Denmark: everything but the cash

May 5, 2016 8:36 pm

Danish government officials have a goal ‘to completely do away with paper money’ by the year 2030. The country has supported ‘pro-anti-cash’ arguments when many other countries refuse to follow in their footsteps and deny their citizens the right to choose their means of payment. The question remains – is the Denmark Government influenced by the banks and electronic payments lobbies?

Just two decades ago, about 80 percent of Danish citizens relied only on hard cash. Today, that figure dropped drastically to about 25 percent thanks to a Government that has been pushing for a cashless country. This transition will bring about more security according to the banks, and according to everyone else, it will lead to more banks profiting.

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Banks like this change, because it enables them to make more money from the fees that they collect from credit and debit cards, or other means of payment. And the Government is in favor of this change, as electronic payments enable them to more easily watch, track and monitor what every citizen is buying and doing.

Little by little, cash is being eradicated, and what we have seen so far is just the beginning. In 2014, over 417 billion cashless transactions were conducted, over 500 billion in 2015 and the numbers keep growing. Banks aren’t the only parties making business out of the situation.

Electronic and online payments certainly aren’t new, and they are becoming increasingly attractive to businesses. The organizations that could really benefit from a cashless future are the biggest tech giants, such as Google, Apple, Facebook and Amazon (namely the “GAFA”). And they don’t need to become banks to impact the financial services industry, in fact they already started offering mobile wallets or integrated payment services to their customers.

The biggest advantage these tech giants have is their huge and unmatched customer databases. If one country, such as Denmark was to become fully cash-less, GAFA could potentially win big money. But in harsh economic times, why would a country stand by while tech giants benefit more than the government?

“These firms will increasingly be in the business of selling banking products, apps and services to consumers in an effort to maintain acquisition traction. And they’re going to be looking at owning more and more of the payment process (before, during and after a transaction) because of the opportunity for high-frequency, low-margin revenue and the ability to capture purchase behavior insight,” (1) stated Brett King, who founded the first direct mobile-only bank, Moven.

If such a transition works in Denmark, it could potentially work anywhere. These firms, as well as the banks and all the financial actors involved in electronic payments, seem to have an enormous influence that has allowed them to sway Danish law makers.

The problem is that citizens have barely any say in this transition. Bust most of them seem to have accepted this major change, which lobbies are describing as “inevitable” and “for the better.”

This happens at a time when another debate is making the headlines in Denmark, concerning the national poverty line and whether or not the Government can measure it in kroner. But a cashless Denmark could have a negative impact on the vulnerable communities who are already below that poverty line and sometimes don’t have access to any other means of payment but cash. “We can’t use a poverty line for anything at all in social politics, so I don’t want to spend any more resources on it or use it at all,” (2) declared Karen Ellemann, the social and internal affairs minister. Only time will tell whether Denmark will be measuring the poverty line in bitcoins.

In the upcoming years, the idea of a cashless society will create major debates in most developed countries. It will rapidly become impossible for some countries to get fully rid of cash while others don’t. Therefore cashless countries could eventually become disadvantaged in many aspects; from foreign investments to tourism. And after a short lived cashless economy, we may even see cash sneak its way back into our lives.

(1) Google, Apple, Facebook and Amazon should terrify banking, The Financial Brand, August 6th 2014

(2) Government scraps official national poverty line, CPH Post Online, September 14th 2015

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