Cash is in crisis. Venezuela is the latest in a series of countries from India to Zimbabwe to pull a major bank notes out of circulation. With an economy struggling from low oil prices and years of mismanagement, president Nicolas Maduro removed the 100-bolivar note from circulation last week. Protests ensued and cash has been in short supply throughout the country. The scenes are not dissimilar from the chaos that has gripped India after prime minister Narendra Modi removed 1,000- and 500-rupee notes. These two notes accounted for 86 per cent of India’s currency. In Zimbabwe, there has been a mass shortage of cash, prompting similar areas of congestion around banks. The country is close to adopting the South African Rand as it s official currency.
Why are there so many conflicts over cash at the end of 2016? For one thing, cash is so, well, old-fashioned. It is the most inelegant means of paying for goods and services. The millions of people that store their life savings in cash face an uncertain future where natural diaster, theft or demonisation could wipe out their life’s work.
By contrast, large cities in the West such as New York or London have moved to largely cashless models. You can pay for your morning coffee with a smartphone and your commute with an electronic card connected to your bank account, and do your grocery shopping online. These transactions leave an electronic “paper trail” and so all is not lost if your wallet is stolen or there is a problem with a recent online purchase. Cashless societies create stronger financial markets and given the fact that we all use smartphones anyway, using our phones to pay for items is easy and seamless.
For emerging markets, the cashless trail is critical in fighting corruption, destroying black markets and ending tax evasion. Mr Modi, for example, plans to catapult the world’s largest democracy into 21st century economic structures through a transition to a cashless society. In Venezuela, Mr Maduro is trying to destroy the cash-fuelled black markets the economic mismanagement created under Hugo Chavez. The future is clear and it is on our smartphones. Cash is an archaic, insecure method of payment. Onwards to a cashless society.
