It Is All About The Money

This Week’s Economist leader discussed the most essential thing in the world, money.There is going to be an interesting change to Britain’s £20 note. Adam Smith, the first economist, will replace Sir Edward Elgar as the face on the note. The Economist attributed this change to the “end of the cash era”.

Is cash fading that fast? I doubt it.

Firstly, the replacing movement depends on the development of technology. It takes time to build up an electronic net. It demands POST and ATM machines for using debit cards, especially in rural areas. It requires software and programs to run electronic system. It also asks for guards to keep transactions’ safety. These equipments are foundations of this movement. All these are not likely to be completely prepared in a short period.

Secondly, it takes time to convince people, especially elderly people to trust the electronic system and adopt the change. My father, for instance, suspects the stability of the electronic system. He believes there is a high risk that the system will collapse for some reasons someday. He prefers to pay in cash rather than credit card. It is a common concern of elderly people. They stick on what they used to, have less confidence in high technology.

Lastly, the replacing trend is based on the maximum capital principle. As money has intrinsic value in itself, the cost of digital money is much less than cash. But it also cost much to build up the electronic net, which is considered as sink cost. Who is willing to pay, if there is no guarantee whether it will pay off?

Nobody can predict “how fast bits and bytes will drive out metal and paper”, I am afraid.