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Countries such as Sweden have debit card adoption rates close to 100%. The governments of the developed world frequently talk about moving to a completely cashless society, but so far not a single territory has made the switch.

So what's currently stopping the developed states with very high credit/debit card adoption numbers from completely abandoning cash?

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    Well, how would politicians, etc. take bribes? I doubt they would want to leave a massive paper trail behind such transactions. (Tongue-in-cheek...not to be taken too seriously) – Fixed Point Jul 20 '17 at 20:07
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    @FixedPoint the people at the very top rarely take cash or straight up gifts. Instead they get campaign donations and cushy multi million dollar jobs after they retire. – JonathanReez Jul 20 '17 at 20:12
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    Does a cashless society imply that the govt is mandating that you have a bank account? – Nacht Jul 21 '17 at 1:41
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    Trade with the less developed states? – Toby Jul 21 '17 at 11:36
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    @JonathanReez If anyone can buy or be paid with prepaid cards, what's to stop people from getting a stack of 'em and using them as cash (to buy drugs etc.)? – Maxim Jul 21 '17 at 19:03
45

It's mainly because there will always be people who do not have credit cards and still uses cash, for example, 96% in Sweden in the article that you cited. 4% is still a relatively huge number.

This article by BBC addresses Sweden, noting that not everyone welcomes the move:

Like the Netherlands and its Scandinavian neighbours, Sweden is among the front-runners in the race to eradicate cash. But not everyone is welcoming.

One of the reasons the article mentioned is that many people are reluctant to give up using cash, including Germany, as they believe that "cash gives them better control over their spending".

The Guardian mentioned that some are not quite ready for this drastic change, so it will still take sometime to convince those who still prefer cash. And it's also a political decision and thus it will need to be popular with Swedes before the government can abandon cash.

Old people’s organisations also fear that those who prefer cash, out of a reluctance to use new technology or simply because they find it easier to keep track of their spending, will be disadvantaged, while educators worry that young people will be tempted to spend money they do not have.

For these and other social reasons, Arvidsson said, cash is not dead quite yet. “Even if, in the next few years, Swedes use almost no cash at all, going 100% cashless needs a political decision,” he said.“The idea of cash, even in Sweden, remains very strong.”

(emphasis mine)

Totally abandoning cash will also result in problems with interest rates, since one could no longer keep cash at home and have to always be subjected to the bank's interest rate, unless governments introduce reforms regulating this but it will take time.

A central bank by all means can adopt a negative rate, charging retail banks to hold their surplus funds on deposit ... But in their hordes, customers would up and leave, withdrawing their cash and locking it up at home. Unless they no longer could.

Unless there were no longer notes and coins to withdraw, and they were confined to a digital ecosystem, free to move their money between banks but not away from them.

(emphasis mine)

Some other challenges include privacy concerns, since electronic payments leave a trace and can be possibly tracked back by companies. So, without cash, anonymous payments will not be possible.

This is something most of us have taken for granted as a huge advantage of the old Greenback. It is the most private, and direct way to transmit value. If you use a debit card, Bitcoin, or a wire transfer, you are creating a massive paper trail that can compromise your identity or security, both now and in the future. Some are just now realizing how important these benefits are today.

(emphasis mine)

