Payments

Cashless society? Not so fast as countries invest in cash technology

Cashless society? Not so fast as countries invest in cash technology

Many finance industry professionals have been predicting the disappearance of currency notes and coins. The first prototype digital currency, E-gold, was created in 1996, just two years after Netscape released the first mass-market internet browser. More recently, bitcoinand its underlying technology, blockchain, has garnered a lot of interest in the finance world, and Sweden made waves last year when reports surfaced that the country has made progress towards becoming a wholly cashless society.

But apparently not everyone is buying the “end of cash” scenario. By some estimates, 85% of all transactions globally are still conducted in cash, although there are indications that this number is falling in Western countries.

NZ's new cash
NZ’s new cash

There is one clear indication that predictions of the demise of cash was premature: Governments are still investing in hard currency. The U.S. Treasury made headline news in April when it announced plans to feature the image of Harriet Tubman, a 19th century anti-slavery activist, on a revamped $20 bill. Also in April, the International Bank Note Society crowned New Zealand’s new $5 bill as the banknote of the year for 2015, winning out over currencies issued last year by Scotland, Kazakhstan and Russia. Even “soon to be cashless” Sweden issued a new 20 kronor bill in 2015.

But even if cash remains king, it does not mean that the world of traditional banknotes has been immune to the march of technology. According to the Reserve Bank of New Zealand, the new currency, and all denominations currently in circulation in the country, feature a host of security features previously unavailable in an age of paper money.

For example, like other denominations of New Zealand’s currency, the new banknotes are made of polymer, a single sheet of flexible plastic that makes it possible to embed a series of security features. These include the use of Metameric inks and intaglio printing, a method that allows an image to be incised into a surface, and the incised line or sunken area holds the ink.

In addition, the notes feature holographic windows – spin the note and colors appear inside a new, larger window. There is also a “puzzle number” – place the bill on the table and it will appear to show a series of irregular shapes on the front and the back. Hold it up to the light and the shapes will line up to show the denomination of the note – 5, 10, 20 or 50.

The release follows the 2013 U.S. release of a new $100 bill. Unlike the New Zealand currency, the American cash is printed on paper, not plastic, but the bills also feature anti-forgery technology, including a 3D security ribbon that is woven, not printed, into the fabric of the paper note and a bell logo that changes into numbers when held up to the light at a particular angle.

The technology advances related to cash are significant because , even with the sharp spike in global mobile payments in recent years – total mobile payment transactions in 2016 are expected to top $27 billion, up from nearly $9 billion in 2015, – there are important parts of Western economies that are likely to continue to run largely or exclusively on cash payments. For example, restaurant waiters will likely continue to be paid in cash, rather than via mobile payment apps like Venmo. Similarly, major industries in some markets – including construction, and even some professional services like psychology – pivot on cash payments, for the simple reason that hard currency cannot be traced and allows individuals to avoid paying taxes on earned income. Even more common, many merchants prefer cash for small transactions because there are no transaction fees, like there are with most payment platforms.

And lastly, some people say they are intimidated by online and mobile payment or cash transfer systems, or they simply prefer the old, familiar, secure feeling that comes with holding a nice, thick wad of cash. Nor are these feelings limited to the millennial generation.

“I transfer money to my son in Australia several times a year,” said Jane G., a 56-year-old woman who spoke on condition of anonymity because she wanted to preserve her son’s privacy, “but we do it the old-old fashioned way. When I hear of a neighbor or someone that is going to Australia, I bring my local currency bills to a money changer, who then gives me the equivalent number of Australia dollars, and I give the money to whoever is traveling to see my son.

“It may sound old fashioned, but it works. I don’t see any reason to change it,” she said.

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