Cash has traditionally been the default mechanism for all business transactions.
Perhaps because of its ease, its simplicity, the fact that it is tangible and we can really see how much it is, how much they give us back, how much we have, etc.
But, clearly over the last few years and probably even decades, we have seen a massive migration to digital media and to money that is nothing more than a number on a screen or in a database.
The question is: Is cash going to end as such?
Today we can have digital money in many ways, in our bank account through a debit card, or with credit cards, through transfers or consignments and others.
E-commerce began only as a means of digital payment and only with a credit card.
Today we even have the possibility of paying in cash through different agreements and places, however plastic money is the mechanism par excellence.
And this is mainly a trend in younger people, because those who use more cash are older people, who even withdraw their cash pension in its entirety and keep it in a small box at home, with the risks that this it implies.
Clearly, not using cash has many benefits. In principle, criminal organizations are the ones that mainly have this resource in large quantities to make movements without being detected.
And therefore governments have wanted to carry out a drastic reduction of it.
They would be happy to cut out the cash so they can always make sure every transaction is traceable and all our movements can be tracked in detail.
Even the Australian government already has a plan (for now it is not known if it will be carried out or not) to make illegal all movements greater than $ 10,000 in cash.
But then, when we analyze what are the possible alternatives to a future without cash, the main mechanisms or means that we have are credit and debit cards .
Advantages Or Disadvantages Of Digital Money Vs. Cash
For example, if you lose a debit or credit card, you can simply call to request a new one and there is no problem.
But if you lose cash, whoever finds it keeps it, enjoys it, and uses it.
Although losing a credit card does not mean that you are risk-free, when we compare the risk of cash with the risks of cards, we could say that the cards are more secure .
Even with all the things that happen today at the level of scams, cloning and others.
The fact is that there is always much more fluidity and ease of handling plastic money, and really this in itself is by design.
On the other hand, cash is not free of fraud …
It is estimated that approximately 0.1% of all dollars in cash in circulation are counterfeit dollars , counterfeit bills.
And this may seem very small until we realize that the total money in circulation is more than a million million dollars .
Credit cards definitely have a main disadvantage compared to debit and cash, and that is that you do not pay with money, you pay with debt .
In other words, there is no direct transfer of value between buyer and seller, but rather a promise between buyer and bank or financial institution, to pay or return the money that the bank delivers directly to the seller, only within an agreed period, or with a few interest, or a number of installments.
Then one would say: « Well, but then debit cards are a solution to the fact of not having to think that they are a debt, that it has interest, that it has cost overruns and many other things « …
And it really is that debit cards do, use and dispose of the funds in my bank account and therefore reject any possible transaction that exceeds this, although there are still accounts with overdraft and debt capacity at very high rates.
But regardless of this, there is no promise and there is a direct transfer of value.
But the problem with cards of any kind is simply the costs and fees per transaction.
In other words, the processing that a merchant pays for .
As this cost is always on the supplier’s side, one as a consumer hardly ever sees or consciously thinks about it.
And normally we are talking between 1% and 3%, plus a fixed amount, say $ 30 cents or the equivalent in any local currency.
And one could say: ” Ah, but that’s very little money ” …
Yes, but imagine 3% of a product that is worth $ 2 dollars, it would be $ 6 cents, ok.
But the extra $ 30 cents, which is a flat fee, actually brings the percentage of product cost, just in card processing fee, to 18% .
Not counting profits, not counting operating costs, or the costs of the raw material of the product, and how many other things.
This means that credit and debit cards are not really an accepted medium for many merchants in low value transactions.
And there are businesses in which those are the only products that they sell, low-cost products, therefore they could never adapt to a medium of these unless they make the products super expensive and we have to bear that cost.
In addition to all this, credit cards for example offer bonuses, miles, points, benefits for just using them, and clearly they would not have to leave only that small percentage.
For example, if we talk about 2%, 3% commission, how is it that some cards offer 5% cashback in certain categories?
This really comes out (and for people who don’t know it, make it clear from now on) from those who pay interest on their purchases .
In other words, people who get into debt and who do not have the full money to pay for their purchases, and what they do is put it at various installments on their credit cards, end up financing the benefits , flights, miles, gasoline, the redemptions in supermarkets and many other things, of those who use it at a fee.
In other words, credit cards are a means of passing money and value from the poor to the rich.
Clearly you have to decide at this point which side you want to be on: the side of those who pay interest or the side of those who receive points and miles regardless of where it comes from.
Because the point is that the price of the product is the same, regardless of whether I pay with cash and do not receive any benefits, or if I pay with a credit card and earn all those benefits.
In Colombia, for example, the price cannot change according to the means of payment, and simply if they tell you that they are going to give you a discount for paying in cash, then clearly you should take it.
However, it is not the way it works, far from it in practically everyone.
Ultimately, therefore, businesses are forced to raise prices for everyone, so that they can simply bear the cost of processing the cards.
And those who really end up winning are the franchises and the banks, not so much the users or the businesses.
