When people go shopping in Sweden, they spend the Swedish Krona. Except they usually don’t spend quite like they used to. Sweden is said to rank somewhere near the top of the pile in electronic payments and the Swedish central ‘Riksbank’ suggests that cash transactions make up less than half of all payments made on a daily basis.
According to figures cited by MasterCard and the World Bank in a report entitled ‘Measuring progress towards a cashless society’ we know that Singapore, the Netherlands, France and Canada also rank high on the list of nations embracing non-cash transactions.
But could the same model play out here in the Middle East? Although we enjoy high mobile penetration across the entire region, sometimes incongruent and often geographically dispersed access to banking facilities has meant that age old means of trading still rely on cash. It’s often still better to cross a palm with silver… or at least copper, nickel or bank-approved paper.
Challenge for Arab e-payments
It’s a fact of life; some people in the Middle East are still unbanked or underbanked. In rural areas, developing regions and poorer economic zones, not everybody has a bank account or the means or opportunity to open one. This reality of course makes cashless transactions impractical. Farmers down in Upper Egypt, herdsmen from the edge of Saudi Arabia’s Rub Al Khali and fishermen from Morocco to Mauritania will rarely be seen brandishing an ATM card.
Initiatives do exist to give the unbanked a degree of banking power. Prepaid credit cards, grocery story vouchers and so-called Alternative Monetary Unit systems have provided a line of credit for the unbanked community in various world nations. But even in developed parts of the Middle East, markets and souqs still often predominantly rely on cash payments. The end goal in any typical Arab bartering exchange is meant to be money, not the swipe of any credit card.
So the completely cashless society creates some questions and concerns. How do we give money directly to the homeless or needy, who sometime need it in the palm of their hand? We have to stop and ask whether all monetary gifts need to be made under the purview of and within the systems provided by banks, retailers and governments?
Then after those misgivings, there’s always going to be the question of privacy. If every commercial transaction we make is recorded on a digital log or electronic balance sheet somewhere, then does that restrict our personal freedom in any way?
Privacy & practicality questions
"It is inevitable, in the Middle East as in the rest of the world, that consumers will gravitate towards cashless payment systems where they find them more convenient and are happy that they are secure. There is nothing wrong with that. But for a society go the full way and remove the option of paying with cash would create total reliance on electronic systems, which can and do fail. It would discriminate against small traders, for example in open air markets, who will inevitably face disproportionate costs when processing transactions,” argues journalist Ross Clark, author of the War Against Cash.
“To anyone who suggests that a mobile phone could one day take the place of a wallet I ask this: when was the last time you found yourself somewhere without phone reception, or found that your phone batteries had run out of charge? In a cashless future you would be unable to conduct any kind of financial transaction,” said Clark.
Clark’s words are arguably timely. As we enter the deeper channels of the digital age, we should perhaps stop and consider what the implications are for the cashless society. If we use a machine to initiate every single payment we make, then don’t the commercial corporations, banks and even governments supplying and overseeing the goods and services we consume know more about when, where, what (and potentially why) we choose to buy the things we buy?
Time for change
As this inevitable shift takes place then, it’s clear that there are responsibilities and apprehensions. As countries invest deeply at the infrastructrual level to make electronic payments ubiquitous, have they also considered the little guy? As a family of nations, the Middle East has been known as a place of trading, barter and hand-to-hand commerce for many generations.
Yes we can see that digital business will transform the way we all live. But our region is a place where established big business often sits side by side with traditional peoples of all kinds.
The Middle East will ultimately become a cashless society across all territories of the Arab League, but the sensitivies that make this region a land of great traders may anchor a few transactions to the past for a while yet. You want a special price on that prediction habibi? No problem, come into my shop.