The digital transformation in the financial industry suggests a future where cash usage might become obsolete.
How practical is this? Is this the future we want? What has been the benefit of cash in transacting? To establish a cashless society is also to toss out the utility of notes and coins in everyday transactions. It is evident, however, that banks and other financial institutions in Botswana have done an excellent job in reducing instances of transactions where we would need to use physical currency. Mobile banking, electronic wallets, online transactions and online purchases, all of these have coalesced to create a society where cash and coins are playing less of a role. One of the most essential aspects of our embrace of digital transactions as a society is our rate of penetration for internet usage, which according to Statista.com stands at 77.3 percent as of January 2024. Internet usage accelerates the use of digital transaction services from mobile networks, non-bank financial institutions and banks.
We do see an embrace of utility, for convenience, through digital platforms from saving to investing, and most importantly, for transacting. What we do with money and how we do it contributes enormously to our economy. It has become clear though that due to the role of technology, paying without cash is becoming normalised. How often do you pay with cash? How convenient are the methods you use when you pay without using cash? The more your answers skew towards cashless options to these questions, the more it might become apparent as to how soon a cashless society in Botswana might be possible. Yes, it seems inconceivable to have no physical currency being exchanged in society, however, technology is often revolutionary and can bring about significant change, not just in degree, but in kind. In 2005, how many of us may have realistically conceived of Chat GPT? Technology like that could be a threat to our jobs, our way of life, and the way we approach education.
In an increasingly digital world, physical currency does remain an integral part of our financial system because of its utility. Cash is accessible to all including those particularly in remote areas who have neither access to banking services nor digital services and infrastructure. Digital transactions also have another effect of placing strain on our electrical systems and compromising minimising our carbon footprint as a society. Thus physical cash for the foreseeable future will remain integral, especially if there are power outages or in crises and emergencies. Cash cannot be hacked and provides a degree of confidentiality and this offers a significant degree of security. All of these coalesce to provide a guarantee of confidentiality in terms of making purchases and investing.
The reason why the title of this article is a question and not a statement is that it speaks to our different priorities. It is an exploration to try to determine what we think may happen, questions make us think, unlike a statement, which suggests a conclusion. What matters to us differs according to how we think and our upbringing. Our financial services have contributed enormously to reducing a lot of the concerns towards digital transactions, digital savings, digital investments and digital insurance. Cash and coins are a technology as well. In humanity’s distant past, we did not use these to trade, instead, we used our reputation, our services, crops and animals that we owned to exchange for goods and services we needed. It is becoming evident to historians, and economists alike that humans are in a constant state of change. We favour what makes life easier for us.
Exchanging your goat for some chickens in our distant past for example would need us to consider the barter system and its inherent problem of the double coincidence of wants. If you had a goat as a goat farmer, not only would you need to find a chicken farmer who is willing to sell you chickens, you would have to find a chicken farmer who would be willing to sell you the specific number of chickens that you wanted in exchange for the one goat that you are willing to sell for that number of chickens. Through this system, it would be tough to find a good match, and as societies became more complex and had an increasing variety of goods to sell, and their relative values became increasingly difficult to match against each other, the barter system crumbled. These issues led to the development of money as we know it now so that with money, you could sell your goat for a sum that buyers of goats would accept and then proceed to buy chickens, however many you wanted from the chicken sellers and perhaps even save the balance if the amount of money you had left over exceeded the amount you gave the chicken sellers for the quantity of chickens you wanted.
This change would allow for more flexible transactions and for us as a species to develop more complex economies. An important aspect of the development of currency as we know it now was that it became a store of value and a unit of account, which would allow us to compare the values of different goods and services, so that a goat would be valued at a certain amount, and a chicken at a certain amount and thus we had a common measure of both of these values.
We overcame bartering with one another and moved towards money, is it inconceivable that we could be moving into another system? Our distances no longer define us. For example, in our postmodern era, we can communicate across thousands of miles across oceans in real-time, through Zoom, Skype, FaceTime, WhatsApp and numerous other platforms. Thus cash transactions in our era can be a limitation and even a liability as this requires both parties to be in the same physical location at the same time to be physically present to conduct a transaction. Carrying coins and cash is also a security risk that may lead to theft or loss, and these risks grow exponentially when it comes to large transactions, such as those for real estate for example. International trade also becomes limited as exchange rates fluctuate and cash becomes impractical for transacting via voyage by ship overseas. As commerce and our daily transactions move online, the limitations of cash and coins are becoming apparent and the digital solutions offered by banks and other financial services shift towards digital solutions, greater convenience and security are on offer. Digital transactions have no need for physical exchange and payments can be made instantly, anytime and anywhere.
Security has always been the criticism for how society can effectively move towards digital mediums for transacting, however, significant progress has been made in digital security such as encryption, two-factor authentication, and fraud protection.
Money solved the double coincidence of wants problem associated with barter, and yet by providing efficiency, security and convenience of exchange, digital transactions may provide an opening towards a future where currency may no longer be necessary. Financial technology paves the way for inclusivity for more people to take greater control of their lives and for flexibility in how we humans transact.
Over centuries, humans have faced massive change, we rise to overcome challenges. Since the development of financial services beginning with banking in 14th century Italy, our human society has been able to develop by making capital better available to more people, and in this endeavour, it has been the efficiency of doing so that has led to an ever increasingly prosperous global society. Ofcourse inequality persists, poverty remains a reality, yet by being able to exchange value in a much more efficient manner, we are ever more likely to overcome these remaining challenges.
*Blumton is an experienced business and finance writer and a digital consultant at Hotwire, dedicated to delivering practical insights and solutions.
