Cashless Society

Money itself is changing, In ten, twenty, thirty years, who will still be exchanging pieces of paper?

Electronic payments are becoming the norm. Signs now say Ecocash and Swipe in many shop windows and we can pay for low-value goods with a simple swipe of our card or even our phones thanks to technology.

In the Zimbabwe, cash still accounts for just over a third of all payments. But this is predicted to fall to just 16% by 2027. In Sweden, cash has been virtually eliminated. Only 2% of transactions made in the economy are now in cash, according to the Swedish central bank Riksbank.

IMF research, which explored the idea of digitalised money, has also suggested the demand for cash is decreasing while awareness is growing of virtual currencies, such as Bitcoin. Digitalisation is reshaping economic activity, shrinking the role of cash, and spurring new digital forms of money. The Reserve Bank of Zimbabwe has been pondering whether and how to adapt.

Although electronic payments are on the rise, the financial system is still based on physical money, printed by the reserve bank. Commercial banks and private payment systems like Visa and Mastercard enable us to make electronic payments.

Cryptocurrencies grew in popularity after the 2008 financial crash as the public lost trust in the banking system. However, cryptocurrencies work more like an asset and cannot be used to purchase goods and the lack of regulation has proved a concern.

The government should try to figure out how to regulate virtual coins and should look into whether they should launch their own digital currency.  

Unlike cryptocurrences, digital currencies issued by the reserve bank would have the same value as a cash currency – and could be spent on goods and services. Both would likely use some sort of digital ledger technology, such as blockchain. 

Digital currency might soon become a reality. IMF chief, in Singapore, said that “we should consider the possibility” of central banks issuing digital currencies and supplying money to the digital economy.

Such digital currency issued by a central bank would be a liability of the state – as cash is – rather than commercial banks or private payment providers. State-controlled digital currency would have “clear advantages” and could fix the financial system challenges faced by our country at the moment.

The reserve bank would retain a sure footing in payments as most digital currency transactions would be recorded on a single centralised ledger, the central bank or government would be able to see where money is flowing to, which could help tackle corruption. A digital ledger, where you can see money flows in real time, would be “a very fascinating thing for the government” because they could spot illegal transactions and financial activity.