The Multiple Meanings of “Cashless”

One of the interesting aspects of the “cashless society” concept is that it is essentially a negative vision for the future. Like the “paperless office” (which was another hot topic in the 1960s and 70s), the “cashless society” vision focused on what it would remove instead of what it would add in its place. It said much more about what it would not be, and very little about what it would actually look like once it arrived.

In many ways, this lack of positive definition was actually a good thing. It enabled several different groups and firms to all pursue a common goal, even though they disagreed, sometimes vehemently, about the specific details. Amongst the bankers of the 1960s, the goal was relatively clear: replace paper checks, notes, and coins with some kind of electronic funds transfer system. But how that system should be structured, who should govern it, who should pay for it, who should operate it, and how consumers and business should access it, were all open questions. For each of these questions, there was money to be made and lost, so not surprisingly, different groups had very different opinions about the potential answers (for more details, see our working paper, “How the Future Shaped the Past“). A general meaning of “the cashless society” might have been shared, but the specifics were hotly contested.

Despite these disagreements about the specifics, however, US bankers in the 1960s assumed that these new electronic transactions, as well as the accounts they accessed, would still be denominated in US Dollars. In other words, the cashless society might eliminate paper bank notes and checks, but it wouldn’t eliminate money altogether, nor would it replace the centralized, state-issued fiat currency with a host of privately-issued ones. “Cashless” was really just a synonym for “electronic transactions.” The cashless society promised to automate the mechanisms of monetary exchange, but it would leave the existing state-issued fiat currencies firmly in place.

This time around, however, I’ve noticed a broadening of the meaning of “cashless” to include such things as privately-issued electronic currencies (e.g., BitCoin), as well as the dream of a completely moneyless society. When most contemporary bankers, journalists, and academics use the phrase “cashless society,” they still mean something similar to what the 1960s bankers meant: the replacement of paper checks, notes, and coins with electronic transactions—except that this time, those transactions are initiated with a mobile phone instead of a plastic card. But several reactions we have recently received to our working papers indicate that at least some people consider “cashless” to also mean “dollar-less” or even “completely moneyless.”

The cashless solutions that seem to get the most attention from the press these days (e.g., Square) are really just making it easier for more people to access the existing electronic payment networks owned and operated by Visa and MasterCard, both of which settle using existing state-issued currencies. But BitCoin and other electronic currencies are quite different. BitCoins are not issued by a state or a central bank. BitCoin is an alternative currency, one that is parallel to the dollar, pound, euro, yen, etc., and can be exchanged for these central-bank currencies according to market-based, variable exchange rates. The BitCoin system is certainly “cashless”—all their accounts and transactions are processed electronically—but it is also more than that.

As historians and social scientists, we should of course strive to let actors define their own categories, and avoid layering our own meanings upon them. Actors in the 1960s seem to have had a more restrictive definition of “cashless,” but that definition may be broadening today to include alternative currencies, as well as moneyless barter societies. As we investigate the discourse or the actual systems from a given era, we must pay special attention not only to what is said, but also what is left unsaid, what is simply assumed.

But as analysts and authors, we should also make clear what we mean by our key terms so that our readers know how to interpret our work. I have so far been using the term “cashless” in the more restrictive sense, and will use terms like “alternative currencies” or “moneyless” to describe the other categories.

What meanings have you been assigning to the term “cashless?” And what terminology do you prefer?

Myths and realities of the cashless society

People *think* that technology moves fast and culture moves slowly. I mean, the Rolling Stones are still one of the world’s most popular bands, right? But that’s not always true. If you look at futurists’ takes from the middle of the last century, their biggest misses were not just technological (jetpacks instead of iPhones) but cultural .. [such as failing to] anticipate the rise of the natural and organic food movements. Alexis C. Madrigal – The Atlantic

A panel named as above took place at the European Business History Association annual conference (#ebha2012) in Paris (August 30th to 1st September, 2012). The panel was chaired by Carles Maixe (@carlesmaixe) from University of La Coruña (Spain), who introduced the audience to the authors as well as the idea behind this blog/forum. A common theme was looking at the practical implications of delivering on the idea of a cashless society by not for profit deposit taking financial institutions.

The panel was composed of:

The comments by Mark Billings (Exeter, UK) and the discussion that ensued included contributions from of Patrice Beaubeau (Paris Ouest Nanterre, France), Steve Toms (Leeds, UK), Chris Colvin (Queens Belfast, UK) and Osamu Uda (Nihon, Japan), among others. Points raised included (included, in no particular order):

  • This panel and indeed a good attendance, reflects a growing literature and interest to look at the impact of technology in financial services from an historical perspective, which is challenged to provide a true comparative history of automation (rather than individual case studies sitting side by side).
  • For the foreseable future we are likely to talk about “the less cash society” (see recent article in Gadget Lab — about generalise mobile payments needed at least another 10 years).
  • There is a need to look at the impact of cashless (and indeed deeper analysis of ATMs) into bank employees and banking practices.
  • Provide a comprehensive survey of how the idea of a cashless society has been dealt with, at least conceptually (including contributions to economics, social costs of different payments, anthropology, etc).
  • It is still not clear the importance of differences in the institutional setting to promote financial inclusion and aid (or hamper) a cashless society.
  • The 1960s sees the birth of the modern monetary economy, which in large part is based on applications of computer technology.
  • The discussion on the cashless society (and particularly contemporary narratives) tends to emphasise the artifacts (such as mobile phones or chips) as opposed to what is money and its economic and social uses.

The discussion continued during the evening (see photo below). An idea here emerged following last week’s post on transparency, as it was considered that surcharges on cash withdrawals were similar to a regressive tax: a fixed value regardless of amount withdrawn is more punitive on lower income individuals as the total payment of surcharging fees is a greater proportion of their income than for high-income individuals. An empirical issue is which of the two groups observes greater frequency of withdrawals and keeps a higher balance of cash and coins. Gustavo del Angel baptised this effect as “feeding the gander”, in a loose symil to the large tubes commonly used in the creation of fois gra, replicating the payments pipeline giving no option but to “eat” the surcharge.

(L 2 R): Gustavo del Angel, Carles Maixé-Altés and Bernardo Bátiz-Lazo, Paris (Sep, 2012)