Imagine a future where everything is seamlessly paid for via your phone. It’s a beautiful vision of what a cashless society would look like, however, with some dangerous unintended consequences. A cashless society is one where purchases by physical cash are no longer available and, instead, financial transactions between two parties are conducted through the transfer of digital information. Changing into a cashless society will weaken the Vietnamese economy because of three reasons: the government will have more control over the population, some social groups will be directly harmed, and the economy will have a substantial loss. To start with, the participation of the government in a cashless society plays an important role.
Firstly, a cashless society works in the favor of the government – who can gain more control by tracing the information about electronic transactions and vigorously releasing more economical policies and regulations. When all our payment transactions are tracked, it creates a trove of data we have no control over. It’s easy to imagine a daring divorce lawyer or a government agent trying to gain access to our financial history to try to build a story about who we are. (Fast Company 42)
On the other hand, some of the policies released by the government can become barriers for open market, in the form of duties and taxes, and they will turn free competition into closed market. In addition, when the government has more power, they will distribute resources based on their political needs and wants, which could lead to less efficient allocation of resources, and directly affect the economy. For example, The Central Bank of Nigeria has reintroduced charges on cash deposits and withdrawals in banks in line with its cashless policy. The policy was enforced not to eliminate the use of cash but to reduce the volume of cash used individually. (CBN 8) This new cash withdrawal policy will ensure that a larger proportion of currency in circulation is captured within the banking system. Using these information, Nigerian government is able to make new monetary policies, thereby comparatively becoming more powerful to control the economy.
However, when all transactions could now be traced accurately, the government will have a trusted source to know the overall income of the citizens, and as a result, the tax base will be increased. Therefore, they are able to bring out more realistic policies and help the economy. For instance, Nirmala Sitharaman claims, “The push towards cashless transactions by the union government would result in a drastic increase in tax revenues of the government.” (State for Commerce and Industry of India 1) In fact, the government have been making decisions by other primary sources already, and the push toward cashless society will simply help them gaining more power.
Secondly, moving into cashless society will precisely affect retirees, illegal immigrants, and poor people. In order to participate in the cashless society, the citizens has to provide precise information about themselves as well as having some basic knowledge of this new method of transactions. These three social groups will be directly affected, because they cannot qualify the above conditions. Retirees and people with low income are part of Canadian society economy. Illegal immigrants, who do not possess the right to live in the country, still do have some contributions to the economy. The disappearance of these three may cause “substantial social unrest” and weaken the economy.
Many of the retirees are incapable of transacting using plastic. In Australia, older Australians are anxious of such change. They are distrustful of automated systems. Many older Australians still use old phones. The Reverse Bank of Australia’s new technology would rely heavily on smartphone capabilities in order to conduct transactions. (Paul Versteege 9) Additionally, they will bear the costs of having to hold their liquid savings entirely in a costly bank account. The very poor people also have this issue, since many of whom don’t have access to the banking system, or managing a bank account is incredibly difficult due to their financial disadvantages. Therefore, this will only make them more dependent on government handouts.
The third social group to be affected is the illegal immigrants, which have a considerable contribution to every economy. If the society changes to cashless, they would be out of a job very quickly. Since the wages of illegal immigrants are invariably paid in cash, a cashless economy would be a more effective deterrent than any wall. (Kenneth Rogoff 59) It is especially true in America, because they are dealing with illegal immigrants from Mexico and other countries. In case of Canada, a cashless society will wipe out illegal immigrant workers, but at the same time, it will cause a substantial social unrest problem.
On the contrary, since cashless transactions provides more precise information, it is easier for government to solve some social issues related to Canadian economy. Underground economy and parallel economy – grey and black market, unaccounted money and more social issues – will be put to rest by the government who has more information now. Narendra Modi, who was Prime Minister of India until 2014, comments, “Demonetization would attack the parallel black economy, eliminate counterfeit currency, and end the nexus between black money and terrorist funding.” (Chronicle 12) However, when these problems are solved, consumers will not always get what they demand because the market size is smaller. Unfortunately, this also causes a social unrest for a group of consumers too.
At least four important social group in the society will be affected: the retirees, the poor, the illegal immigrants and the underground economy traders. Therefore, cashless society will definitely cause a social issue, and impair the economy.
Finally, the economy will have a substantial loss due to “after tax income” – what happens when customers convert cash into bank deposits. This will cost customers fees, which sounds like to earn negative interest for them because the bank usually offers low interest but high fees. It will have no effect on the Canadian economy in the short run, but when it comes to a long run, customer is going to get concerned because they are still losing money, after their income has already been taxed. In a truly cashless society, “People and companies are forced to convert their paper money into bank deposits, the hope is that they can be persuaded… to spend that money rather than save it because those deposits will carry considerable costs… This can boost consumption, investment, inflation, and GDP in the short run. This can explain why the Federal Reserve and the European Central Bank are cheerleaders for the transition to a cashless society. It just makes their monetary policies more effective.” (Factor Daily 159)
As a result, people will feel unsafe about their money, and even their privacy, because their information are all available to be traced online. While officials can trace money in the best interest of its citizens, corrupt groups can easily track and abuse the system. The entire world will become vulnerable and they use to counterfeit an adversary’s currency to undermine their economy… The idea of moving to a cashless society is just insane. Somebody has to give up something here.” (Armstrong Economy 24) Nevertheless, a cashless society does not only create an insecurity sense: many people are already effectively living in a cashless world, they are choosing credit cards, bank cards and online shopping over the old dollar bill. A 2012 CIBC poll suggested, almost half of Canadians with smartphones would consider using their devices like credit cards to pay for everyday purchases. (Financial Post 62) Besides, cashless transactions made by bank are safe and trusted, with its highly protected security system and customer information protection policies. Still, since the Canadian economy is affected in the long run, cashless transaction will not help strengthen the current economy.
In conclusion, an economy is not strong anymore when the government gains more control, some social groups are directly affected, and people feel unsafe about their money and privacy. Changing into a cashless society is an important topic, because it represents an evolution from cash transaction to cashless transaction, with the use of a new digital technology. Cashless society is a subject that concerns not only Canada and North America countries, but also a large part of Europe and South Africa as well. Undoubtedly, cashless society is not an ideal choice for the economy; but it also raises another question: do we really need cashless society?
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