It is practically an oligopoly in which simply these few providers that are the franchises keep all the profits, are in control and can even deny services to anyone, essentially if there were no alternatives such as cash, leaving you bankrupt immediately.
Possibly there are other solutions, for example in China, the WeChat application that became the default application, the default mechanism to pay for anything.
It is so common that QR codes are found everywhere, and the massive adoption of this application is so incredible, that even beggars receive alms for WeChat.
Apart from the fact that the businesses do not have to pay the rent of a dataphone or a device to receive the cards, nor the installation costs, nor anything like that.
Rather, everyone downloads the application on their cell phone, scans the code and with that pays, and that’s it.
There they receive their salary, from there they use the funds they want to have, and quantities of things.
It is a private provider that really when we are going to analyze the volume of money in annual transactions, they process 10 times more money than debit and credit cards in the United States , which is an incredible thing.
Of course China has more inhabitants, but when the conversion and population-adjusted analysis is done, we realize that it is even more than double the number of money transactions as such with this application.
And we are talking that it is an application that they created just like 10 years ago.
And the incredible thing about WeChat is that they do not charge any kind of fee, therefore it makes any small business can sell without having to think about this commission and what the net percentage of all their profits will be, because one thing is to sell a cup of coffee and think ” Okay, this was $ 36 cents “, another thing is to sell a thousand cups of coffee and how much money they end up accumulating in commissions.
But then the question is how does WeChat make money, and the answer is:
The government loves that WeChat shares all the information of the movements and transactions of its users , and therefore the government has been very supportive of this application, so there is no privacy, the government knows everything.
And many people in China are simply willing that for all the conveniences that the system provides, they will hand over their privacy, the information of all their movements, without any problem as such to the government.
But regardless of whether there are people willing to accept, this makes it clear to us that with WeChat or Visa and Mastercard, we are giving a lot of power to providers.
A power that if cash disappeared, is really too great and is much more than we should be willing to accept.
A cashless society would have many more negatives than positives .
It’s okay that the government really wants to control the issue of illegal transactions a bit, but don’t you think there would be other ways?
If there is the motivation, there will be the means, whether through gold or cryptocurrencies, there will always be a way to trade anonymously, then what are the benefits and conveniences as such for us.
But another thing to think about is that beyond the bills and coins, money itself is nothing more than an ideal representation that we have for value.
When we see that a bill has a number printed on it, we get the idea that that bill is worth that number, when in reality what we are holding is a piece of cotton and linen, but it really has no value.
It is nothing more than the one we assign to it.
First the notes were certificates of deposit backed by gold, then backed by debt, then backed by nothing .
And then ultimately the money, whether in cash or with a card, with debt, whatever; It ends up being an illusion and then, here the question is: What awaits us in the future?
In addition to everything, inflation has wiped out much of the value of many currencies, many of them completely wiped out.
The dollar is worth 95% less than it was in 1911 when the United States Federal Reserve was founded.
And virtually all currencies are on the way to depreciating and becoming weaker and weaker.
For now, there is a lot of uncertainty about what will happen, and cash will not disappear in the short or medium term.
I personally do not consider that in 10 years there will no longer be cash.
What happens is that we are going to have it for certain things there, just in case … But in reality digital money is practically taking over the world.
And when we talk about cryptocurrencies, it is still in doubt if this is going to become the default mechanism for transactions, especially when there is so much volatility, so much variability in the price that it really is not as stable as we perceive for example a dollar.
And many people are still not willing to assume the change that this implies, apart from what I am telling you happens in China, with WeChat even beggars receive their alms there; But with cryptocurrencies, we hardly find how to buy them and how to have them legally, at least in countries like Colombia.
But governments would definitely be happy if there is no cash because they would have a paradise of traceability, of analysis of each of the movements, they would know how much you really earn, how much they can charge you …
Tax money would be practically automated and you wouldn’t even have to hire an accountant, because they would tell you how much you have to pay, since they basically know everything .
Regardless of all the above, what I always think and what I like people to think is that today, tomorrow, in 10 years, in 20 years, in 60 years, there will be successful people , today there are successful people.
Regardless of the means of payment, how the money is, what it is that has value.
Before it was land, gold … Today it is money in a bank account, numbers in a database.
Whatever it is going to be in the future, it is going to represent financial success, wealth, net worth and the equity of individuals or companies.
So, actually regardless of this situation, from these means, from today I can acquire good driving habits , know how to save, invest or waste and buy impulsively, it can happen today with cash or credit cards, or with WeChat , or in the future with cryptocurrencies or with whatever strange thing comes up.
So the key is how we are going to handle the money, what are we going to do.
We should be firm not to accept anything that the government wants to mount on us and that’s it, just because.
However, we must keep in mind as a priority the fact that financial success depends on each one of us , and if this way we ensure that it happens now with the means we have today, we can make the transition without problem assuming that we are people capable and flexible to adapt to any change.
And all this is possible if you constantly educate yourself financially.