and financial institutions prefer this. Financiers worldwide have also woken to the realisation as a result of the globalised economy that if they can control money they can control the economy. Remember the call during Covid – ‘get out there and spend’? Spending money is integral to a digital monetary system as it is traceable, accountable and can be controlled.
Cash in paper and coin is also expensive to manage. Banks find it labour intensive, hence reducing bank employees handling of it. It is preferable for financial institutions to take money we have earned out of our wallets, out from under the mattress or out of the bank where it is not currently gaining any traction and put it into places where they can manage it more efficiently. Banks have become commercial businesses and less like the holders of a social license. They have started behaving like any unregulated business that has a monopoly on the market. They can start asking the consumer to pay them for their services! From this privileged position they don’t have to be socially responsible because they are relatively unregulated. The only thing stopping them from being entirely free to conduct themselves as they wish, is the Government. Removing cash is one step closer to a centralised digital currency, which would be the coup d'etat. One only needs to look at China to see how pervasive a digital currency can be on a social level. Creating one’s own global digital currency is all the rage these days from Facebook to Bitcoin. We are on the move towards cashless if we like it or not.
“Paper currency has become a major impediment to the smooth functioning of the global financial system,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund.
The two monetary systems currently in action in New Zealand may become one sooner than we think if current overseas trends are to be taken into account. Perhaps an unintentional result of creating the move towards a cashless society by independent banks means the emergence of what are called ‘de facto regulations’. This could be seen as a good thing by some financial institutions. A de facto regulation comes about when a particular group of market participants has control over how that industry works to the extent that their dominant position enables them to dictate who can be market participants in the future. An example of this is the supermarket duopoly in New Zealand. By dominating the food delivery systems they can make it near impossible for small food producers to operate efficiently. Consequently the industry system looks and is in effect more ‘efficient’. The same case with banks, by making cash hard to access they create a society that cannot access cash and one that is more reliant on digital and therefore more efficient, modern and safer. The fact that the supermarkets in NZ and the banks are poorly regulated industries; is quite possibly the crux of this whole downward spiral towards a monoculture of consumerism and all its associated problems.
The argument to go cashless has had an unforeseen helping hand. The pandemic of our time has enabled retail outlets worldwide to decline cash as a means of contactless money exchange. The belief that cash is potentially covered in pathogens is not new. Although it is also not scientifically proven that Covid can be transmitted via money and it is often overlooked that the digital Pin Pad is in fact more infectious, misperceptions stick. The highly competitive card companies along with big retail companies would relish the cashless economy on a world wide scale. Despite the RBNZ attempts to ensure cash is available during these times, the best marketing ploys couldn’t have wished for a better opportunity than a pandemic as an excuse to push misinformation to enhance the case for a cashless transactions instead of cash.
Using cash at a local level could suddenly involve unforeseen consequences. There will be inevitable stigmas that are the result of using cash. Once we get over the potential for it to be contaminated it will be seen as ‘dirty’ money for other reasons. Using cash could allude to being seen as old fashioned and not the modern way to go. People with cash are not welcome by retailers who have the right to refuse their money; cash is suspicious and infers association with the criminal world of the shadow economy or a tax evader. Yet more justifications not to use it.
Globally things are threatening to move fast with digital payment systems. Sweden with digital krona, UK and China have been ramping up the push for a cashless economy for a number of years. Each competing to get there first. Over the last 12 months, more than 60 countries have experimented with national digital currencies, up from just over 40 a year earlier, according to the Bank for International Settlements.
If this is not the path that the Reserve Bank of New Zealand wants then it needs to ‘be given the teeth’ to quote Peter Northcote, to ensure the independent banks cannot dictate whether we go cashless or not.
‘RBNZ doesn’t make the law that governs what we and banks can do, we have to work within our statutory mandate, however the bank has a strong demonstrated commitment to making sure that the benefits of cash are preserved’ Peter Northcote RBNZ.
The future of cash as we know it is questionable. So too, is the justification being used that we consumers are leading the charge to go cashless. The decisions and directions that the Reserve Bank of NZ are able to make be it in form of regulation will affect not only the Ohoka market’s future but all community markets’ futures. How banks are allowed to operate should be dependent upon how concerned we are and how loud our voices are in protest. Customers at the market have relied upon us for over a decade to provide them with cash via our EFTPOs system. Even though many of use electronic payment systems and are happy to adopt more modern convenient ways to exchange money, we also appreciate the flexibility and convenience of hard cash when we have it. It is an option. Future decisions that reduce options will affect our local communities and the many livelihoods associated with the farmers market and so much more.
We have continued to adapt to events over the years, some of which potentially could have been damaging to the market. It is hard to envisage a totally cashless world. If it does eventuate It will be significantly different from the one we have now.
Thanks to Peter Northcote for his response and interest.
Author: Barb Warren Manager of Ohoka Farmers Market
Some interesting and relevant links:
http://www.eclipse-experience.com/mindset-blog/homeless-cashless-economy-innovation
https://business.rediff.com/report/2010/aug/13/the-myth-over-dirty-money-busted.htm
https://www.unbiased.co.uk/news/financial-adviser/cashless-uk-may-come-too-soon
https://www.investopedia.com/terms/u/underground-economy.asp
https://www.rbnz.govt.nz/notes-and-coins/future-of-cash
https://www.wsj.com/articles/what-is-the-shadow-economy-and-why-does-it-matter-1488769322
https://www.bbc.com/news/business-43645676 (Swedes reject going cashless 2018)
https://www.rbnz.govt.nz/notes-and-coins/future-of-cash/the-future-of-the-cash-system
https://www.rbnz.govt.nz/notes-and-coins/future-of-cash/cash-use
‘Cause where's all the good times and the pocket full of I.O.U.s!
Take the cash, don't let them pay you in kind,
Take the cash before they change their minds,
And let's see the colour of the money - take the cash!… Wreckless Eric 1978
Colour of your money: If you say that you want to see the colour of someone's money, you mean that you are not prepared to sell them something or do something for them until they have proved that they have the money to pay for it. She never entered into conversation with a customer until she'd seen the colour of his money.