According to the management of the Central Bank of the Russian Federation, in 2017 new banknotes with a par value of 200 and 2000 rubles will be put into circulation. What is the deep economic meaning of creating new banknotes and how is this connected with the general transition to non-cash settlements? The refusal to use cash is a rather old idea that has been present in the global information space for a long time. This may seem paradoxical, but many countries of the world (including the Russian Federation) have already decided to gradually complete the transition to non-cash settlements. Let us consider three foreign regions and after that try to answer the question: is it good or not.
European states are unconditional leaders in the movement of giving up cash. According to the Bloomberg agency, in 2015 the total share of cash payments in Scandinavian countries fell to 25%. Interestingly, the current year, 2017, becomes decisive in this region too: the National Bank of Denmark starts its project to the complete cessation of the issue of the Danish krone, which is planned to be completed by 2030. The turnover of cash in the country is only 2-3%, which is also typical for all neighboring countries (for example, Sweden and Norway, where the share of cash in circulation also does not rise above the value of 5-6%). It is planned that the Mint of Finland will issue the krone.
Such a policy has been carefully analyzed by economists: a gradual transition to non-cash settlements has significantly reduced the turnover of the shadow economy (almost a third in three years from 2012 to 2015), and to simplify the activities of credit institutions. Banks benefit from the transition to non-cash funds: specialists of the National Bank of Denmark point to the fact that the cost of operations with cash is higher than when using non-cash payments on average by 50%. The state is also unprofitable to deal with issues of cash turnover - when switching to a cashless payment, much less budget money will be spent.
Sweden is also a leader in this field. After analyzing customer transactions, the largest Swedish banks came to the conclusion that cash transactions represent a very small part of the total volume of their transactions, for example, in Swedbank this figure was only 5%. Representatives of three of the country’s four largest banks (SEB, Swedbank and Nordea) have taken the initiative to withdraw all available Swedish kroons from the turnover and switch completely to non-cash settlements. The arguments are the same: the fight against the shadow economy, savings of budget and private funds, as well as the fight against crime. Thus, in Sweden, the number of bank robberies significantly decreased after the refusal of more than 1,600 state banks from any interaction with cash (storage reception and delivery). Transition to non-cash settlements, according to the authors of the initiative, would also reduce the number of ordinary theft: theft and robbery. It is noteworthy that the last bank of the four (Handelsbanken) opposes this initiative.
However, in this case, Europe is not monolithic. According to economists, the amount of cash in other countries of the European Union (in particular, in Italy) is growing. It is reasonable to assume that this is due to the introduction of a single European currency, the euro, to withdraw from the turnover that is still not planned.
Gradually, the «banking» movement is gaining momentum to the idea of giving up cash – in some countries banks already practice a negative interest on monetary deposits. This fundamentally changes the concept of banking – before banks paid their customers for keeping money from them, and now to the exact opposite. In fact, banks propose to completely change the paradigm: to replace the concept of bank deposit with the concept of storing cash as things, with payment for such storage. Not surprisingly, against the backdrop of such a policy, thousands of depositors preferred to withdraw their money from banks and put them in safes – so, the sales volumes of individual safes in Germany in 2016 reached unprecedented heights.
The trend of refusing cash has also reached the countries of Asia.
China and Japan, respectively, the second (and according to some estimates, the first) and the third economies of the world, set the tone for the Asian movement of transition to non-cash settlements. For three years, from 2013 to 2016, China has issued more than 3 billion debit and credit cards, and Japan has consistently shown a cash turnover of 15-18% of GDP.
In South Korea, the state program «Society without coins» was launched, within which 85% of population payments are planned to be transferred by 2021 (comparable figures for about 80% of non-cash settlements among the total mass of operations have already been achieved in the above-mentioned countries of Scandinavia). It is also planned to transfer all small change when shopping in stores to a special citizen card. Refusal to issue change in small coins is also a world trend, it is enough to recall, in particular, the initiative of the RZD company to transfer the change for the tickets bought in the terminals to the mobile phone account of the passenger.
However, in this case the most remarkable example is not the Chinese and even Korean history, but the experience of India. This state consistently fights the counterfeiters and the shadow economy sector (whose volumes in 2016, presumably, amounted to 20% of the GDP of the whole of India): with this motivation, banknotes with denominations of 1,000 and 10,000 rupees were withdrawn twice, in 1946 and 1978 (in the second time 5,000 rupees banknotes were also seized).
