Is Cash Obsolete?

It is becoming increasingly evident that money is now almost entirely transferred electronically.  Recently, the deputy governor of the Norwegian central bank suggested that the level of transactions in that Scandinavian country is now so low that it can be considered cashless.  Central bank data indicates that less than 10% of the number of transactions, including buying coffees, are in cash. 

This trend is not limited to Norway.  The whole of Scandinavia is effectively moving away from physical money.  In addition, Australia recently reported that ATM withdrawals were at a 15-year low and have been declining at a 6-8 % rate over the last several years.  Anecdotally, it appears that some beggars and buskers now have card terminals. 

It appears that the movement towards a cashless society is driven by a number of factors, including: the rise of applications that allow for the transfer of money to any person or business electronically, the reduction in fees banks are allowed to charge businesses for processing cards and the costs, primarily to businesses, relating to the handling of cash. 

Investors should take note.  Increasing use of electronic transfers has implications for transaction fees, confidentiality, security and tax collection.  Moreover, a cashless system may effectively exclude the poor and the near poor.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA