A guest blog by Jonathan Jensen (Twitter: @sevendotzero)
The debate around cash has become very vocal recently, especially with the rolling programme of bank branch closures and free to use ATMs closing, leaving swathes of the country without a way to ‘get cash’.
Various arguments are put forward about the importance of access to cash.
Consumer choice. But what does cash do that people can’t do with other mediums of exchange?
Technology failures. It’s undoubtedly true that reliability has been an issue for both banks and payment systems. However, as ATMs are dependent on the same technology there’s a high probability that a technology failure will stop consumers also getting cash. Plus, technology will get more reliable, especially as the digital banks build out their own payments infrastructure.
Budgeting. It’s often argued that cash helps consumers budget better. You can easily ‘see’ how much you have to spend at any point in time. But if you use an account with a newer digital bank, their app provides immediate visibility, not just of how much money you have but exactlywhere you’ve spent it. Over time you can track your expenditure by merchant and category and decide if you should adjust your spending patterns. That is proper budgeting.
But there’s a darker side to cash. Cash underpins much crime. According to the University of Edinburgh Centre for Statistics, “The majority of banknotes – from the £10 note in your wallet to the cash you withdrew from the ATM at the weekend – have traces of cocaine on them.” How much of the cash that passes through your hands has been tainted by crime during its life?According to Ken Rogoff in his book ‘The Curse of Cash’ “more than a third of all US currency in circulation is used by criminals and tax cheats”.
In 2016 the European Central Bank decided that the 500 Euro (approximately £410) banknote would no longer be issued (with issuance ceasing in 2019) because of “concerns that this banknote could facilitate illicit activities”. I’m sure there are lots of legitimate uses for 1,000 Swiss Franc notes (approximately GBP 752) but how can anyone tell where the cash has come from and whether it’s tainted by crime? Even the UK £50 note seems redundant when many retailers won’t accept it. because of concerns over provenance.
So for governments serious about fighting crime, looking at cash, and high value banknotes in particular, seems like a good starting point. As William Gibson wrote in Count Zero:
“He had his cash money, but you couldn’t pay for food with that. It wasn’t actually illegal to have the stuff, it was just that nobody ever did anything legitimate with it.”