You try to pay with your card…but it doesn’t work.
You try to get money out of the ATM…but it’s out of order.
You try to access your bank account online…but the website is down.
Just like that, all access to your money can get cut off when it is only in digital form.
If all else fails, hackers can go straight to the source by cutting electric power. A major blackout could paralyze a country.
I mean, we saw something similar in Ukraine when hackers attacked the power grid…twice.
In 2015 hackers attacked three power distribution companies. They left customers without power for three to six hours. In 2016, the outage was shorter, it only lasted an hour.
According to investigators, the hackers had been inside the system for months. They had a good look around before actually going ahead with the cyberattack.
As Motherboard reports, cyber criminals could be using Ukraine as ‘a testbed for refining attacks on critical infrastructure’ to use around the world.
Sweden are now starting to realise that going cash free makes them vulnerable.
Sweden is one of the most cashless countries in the world. The value of cash as a percentage of GDP was 1.4% in 2016, the lowest in the world.
Demand for cash has been falling fast since 2007.
Most Swedes don’t use cash in their everyday. They pay with plastic…or their mobile phones.
As demand falls, so to do the amount of access points where you can get cash.
Many of the banks don’t accept cash or give out cash. Shops and cafes also stopped accepting cash, mainly because it is hard to find a branch that will take it.
ATM numbers are dwindling. The number of ATMs has decreased by 20% between 2011 and 2016.
Cash is king
I mean, going cashless is great for central banks. It makes monetary policy much easier.
For one, it’s easier to impose negative interest rates. You see, with cash as an option, if central banks impose negative rates, people can take the money out of their bank accounts and hoard it in cash.
Without a cash option, the longer you keep money in the bank the more it costs you. So, there is an incentive to spend it…which in turn could boost the economy.
It is also easier to impose restrictions on your money. For example, if there is a massive loss of confidence, like a bank run.
It is also great for banks.
It makes it easier to impose fees.
We also spend less when we use cash. Cash is more tangible, you are more of a conscious about money when you can physically hold it.
And in the wake of the Facebook/Cambridge Analytica scandal, you can see how going digital should give you some concerns over your privacy.
If everything is digitalised, then it is easy to track where you are spending your money.
How many times you go to the supermarket, what stores you frequent, how often you are ill…
Sweden is not alone. The use of cash is decreasing in many countries.
In the UK, cash accounts for about 3.9% of all payments.
In fact, you can see it in Australia. Few people carry cash around…and many places don’t accept cash.
A recent survey by the Reserve Bank of Australia (RBA) confirms this. In 2016, Aussies made 37% of their payments in cash. That is down from 69% back in 2007.
By comparison, debit and credit card payments have doubled from 26% to 52% in the same period.
There has also recently been a wave of cash banning around the world. They say high value notes are only used by criminals…
Australia may look at eliminating the $100 bill.
The Eurozone is no longer printing the 500 Euro note.
In November 2016, India also declared 500 and 1,000 rupee notes non-legal tender.
Going cashless is risky
The central bank has warned Sweden could become the first cashless society.
The Swedish central bank noted the risks to a cyberattack when going cashless in their recent annual report:
‘Cash usage is continuing to decline. The development is partly due to technological developments, with the technology offered becoming increasingly available in society in general and innovations on the payment market in particular. But it is also a consequence of the general public showing an ever greater preference for digital payment alternatives. The Riksbank is carefully analysing this development. This structural transformation is essentially positive, but it needs to take place at a rate that does not create problems for certain social groups or exclude anyone from the payment market…
‘The question of the payment system’s vulnerability to cyberattacks has been important to the Riksbank over the year. Unfortunately, we do not see these risks decreasing in the next few years. Instead, this issue will continue to demand great vigilance and increased resources.’
So far, complaints about going cashless have been dismissed as concerns from the elderly…or the non tech savvy. But now Swedes are starting to realise the perils of eliminating cash.
And there are already some rebels…literally.
Sweden even has a group advocating for keeping cash, called Cash Rebellion.
As the leader, Bjorn Eriksson told The Guardian:
‘When you have a fully digital system you have no weapon to defend yourself if someone turns it off.’
Much of the push for a cashless country is convenience. It is easy to carry around just the credit card. Or just your phone. I mean, you already carry it around everywhere anyway.
No need to stop by the ATM.
Just tap and go.
Yet our laziness makes us more vulnerable.
Editor, Markets & Money