Potential Consequences of Cashless Switzerland

Cash has three functions: It is a generally accepted means of payment in a geographically limited currency area, a systemic unit of account and a store of value. In a world without cash, everyone would have to have unrestricted access to an electronic bank account, which they could access at any time using alternative means of payment such as payment cards and/or mobile phones in order to make payments at all. Any point of sale would be obliged to accept electronic means of payment, regardless of the underlying system. Since spending and the willingness to pay with credit and debit cards, but also with prepaid cards and, above all, with mobile phones, are significantly higher compared to cash, consumers in a cashless world are highly likely to become over-indebted, especially people with lower incomes – this is because the high transparency of cash greatly facilitates budget and expenditure control. Individual savings and consumer behaviour per se can also contribute significantly to private debt, which is more difficult to learn without cash as a store of value. This is also related to pension provision, especially the voluntary third pillar as an individual savings scheme.

Due to higher individual consumption not only the merchants would benefit, but also the payment service providers, who charge fees on electronic payments. In addition, the latter also benefit from the elimination of expenses which cash causes, for example, through handling costs at the counter, at ATMs and during transport. However, merchants would be financially worse off under the prevailing fee structure.

The entire payment system would be extremely dependent and therefore extremely vulnerable due to the exclusively electronic processing. System failures, whether accidental or intentional, would be economically devastating. Consumers could be screened in every detail of their habits without cash, which brings with it an enormous number of business and criminal opportunities. Total surveillance of a person would be the reality.

In addition, in a cashless world, the Central Bank and the State are losing a large source of income in the form of seignorage. This is due to the fact that the Central Bank does not have to pay interest on the monetary base and can invest the money profitably. The lack of a source of income could therefore lead to lower distributions for the Confederation and the cantons, which in turn would have a negative impact on their budgets. Cash doesn’t stink after all!