Business & Industry

May 26, 2018

"CASHLESS" SOCIETY

Even though under different shapes and materials, money is in Mankind's History for the last 3000 years. One unavoidable reality for a consumption society we see is gaining speed each and every day

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By SARA LOUP and JORGE MATIAS

The first official minting of coins dates from the year 600 b.C., in Lydia (currently located in Turkey), by king Alyattes. They were made of a natural alloy of silver and gold, and minted with pictures indicating its value. The minting allowed this kingdom to fasten the commercial trade, both internal and external, and turned the kingdom of Lydia into one of the most rich and prosperous of Minor Asia.

Not being possible to date the first case, we know today that, at least since the 13th century – when the Venetian merchant Marco Polo arrived China – the use of paper-money was a natural and usual practice.

In Europe, the use of metal coins resisted until the middle 1600, when bankers started printing cash notes as guaranteeing its holder a certain amount of money. This practice turned commercial trades easier, above all among the far away colonies to where it resembled complicated to send large quantities of silver or gold.

As banking systems evolved – as well as the values in the commercial trades – new forms of guaranty or financial support arouse.

Then came the bank checks, which allowed the celebration of safe trades between merchants, even in remote or far places; later, the international guaranty notes; and, closer to the end of the 20th century, what we now call "plastic cash" – plastic cards, equipped with a magnetic register band which establishes a direct connection to the bank and allows, thus, to acquire goods, services or products in any part of the world.

However, even as one of the most important inventions of Human Being, this nice and pretty story of social and economic evolution (the very essence of Human Being), may very well be close to an end.

What's happening

Technology, speed and accessibility anywhere, have been transforming the trade, consumers and traditional forms of payment. We're in an era in which society prefers other forms of payment, safer and with less recourse to physical money: a cashless society.

The idea of being constantly in cash in my wallet, it's not as common as used to be. Younger generations tend to behave in accordance with the technology, which's development, has given new forms of financial transaction to trade and, especially, money and methods of payment.

Online commerce (e-commerce) had its boom with the emergence of companies like Amazon, eBay and Alibaba Group, in the late 1990's. This "new way to buy" intended to replace the purchase in a physical store, making it faster, convenient, accessible and instantaneous.

Over the past few decades, the concept of 'e-commerce' has been changing the way purchases are made and even the role of the consumer. This gained a new role and now has a new decision-making power, which came to be more instinctive, but also more informed. In statements to Forbes, Kiki Del Vale, Vice President of Mastercard, said that "consumers are smarter and have much higher hopes than ever".

In fact, the consumer is, today, more informed and more astute, requiring large companies to follow the technological development and follow in the footsteps of generations, updating, appealing the experiences of 'check out' more safe and reliable and the security of processing of data in the act of payment over the internet – a consumerist fever that was really driven by access and popularization of computers.

With the advent of 'smartphones', the trend rooted in the customs of the individuals and has gained higher ground. However, it's not just cell 'touch' phones to enable this feature, too, rings, bracelets and other types of 'gadgets' have been worked out to enable the purchases, not only online, but also in physical stores, giving the possibility to consumer to make payments with digital media, by association of his image through a photograph, or digital printing.

New forms of payment such as PayPal, Mastercad or MBWAY, enable faster access to money, instant transactions and greater comfort at the time of purchase. However, despite they have gained importance worldwide– a report by Capgemini and BNP Paribas, realize a growth of 11% per year in worldwide digital transactions – these haven't stolen the role of money that, according to Bill Ready, director of operations for PayPal, "will have a slow death".

But, is it for real that "living" cash will disappear?

The trend for a "cashless" society, has been continuously spoken for over two decades. It starts with the principle that, with the development of technology and the "Internet of Things" (IoT), the consumer will increasingly prioritize the use of virtual money to pay for any services – goods or supplies – replacing paper-money.

The World Bank says that digital money can have an even bigger impact in world development than paper-money.

An example that the "cashless" lifestyle is in full growth, specially among the younger ones, are the new adopted options in some music festivals. The Bonnaroo Music and Arts Festival, which welcomes 65 thousand young men every year in Manchester, Tennessee, United States is one of the most recent examples.

In 2017, the access bracelets used for more than a decade, were equipped with money-charged cards. According to the organizers – and according with the users – much lesser wallets were loss and the adherence of the young was almost total.

Printing money-paper is an expensive purpose and that's one of the reasons that took Sweden, Norway and Nigeria to encourage the withdrawal of money from circulation. The results are starting to notice: fraud reduction and faster and easier payments.

Chinese companies such as Alibaba and Tencent have convinced their employees to use electronic payments to such a point that over three billion dollars a year changed hands. Statistics show that, Canada – where each citizen has at least two credit or debit cards – is one of the most "cashless" countries in the world currently; and in Sweden, live cash payments, were reduced to no more than 20 percent of all daily and regular transactions.

Advantages or disadvantages

Looks clear that, a disadvantage of paper-money is storage and protection of large quantities of money (as it's the case of bank institutions): it is specially expensive, and even when the money is spent, it's necessary to get some more. Additionally, the bigger the product or good to acquire, the bigger the quantity of money (imagine buying a car and paying it with an enormous bag of money).

On the contrary, with full implementation of IoT, we won't even need to download an app, or share private information (already stored and protected). And, being a much more secure procedure, merchants themselves will prefer this procedure and avoid applying additional taxes.

With all the changes of the social paradigm, one thing is for sure: money will always have its value and will continue to move entire societies. Therefore, remember that, even though new technologies can guarantee an easier access to payment, in case you're out of battery, it's convenient to have a bank note in your pocket. And, in the future, who knows that single note is not "worth gold".

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