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    @DenisdeBernardy I haven't watched the video you linked, but that appears to me to be very much related to the issue of both keeping track of your spending and not spending money you don't have, which are both discussed in the second block quote in this answer. – a CVn Jul 19 '17 at 18:11
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    @MichaelKjörling: Actually, it's not exactly that (and highly recommended if you've 20 min and kids). It basically highlights, among other things, how kids change attitude towards money when it's physically in their hands rather than virtual. And it raises the interesting educational question of "should I give my kids a (physical money) allowance as early as I can do so?" to give them a better sense of what they are spending - something they won't necessarily grok properly with a debit or credit card. It also raises the interesting societal question of whether we're losing track of value. – Denis de Bernardy Jul 19 '17 at 18:14
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    @DenisdeBernardy And even that is ignoring the issue of whether they'll be able to get a payment card of any kind at all. I'm not sure whether this qualifies as an answer on its own, but certainly few banks are likely to give your average five-year old a card and expect them to be able to use it responsibly and correctly. Sweden did for a while have what was termed a "cash card" a decade or so ago (yes, literally "cash", the English word) -- basically a prepaid bank card intended for small electronic transactions -- but it flopped massively. I don't know what the age limit on that was. – a CVn Jul 19 '17 at 18:21
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    Also, 96% of people can have credit cards, and 89% of all transactions can be non-cash, and you could still have 100% of people use cash regularly. The study is not saying 96% of people don't use cash. – Kat Jul 20 '17 at 6:23
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    "Make a law. Problem solved". How often that's uttered, how rarely that works. – kbelder Jul 20 '17 at 23:15
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There's many downsides and reasons.

  1. Some areas have no reliable electricity. You need electricity to run CC transactions.

  2. Some areas have no reliable telecom infrastructure. You need a telecom connection to the bank for CC reader to function even if you are blessed enough with 24x7 electricity.

  3. You need to have a bank you'd trust (preferably local). If you have an issue with CC and can't pay, and nearest bank help for your card is 100 miles away (and/or a call center 3 countries over), you'll be extremely happy you have cash.

  4. You need to have a population that trusts credit cards.

    Planet Money recently did some podcasts on banking in 3rd world - many people simply do not trust banks or electronic cash. Especially older people. Just because the grandson runs around with Wenmo payments, grandparent may not be quite comfortable with that.

  5. There are privacy concerns over electronic payments, absent ubiquitous block-chain based e-cash.

    Many people of different political persuasion do NOT agree with the concept of the government and/or large companies tracking 100% of their purchases. In some cases these are general privacy concerns. In some, they are life and death (imagine the government of Iran being able to know you spent X amount of money on gay literature/videos).

  6. Electronic transactions are not free.

    You pay extra transaction fee - usually, expressed by a merchant upping the cost of goods (e.g. in US, many gas stations give you discount on gas if you pay cash).

  7. Credit cards are prone to criminal abuse. Identity theft. Plain out CC # theft. If you pay cash that's not a risk.

  8. As a comment noted, some people with bad credit wouldn't be able to be approved for credit or even debit cards, especially without predatory interest/fees.

  9. Credit cards aren't guaranteed to work.

    I personally had it happen twice last year where a reader flat out refused to read my card. If I had no second card or cash, I'm unable to pay.

    And this is a simple card failure. Add on:

    • reader failure

    • system failure at retailer

    • power failure at retailer

    • telecom failure between retailer and bank

    • Data integrity issue at the bank (a bug shows your card as expired, or rejects transaction)

    • Bank rejects transaction because they suspect fraud (the detection algorithm failed on a real transaction). I had that happen often.

    • You are at the credit limit and need to buy over that limit. (and have enough cash).

    • You have AmEx and vendor only supports MasterCard. FAIL.

    There are more failure modes, I'm sure.

