What would happen if we eliminated the use of cash?

cash out what happens

Illustration: Asia Trianda and Lorenzo Matteucci

In recent times there has been much talk in Italy of one of the first initiatives of the Meloni governmenta bill to raise the cash limit—which, after the initial announcement of €10,000, will likely be set at €5,000 (in 2011 the government led by Mario Monti lowered the limit from €2,500 to €1,000, in 2016 the Renzi government brought it to 3,000 euros, the second Conte government in 2020 brought it back to 2,000, while in January 2022 it should have returned to 1,000 euros, but due to Lega and Forza Italia this last change was postponed to early 2023).

This is a symbolic measure which does not offer any particular benefit to ordinary people, but which could have negative effects on the fight against tax evasion—even the Bank of Italy recognized a direct relationship between increased use of money cash and the black economy.

Between 2020 and 2021, Italy recorded a 23 percent increase in cashless payments—thanks to fears of becoming infected through contact with banknotes during the pandemic, but also thanks to the cashback initiative, which encouraged the use of the card even for small amounts, thanks to the possibility of obtaining a refund on purchases for those who made a certain number of transactions. However, we are still decidedly lagging behind the global trend of a cashless society: in the European Union, our country is in 24th place (out of 27) for the number of card transactions per capita per year, Ivano Asaro and Valeria Portale explain by email to VICE , directors of theInnovative Payments Observatory of the Milan Polytechnic.

But if one day our country decides to push digital transactions to the maximum, or even to ban cash in a futuristic scenario, what would happen and what should be done to succeed? Asaro and Portal stop me immediately. “The idea of ​​a completely cashless society—or, worse, forcing consumers to give it up—is not desirable,” they say. “No one wants to go in that direction as the social consequences would be considerable.” It is no coincidence that in Sweden, a country that is now almost totally cashless, the government has decided to take measures (but we’ll get there later).

The two researchers from the Polytechnic explained to me that in a company predominantly without cash, the advantages would be numerous: the very concept of smart city cannot do without a greater diffusion of digital payments—services such as car sharing or shared electric scooters could not exist otherwise—while a digitization of the Public Administration would make it simpler and more efficient also the payment of various public services.

The most obvious advantage for the community would be a reduction in tax evasion: according to estimates by the Observatory from a few years ago, 33 percent of cash collected is not declared, a percentage which drops to 12 percent when cash is collected electronically. “Obviously there are frauds or scams even in a cashless society, but it has been proven that digital payments, due to their traceability, hinder the evasion and laundering of money and make life a little more difficult even for organized crime,” adds Asaro.

Taking into account that Italy has one of the oldest populations in the world, which certainly does not facilitate openness and trust in technological innovations, transforming our country into a cashless society would require a massive digital education campaign and a quite a convincing work. The infrastructural obstacles would not be secondary: we all know the scene of a waiter walking outdoors with a POS in his hand, desperately searching for the network. However, the situation could improve in the coming years, considering that the PNRR funds assigned by Italy to the digital transition amount to approximately 63.5 billion euros.

In a hypothetical cashless society obviously a myriad of small habits based on its use would have to be rethought – from the pocket money left by the grandmother to the grandchild, to the scratch card paid with the change -, while special apps would be used to split the bill in a pizzeria, or new configurations of apps and services that already exist, such as Paypal and Satispay. In some cases the change is already underway: it is now possible to make cashless donations to charities’ booths and even in church.

The real risk, however, would be to leave some more vulnerable categories behind, given that the use of cash occurs more frequently among the elderly, ethnic minorities and those belonging to a disadvantaged socio-economic group. In Italy live then about 50,000 homeless peopleof which at least 30 percent are dependent on collections from passersby, while for many migrants it can be difficult to access a bank account or a card.

Asaro also points out to me that, according to a survey carried out by the Observatory in collaboration with the multinational market research company Ipsos, about 7 percent of Italians rely exclusively on cash and have no electronic payment instrument, disproving the general belief that anyone who uses cash still has a card. In other words, many people may find it difficult to purchase vital goods or services due to a lack of the necessary technological tools.

In this regard, Asaro and Portale cite the case of Sweden, where autonomously and by choice of citizens the use of cash has been reduced to less than 2 percent of total transactions, a trend that has led many businesses to accept only digital payments, various banks to stop cash services or eliminate ATMs for withdrawals. For this reason the government of the Scandinavian country had to implement some initiatives to not discriminate against those categories that cannot or do not want to resort to electronic transactions, for example by requiring banks to keep branches for cash services active.

In some respects, Sweden was ready to make the leap towards a society free of liquidity, but it has decided that such a sudden change and without gearing up for any consequences is still too risky a choice. We are therefore in the situation where more than 4,000 Swedes already have a microchip for digital payments implanted in the hand, but the Swedish Civil Protection Agency suggests to keep some cash at home in the event of a collapse of the payment system.

But the dystopian scenario of a collapsing payment network how realistic is that? Would a cashless company be resistant enough to the risk of cyber attacks or leaks of sensitive data? Asaro tries to reassure me by telling me that the risks for a cashless society are not greater or different than the current ones, “increasing the volumes of digital transactions it is physiological to see, in absolute terms, also an increase in attacks on personal data, but one also expects ever greater security in the field of cyber security and greater solidity of digital infrastructures”.

Another risk associated with a cashless company is that our transaction data could be used to watch over us. It seems like a dystopian and paranoid vision of the future, but in fact it is an already present risk: during the 2019 protests in Hong Kong many demonstrators who went to the protests they bought in cash their metro tickets, given that the contactless payment system would have made their movements locatable and traceable. “This can be a significant consequence: in a similar scenario, all decentralized payment systems based on cryptocurrencies could be a very useful tool. But the real problem here is not in the form of payment, but in the authoritarian government that represses democracy,” reflects Asaro.

Another thing to keep in mind is that cash is issued and controlled by the state, while cashless transactions are handled exclusively by private operators. A difference that we often don’t think about but that is very clear to governments. Portal points out to me that many countries and continents are already discussing the creation of state-issued and controlled forms of digital payment, and in 2025 the so-called Digital euroan electronic money issued by the ECB and the national central banks of the euro area countries.

Perhaps this scenario is the closest to a utopian cashless society, in which the digital payment network is public, managed by the state and not by private companies that charge commissions on our transactions, as is the case now. The emergence of other players such as cryptocurrencies or stablecoins, which are already making the cashless world more pluralistic, will not be secondary.

But what should we expect 50 years from now? Will money continue to be printed at least as a form of backup in case of emergencies, or will banknotes become a bit like vinyl, an anachronistic but fascinating object with its own small but fierce market niche? According to Asaro and Portale, it is a difficult prediction, but they do not see the imminent advent of a totally digitized society that relies only on electronic transactions: “the trend is that of an ever-increasing use of digital payments and it will be difficult to go back. But even in the societies most ready for this transition, a part of the population does not want to go in that direction. As long as freedom of choice is respected, there will always be some banknotes in circulation.”

What would happen if we eliminated the use of cash?