by From Norbert Haering and the current issue of RWER If people write about a war on cash, even well-meaning readers will tend to think of them as doomsayers with paranoid tendencies. However, many will have second thoughts if they hear that there is indeed a Better Than Cash Alliance, which has the goal of replacing cash by digital payments on a global scale, and that this Alliance is doing this with the explicit support of the government of the 20 most powerful countries. The term “war on cash” was coined not by critics, but by key members of this Better Than Cash Alliance, as a rallying cry in their drive to increase their profits. At a conference on payments in 2005, representatives of credit card company MasterCard talked about a new generation of card solutions, with which they
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from Norbert Haering and the current issue of RWER
If people write about a war on cash, even well-meaning readers will tend to think of them as doomsayers with paranoid tendencies. However, many will have second thoughts if they hear that there is indeed a Better Than Cash Alliance, which has the goal of replacing cash by digital payments on a global scale, and that this Alliance is doing this with the explicit support of the government of the 20 most powerful countries. The term “war on cash” was coined not by critics, but by key members of this Better Than Cash Alliance, as a rallying cry in their drive to increase their profits.
At a conference on payments in 2005, representatives of credit card company MasterCard talked about a new generation of card solutions, with which they wanted to “go to war”. Competitor Visa was confident, that they would “win the war on cash”. Together, they wanted to “eliminate cash from the financial system”. In a friendly report on the conference in the industry-journal European Card Review with the title War on Cash, the author says that while banks and governments have a shared desire to eliminate cash, governments prefer to let the card companies take the initiative, because they are afraid that the public would not like the war on cash.[1] A department head of the EU-Commission is quoted saying: “We agree with the war on cash” and continuing with a plea to lower prices for card payments in order to be more successful in this war.
Alexander Labak, President of MasterCard Europe said in a speech on The Future Beyond Cash that the war on cash had to be won and would be won, because these old-fashioned coins and bills were so expensive for society. The EU-Commission assisted with questionable calculations about the high cost of cash, while the leading US-consultancy McKinsey provided the rationale for the furor: They presented a study according to which the profits of the financial industry would increase massively, if cash could be pushed back.
At their industry meetings and in front of financial analysts, banks and card companies like to be bold and explicit about their goal to get rid of cash. However, if the general public is listening, the strategy is one of laying low. The International Monetary Fund (IMF) recommends letting the decline of cash appear to be a gradual and unplanned side-effect of unrelated measures and developments. The fund advises governments to let the private sector go ahead, because direct official action would cause popular resistance. If they did act, governments should start with harmless seeming steps like phasing-out large denomination notes or (initially) generous upper limits for cash payments. While measures against cash should be presented to be unplanned and independent, they should in truth be closely coordinated with the private sector, recommends the IMF-author.[3]
McKinsey also advised governments, banks and payment providers to cooperate in a “systematic war on cash”. The consulting company has conveniently provided a list of harmless-seeming steps for governments to take. Many of them have recently been enacted all over the world. They suggest are to require merchants to accept card payments and to prohibit them from passing on the cost to their card-paying customers. On the other side, cash-users should be confronted with the true cost of their payment-methods, including all indirect costs. Standards for security and maintenance in the cash circuit could be made more stringent, to make cash more expensive. McKinsey praises the Finnish who managed to push back cash by forming a cartel of banks and payment providers, which made cash more expensive. Also in Canada, Norway and Australia, they write, central banks and commercial banks together had achieved the same good result.[4] read more
[1] Jane Adams: “The War on Cash.” European Card Review. März/April 2006. S. 12–18.
[2] Alexander Labak: “The Future Beyond Cash – Europe’s Debit Alternative”. Speech to Delegates of the Fourth Annual MasterCard Debit Conference. Genf. 10.3.2005.
[3] Alexei Kireyev: “The Macroeconomics of De-Cashing”. IMF Working Paper 17/71. 2017.
[4] McKinsey & Company: McKinsey on Payments. March 2013.