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    Credit transactions can be done without electricity or telecom by writing things down and mailing, it just is much less responsive and prone to fraud. There is also an issue of banks trusting people. Not everyone is guaranteed to be approved for credit or even debit cards. – user9389 Jul 19 '17 at 17:17
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    Theft most assuredly is a risk with cash. @notstoreboughtdirt that's why a contractor who did some work for me last week told me he preferred card payment. But his system failed to process both of my cards. So in the end I paid cash anyway. – phoog Jul 19 '17 at 17:31
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    Some EMV have offline authentication scheme that works without internet connection, usually for public transport. The state may also force banks to enroll in national payment gateway so all cards are accepted on all EDC/ATMs. Even without regulations, banks can also offer multiple cards (usable as backups) that works in any network with zero fees, the savings come from operational cost reduction. – Martheen Jul 20 '17 at 9:14
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    Your point 5 in the other hand, kinda jolt me from my usual "eh let's go cashless, what's the harm". Unless every merchant & every customer pays with block-chain based e-cash, every "undesirable" & "deviants" are painting huge target on their back. Even my own government won't be happy with my transaction records, which while not outright illegal, could lead to harassment & general disservice. That's not considering what happen when regime change into hostile ones & I'm stuck with the paper trail pointing at me, without any way to bring my money overseas – Martheen Jul 20 '17 at 9:18
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    Even in tech. advanced countries, you can have issues. I got stuck at Schönefeld Airport, (Berlin, Germany), where I could not buy a ticket for the S-Bahn, (train), to the city. I had Visa and Mastercard - a combo I thought shoud be OK anywhere. No. After waiting in queues three times to try my various cards, I realised that the ticket machines in the station tunnel did not accept either! I had to stagger back to the terminal building to find an ATM to get cash:( – Martin James Jul 20 '17 at 16:14
20

I wonder that people did not mention the most dangerous reason.

If there is no cash and every transaction need an account, you can harass, threaten or even bankrupt political opponents. If every good must be bought with electronic money and the government forces the bank to lock the account, even friends and family cannot give you money. So you either must go back to exchange goods 1:1 (with notable losses) or you need to buy goods on the account of others. Then it could happen that their accounts are also locked..erm, that their accounts may experience currently some problems with transactions which are purely technical and will be settled some time in the future. These problems have nothing, absolutely nothing to do with their support for persons.

This problem already exists: Whistleblower organizations are denied Paypal and bank services to lock them out of support. I also heard that at least in the US porn providers have really trouble to get a bank account.

It is also insidious because the complexity of electronic accounts allows many loopholes to deny the service. Even if a judge orders the bank to pay, the bank can always claim that those problems are simply technical and unintentional.

I also like to add that you cannot easily escape the situation. Whatever you want to use to leave the country costs money (the sole exception is walking by foot or using a bicycle) and even if you leave, you likely lose your lifelong savings which allow you to live unimpended in the new home. If every country switches to electronic, you are completely screwed.

ADDITION: This concerns not only specific political positions, it concerns everyone. The problem is that banks are still in the private sector and are very prone to be influenced by many people: the government, protesters and influential people. So it can happen to anyone who offended the wrong people with his/her opinion...left, right, black, white, Jew, Christian, Muslim...whatever. So do not claim that your specific subgroup is specifically targeted.

The EU is at least partly aware of that and forced the banks (Directive 2014/92/EU, paragraph 31) that everyone (homeless, refugees inclusive etc.)

  • can create an account which cannot be denied or canceled later
  • is able to transfer money wirelessly to other accounts
  • can change later to other accounts with more functionality

This account is a deposit account, you cannot make debts and you don't get a credit card (which is in the EU no problem). But at least it allows to lead a normal life.

  • Also marijuana sales (where legal for medical or personal use) is usually strictly cash (perhaps BitCoin is accepted) because banks won't allow accounts or CC services. – Kevin Fegan Jul 20 '17 at 3:34
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    This already happens, third party companies that provide online donation or advertising services to right-wing news sites are subject to massive harassment campaigns. – MrLore Jul 20 '17 at 9:49
  • I actually alluded to this in my answer in #5 :) In some cases these are general privacy concerns. In some, they are life and death (imagine the government of Iran being able to know you spent X amount of money on gay literature/videos).. But you raise a couple extra good points, great answer! – user4012 Jul 20 '17 at 13:15
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    @MrLore - forget right wing news sites. Look at Youtube demonetization. – user4012 Jul 20 '17 at 13:22
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    The true problem is not only that you can bankrupt political opponents. It's that currently all credit card multinationals are US-based; so the US can bankrupt their political opponents (and they have been doing so in the past, e..g, Wikileaks, or the embargo on Iranian banks). Other countries, understandably, do no want to relinquish control of their financial infrastructure to an external superpower. – Federico Poloni Jul 21 '17 at 6:19
14

You as an individual can use paypal today, if you don't mind them taking their substantial percentage, subject to their judgment on disputes, and you don't mind giving them permission to raid your bank account when they see fit if a judgment goes against you. Hopefully, a government would replace that with a less expensive model... governments being known for their efficient operation.

