Farewell to banknotes and coins starts in the richest countries

In Sweden and Norway, this is where electronic payment advances the most; what precautions it is advisable to take

THE ECONOMIST: In the last 3000 years, when we thought
money people have thought of
money. From buying food to paying the bill in a bar, daily transactions involved crumpled paper or pieces of metal. But now, pbading a plastic card or bringing a mobile phone to a terminal has become normal. And this revolution is about to turn species into an endangered species in some rich economies. This will make the economy more efficient, but it raises new issues that could hinder the transition.

Countries eliminate species at different rates. But the sense of movement is clear and in some cases the journey is almost complete. In
Sweden, the amount of cash transactions per person has fallen by 80% over the last ten years. Cash only covers 6% of purchases in
Norway. Britain is probably four to six years behind the Nordic countries and the United States is a decade away. Outside the rich world, money always reigns. But even here his domain is eroded. In China, digital payments increased from 4% of the total in 2012 to 34% in 2017.

Money is eliminated by two factors. One of them is the demand: young consumers want payment systems that integrate perfectly into their digital lives. It is also important that suppliers such as banks and technology companies (in developed markets) and telecommunication companies (in emerging markets) develop fast and easy-to-use payment technologies with which they can obtain data. and charge a fee. The operation of an infrastructure that promotes the economy of cash has a high cost: ATMs, security trucks, vending machines that accept coins. Most financial companies are eager to abandon or dissuade obsolete customers from paying high fees.

Basically, the prospect of a cashless economy is great news. Money is inefficient. It is estimated that in rich countries, its publication, clbadification, storage and distribution cost about 0.5% of GDP. But that does not reflect the benefits. When payments are dematerialized, people and stores are less vulnerable to theft. Governments can better control fraud or tax evasion. Digitization greatly expands the opportunities of small businesses and individual operators, enabling them to sell across borders. It also creates personal financial records, which helps consumers obtain credit.

These benefits also raise a number of issues. Systems of
electronic payment they may be vulnerable to technical failures, power outages and cyberattacks: Capital One, an American bank, has been the most recent victim of hacking. In an economy without money, the poor, the elderly and the rural can be left behind. And remove money, an anonymous means of payment, to replace it with a digital system could allow governments to spy on people's buying habits and exploit their personal data to titans private.

These problems have three remedies. First, governments must ensure that central banks' monopoly
coins and
Bank notes Do not be replaced by private monopolies on digital currency. Instead of allowing a few credit card signatures to control electronic channels of digital payments – which the US can authorize – governments must ensure that payment methods are open to a variety of digital signatures: can create services based on them. Banks should be encouraged to offer digital bank-to-bank transfers, instant and cheap, between deposit accounts, as is the case in Sweden and the Netherlands. Competition should keep prices low enough for poor people to access most services. And if a company stumbles, others must be able to cover it to make the system resistant.

On the other hand, governments should maintain the obligation of banks to ensure the confidentiality of customer information. Digital businesses that use electronic channels to provide services, such as advertising agencies, should still be able to monetize transaction data as long as their business model becomes explicit to their users. Some customers will prefer free services that record their purchases; others will want to pay not to disturb them.

The elimination of money should be gradual. For ten years, banks should be obliged to accept and distribute cash in populated areas. Governments will thus have the time to help poor people open bank accounts, educate the elderly and improve Internet access in rural areas. The move towards digital currency is the result of spontaneous demand and innovation. For all the benefits, governments must be prepared for the time of the last wrinkle ticket exchange.

Gabriel Zadunaisky Translation