Since its introduction in 1999, the euro has been the symbol of European integration. Today, it is the legal tender in 19 of the 28 Member States of the European Union, including the overseas departments, territories and islands, which are either part of, or associated with, Member States. These countries form the euro area. In addition, the micro-states of Andorra, Monaco, San Marino and Vatican City and Montenegro and Kosovo use the euro, based of formal and informal arrangements with the European Community. Issued and regulated by the European Central Bank in Frankfurt, Germany, the euro allows consumers to easily purchase goods and/or services in other participating states without the need for prior currency exchange or quickly pays for goods and/or services online across borders.
Amid European finance ministers February call for the restriction and possible abolishment of the currency’s €500 note paired with the exponential developments in electronic payments since the euro’s introduction to the general public in 2002, the notion of ‘paper’ money has increasingly become outdated and calls to abolish the use of physical cash.
A cash-free 21st century society
Deutsche Bank CEO John Cryan sparked headlines in January when he announced that cash would not exist in a decade anymore. Speaking at the World Economic Forum in Davos, Switzerland, he said “there is no need for it, it is terribly inefficient and expensive”. Cash has a long tradition as the payment method of choice since the 15th century. The benefits of cash to economic activity are obvious. Most of all, it allows for safe and quick payment transactions and, since the introduction of notes, the easy and safe transport of large quantities of monetary value. However, as apparent as its benefits are its drawbacks. Cash is a driver for a large percentage of crime, the black economy and fraud.
As futuristic as John Cryan’s predictions may appear to most, the Nordic countries already have taken strides towards cash-free societies. Sweden and Denmark are leaders in the digitalization of their economy. Compared to other country’s move to digitize major industries, the digital economy in Sweden and Denmark encompasses every aspect of the local economy. From purchasing magazines from homeless street vendors via credit card in Stockholm to paying your bus fares by credit card, the Nordics have been forerunners in reducing the need for cash out of the economy.
Digital payments for a digital society
Although cash remains the most frequently used payment method among Europeans, the use of electronic payments is ever increasing. Carrying cash is handy for casual, small value transactions such as purchasing a coffee at your nearest coffee shop. However, in an ever developing 21st century digital society, physical money has increasingly become redundant. In the past, to purchase a plane ticket, one had to go to a travel agency and pay by cash. Today, with anyone and anything connected through the internet, you can purchase the same ticket, for less money via electronic payments from the comfort of your own home. The same goes for online shopping and, increasingly, food shopping where the consumer picks the items online and it will be delivered home at a pre-specified time.
Even more, at an increasing number of retail outlets, using modern technology (such as NFC) embedded in your payment card, smartphone, smartwatch or clothing and the corresponding infrastructure on retailers’ card terminals to make quick, low-value and hustle-free payments. Remember that coffee shop? Just by tabbing your card/phone/watch against the terminal, you can now be on your way faster than the time it takes to scramble for that €3.49.
Trust is the magical word
The debate on cash-free societies, however, has to be viewed in the wider context of the ongoing debate on data protection and data usage by big businesses and governments. Particularly among the German public the notion of a cash-free society and digitally based payments raises concerns of data protection and state surveillance. Germans see cash as a fundamental instrument of freedom, a feeling of anonymity towards the business and perceived government surveillance.
Particularly in a time shaped by ‘invisible’ data, news stories of data breaches and government surveillance, people lack the fundamental feature needed to move from a cash-based society to a digital-payments society: trust. If European governments aim to pursue their quest to move away from cash towards digital payments, they first will have to invest in citizen’s trust in the technology, security and their government.