Cash is simple for individuals to use. Hand it over, and it's done. Between individuals, there's no accumulated data for governments to spy on, or corporations to farm and sell stats for their profit, or even spouses to subpoena in a divorce proceeding. Do you really want another government run institution intruding on your daily life?

So, to answer the question: it's not governments who keep cash in use. They'd love a purely electronic payment system - they can track everything.

It is individuals that keep cash popular. Anyone accepts cash, any time, any where, under any circumstances, and only the buyer and seller know about it.

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    "You as an individual can use paypal today" If you're 13 years or older, was it not? And you need to have a pretty decent grasp of written communication in a language that Paypal offers their (web, etc.) interface in. – a CVn Jul 19 '17 at 18:22
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    also... cash protects you from negative interest rates... Goverment would love to ban cash and then impose interest rates below zero and you could do nothing but see your savings vanish... – Lucas Oliveira Jul 19 '17 at 20:26
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    @EldritchWarlord Governments love control, so having the option of seeing and potentially having the option to stop all transactions is something many of them would be interested in – Maxim Jul 19 '17 at 21:47
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    besides other things, government loves artificially low interest rates as it can start a economic boom on the incumbent term, or delay an economic burst until next term... – Lucas Oliveira Jul 19 '17 at 22:31
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    @bloodmagew: Governments already have a trivially easy way of taxing cash. It's called inflation, and they achieve it by printing money. And because it's far less obvious, there's less vocal opposition. – MSalters Jul 20 '17 at 8:03
6

100% credit card ownership does not imply 100% credit card usage. People may have a credit card solely for particular transactions, e.g. to pay hotel stays or to withdraw cash in foreign countries. In particular, the rise of the internet with increased opportunity for international shopping has driven the credit card ownership percentage up in some cases - until Paypal and similar services were established credit cards were one of few ways to pay internationally. So while many people might have credit cards, not all might use them in everday life.

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    Welcome to Politics.SE. Please note that this is a Q&A site about politics, so we would be more interested in the political perspective. – Philipp Jul 19 '17 at 19:35
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    @Philipp So "the political perspective" doesn't include pointing out logical fallacies in arguments, especially if they involve statistics? Oh, silly me - of course it doesn't, in real life politics! [/irony]. – alephzero Jul 21 '17 at 8:11
5

In addition to several valid points raised by the other answers:

Having physical cash available creates a psychological effect, a perception that fiat currency is something real, and not just something created by the government.

If you remove physical cash, money will literally be only numbers in computers. Psychologically, this will give the population a direct illustration of the fact that fiat currency is not actually something real. This may decrease the public's trust in the currency, the banking system, etc., and create insecurity and doubt.

The existence of physical money has a symbolic value. Knowing that you can go to the bank and withdraw your cash in something solid and physical provides a certain feeling of safety to people. It is important for governments that the public has faith in the currency and the financial system.

A currency is only worth as much as the faith people have in it. If nobody trusts a currency or assigns value to it, it loses its real value too.

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    There is also study after study after study that shows that consumers who use a card type payment will often spend more. Observational, personal experience bears this out. During a recent house renovation I used cash to buy some flooring. Spent around $300. Counting out the 50's stung a bit, mentally. Few weeks later, used a card to spend about 500 on flooring. It didn't even register. – Paul TIKI Jul 21 '17 at 14:00

protected by Philipp Jul 19 '17 at 19:34

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