Gradually, the return to circulation of large denominations of banknotes eventually led to the fact that according to the economic situation in the country, by 2016 the turnover of banknotes of 500 and 1000 rupees denominations reached an incredible scale: banknotes of this denomination amounted to about a quarter of the total number of banknotes in circulation And up to 85% of the total value of cash in the country. According to the responsible authorities, these banknotes most often forged counterfeiters, and then these amounts were used to finance terrorism. In such circumstances, the Government of India decided to completely withdraw banknotes in denominations of 500 and 1,000 rupees from circulation.
The reform was prepared in the conditions of strictest secrecy and the announcement about changes became a complete surprise for the population of the country: on November 8 (on the day of the official launch of the reform), queues of those who wanted to exchange bills that were declared invalid from the next day, November 9, 2016, were lined up in all the country’s banks. It was assumed that invalid banknotes should be exchanged before December 30, 2016, and the money that is expressed in them, transferred to your bank account. Significant restrictions were imposed on the exchange of old and the issuance of new banknotes.
While it is difficult to assess the results of the monetary reform of 2016 in India for the recovery and «purification» of the country’s economy, however, several conclusions can already be drawn. It is necessary to think carefully every step in the way of giving up cash – the sharp moves in this area to lead to negative impact on the population, which is illustrated by the example of the monetary reform in India.
Africa is also developing economically, and is involved in the movement of refusal of cash turnover. Particularly the example of the Republic of Zimbabwe is interesting.
As you know, the regime of President Robert Mugabe in the early 2000s began uncontrolled issue of cash. As a result of this thoughtless step, the country has broken all the negative records: at the moment, the budget deficit is more than 50% of the country’s GDP (the vast majority of budget workers have nothing to pay wages), the debt to international creditors has exceeded the $9 billion mark, and the Government is making plans of exit from the liquidity crisis in order not to repeat the historical result with hyperinflation of 500,000,000,000% (when banknote 100 trillion zimbabwe dollars were issued).
The new administration is trying to find a way out of the crisis in the transition to a multi-currency basket (using, in particular, the US dollar, the euro and the South African rand), and, paradoxically, the development of non-cash payments – now the population of Zimbabwe is free to use non-cash settlements in everyday life and conducts in this way (without the use of cash) most of the operations. Foreign journalists are surprised to write that terminals for carrying out electronic payments can be found literally at every step – in the parking lot or even in the church, and in case of interruptions with electricity, the citizens of the country use mobile phones.
With regard to Russia, it must be said that the transition to non-cash settlements is also gradually playing an increasingly noticeable role. Unbeknownst to us, we are becoming part of the global trend: the use of mobile banks and applications allowing to pay for anything using only one mobile device is growing, terminals are transferring small transfers to mobile phone accounts, and ATMs and terminals for payment by cards have even appeared in couriers of the delivery service. Its role is played by the policy of the state to reduce the cost of servicing cash –coins with denominations of 1 and 5 kopecks have been withdrawn from circulation (since their production was much more expensive than their nominal value), but so far a coin of 10 kopecks has been preserved (although, according to economists’ calculations , the creation of one such coin is worth more than 20 kopecks), the place of a 10-ruble note was taken by a coin, and now, for convenience of calculations, banknotes with a nominal value of 200 and 2000 rubles are also introduced.
In spite of the fact that refusal of cash is an established world trend, it must be approached with the utmost care. Considering the European experience, people should look at banks and understand that banking operations in the absence of cash in circulation will be fundamentally different. The concepts of tax collection and control over monetary operations will change qualitatively. A person will actually lose freedom – the state and credit organizations will be able to learn about all of citizens’ savings at any time. The state of psychological calmness will disappear from the fact that a certain amount of money is «put aside» in the box of the house «just in case», and it will be easier and more dangerous to pay – without seeing real, paper and metal, money a person can easily part with them and, plans his or her own expenses worse.
The refusal of cash will not defeat corruption and will not destroy the shadow economy – as the introduction of a worldwide system for the exchange of financial information has not helped to solve the problem of offshore companies. Criminality has the property of adapting and using the latest advances in progress to its own advantage, criminals use any loophole (so in due time «tax havens» were created) – and simply depriving them of the opportunity to transfer cash is indispensable.
So, ordinary citizens will suffer from the transition to non-cash settlement first. And this is the most serious reason to think about the correctness of the way of giving up cash.