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Stoking the fire in the cash debate
December 10, 2013 by atm Atom — blogger, atmatom
For more than twenty years, the "Death of Cash" argument has been fairly stale. Its advocates argue that cash is inconvenient, impractical and ultimately will be overtaken by new electronic payment technologies.
"Cash Lives" supporters argue that cash is convenient and anonymous, and that it provides security when electronic payment technologies are interrupted.
On a regular basis, organizations in one part of the world or another will issue updated statistics showing the increase or decrease in cash use, spurring a flurry of articles on one side or another as to whether this might represent an inflection point in the rise or fall of cash.
Case in point is a recent article from Finextra, which reported that Sainsbury's Bank has estimated an increase of 3 million cash withdrawals in the U.K. this December as compared with last year. The article goes on to say that RBR forecasts an increase of 65 percent in global cash withdrawal volumes by 2018 on ATM growth of 40 percent — delighting the "Cash Lives" contingent.
On the flip side, it seems that not a day goes by without the announcement of a new electronic payment platform whose proponents claim will be the cash killer, dominating the payment space — much to the delight of the "Death of Cash" delegation.
As with most longstanding arguments, beware of the black swan — the unexpected wildcard that permanently changes the discussion.
In an opinion piece this week in the Wall Street Journal — seemingly unrelated to the Finextra report — Romain Hatchuel, managing partner at Square Advisors, offered up a scenario that would likely have a significant impact on the use of cash.
Hatchuel argues that unsustainably high government debt and deficit levels will eventually necessitate a "global wealth tax." His opinion piece suggests that this tax could be as high as 10 percent of every household's positive net worth above a certain threshold. As a precedent, he offered the expropriation of bank deposits in Cypress earlier this year.
Clearly, the adoption in the United States of a "net worth tax" is mere speculation at this point. But imagine a scenario in which the concept finds its way into open discussions.
Odds are that the threshold for a net worth tax would be among the last questions to be decided. Faced with the potential loss of financial assets, how long would it take for large numbers of people to begin hoarding cash outside the view of tax authorities?
Since withdrawals of cash above a certain level would likely be flagged, it is possible that ATMs might be used as a convenient vehicle for building stocks of cash. Transactions would soar along with cash use, ISOs and IADs would suddenly find themselves very busy.
While this scenario remains a long shot at best, Hatchuel has certainly succeeded in stoking the cash fire.
Read more about trends and statistics.
This article has been republished from the Triton blog, atmAToM, with kind permission from Triton.
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