On April 28, an unexpected blackout temporarily paralyzed the electricity system of Portugal, Spain, and parts of France. For nearly twelve hours, more than four million Americans were too. This incident has raised alarm about what happens when cashless systems go offline. It underscores the limitations of electronic payment methods during emergencies. As societies around the world move to become more cashless economies, the case for printed currency is even clearer.
In other cities, cash has dropped to just 1.5% of all transactions. This move is indeed to promote efficiency and limit opportunity for theft, there are major downsides. Credit card consumers are paying an average of a 1.5% upcharge on their purchases. This combines to make cash a much cheaper choice for regular transactions. By choosing to pay with cash, people can sidestep these extra fees and save money by spending cash more wisely.
The recent blackout also reminded everyone of the danger in relying completely on cashless systems. During this storm, thousands of local residents could not get money or buy anything, as cash registers and ATM payment systems went down. That shift completely disrupted the model for street performers, who normally got cash tips directly from people walking by. Others have pivoted by going all-in on electronic payment methods and QR code menus. The inability to accept cash can severely limit their income potential by surprising circumstances.
The advancement of cashlessness brings up a lot of equity concerns as well. It excludes vulnerable populations such as the elderly and unbanked who may not have access to digital payments from participating in our economy. Yet dependence on electronic payments introduces hurdles for anyone lacking a bank account or smartphone. This truth only further supports the case for keeping a cash option— a key ingredient for ensuring everyone can participate in the economy.
In view of these mounting pressures, the Swedish government has responded. They told their citizens to keep physical cash at home in case of emergencies. This new guidance takes as its premise the deteriorating international security environment. It recognizes that there are clear dangers in putting all your eggs in a digital infrastructure basket. Even Norway is reconsidering its plans to go completely cashless. This change is a part of a larger, national reconsideration of what it means to leave behind cash.
A full move to cashless systems uncovers life-altering implications. Now factor in the bedlam if some nefarious dude hacked the electric grid! Such a move would likely be seen to have extreme consequences for economies based on accepting electronic transactions. In an emergency, a rapid loss of power would bring down all digital payment systems. Otherwise, Americans would be unable to access their money, run their businesses, and conduct commerce.