A World Without Cash: The Future of Money

Photo by Sara Kurfeß on Unsplash

Our world is growing increasingly digital. David Wolman, author of ‘The End of Money’ and contributing editor at Wired, believes that the most impactful contribution from the invention of the smartphone is the applications that transform the device into a seamless wallet, remittance, and payments tool, granting financial inclusion and unprecedented convenience to billions of unbanked people around the world.

While paper money has helped the world exchange value for goods and services for approximately the past millennium, it’s time the money system updated itself to satisfy today’s needs. The case against cash is clear.

Cash for crime

Cash is the preferred mode of payment for individuals and organisations conducting illicit activities. Peter Sands, Harvard president emeritus and a senior fellow at the university’s Kennedy School of Government, believes that cash provides an untraceable means to facilitate and fuel the criminal economy. “No other payment mechanism simultaneously provides anonymity for payor and payee, leaves no trace of transactions, and is so widely accepted.” 

Without physical cash, large-scale criminal activity would be much easier to detect: transactions will have to bypass bank accounts, which are traceable. They may even resort to a more troublesome form of barter trading.

Unsurprisingly, reducing dependence on cash can also alleviate the problem of street violence. Richard Wright, chair of the justice and criminology department at Georgia State University, conducted a study in the US on the correlation between cash and street violence. He discovered a 10 percent fall in total crime rate in areas that have moved away from giving federal welfare benefits in cashable checks to preloaded debit cards.

Environmental woes

It costs money to manufacture money. The penny, in particular, costs more to make than its actual worth. According to a study done by University of California Davis, it costs the US Mint 1.43 cents to make a penny, even before accounting for the massive environmental impact created by mining, smelting, minting and transportation operations.

Enabling tax evasion

Cash enables the ‘hidden economy’. It’s not hard to see why, as it doesn’t leave a paper trail to be audited or tracked by taxation investigators. For example, when an employer pays a worker in cash under the table, both employer and employee do not pay employment benefits or income tax for the transaction. It isn’t surprising to see why workers in jobs paid primarily in cash — like waiting tables or private tutoring — tend to underreport their income.

Underreporting of income by individuals is the single largest contributor to the tax gap. Tax evasion costs the United States $200 billion every year, amounting to about 1 percent of the country’s GDP. OECD countries, on average, lose about 2–3 percent of their total tax revenues every year, while lower-income countries tend to lose more: about 6–13 percent.

By Alan Seng