FX International Payments
By Gianvito Grieco
Cash remains widely used in the United States, especially for low-value payments. However, noncash payment methods are gaining ground. The total value of noncash payments rose to US$174.4 trillion and grew at a rate of 4.2 percent per year. As checks continue their decade long decline in use, the number of credit card transactions grew 7.6 percent per year to 26.2 billion in 2013 alone.1 The trend towards an increasingly credit card-based world shows no signs of slowing down.This could be influenced by many things—innovations in technology facilitating electronic payments, the proliferation of mobile devices that allow for easy electronic transfers, or maybe simply shifts in consumer behavior driven by a changing population.
A cashless society has its advantages. For example, such a society may have less crime. It’s a known phenomenon that where there is physically less cash in circulation, less crime occurs.With less cash in circulation, fewer crimes targeting cash can be committed. Cass R. Sunstein, Harvard Law Professor and the former administrator of the White House Office of Information and Regulatory Affairs, argues that the government should take stronger steps to reduce the use of cash in order to reduce street crime.2
In other countries, cash is under outright attack. In France, cash transactions over €1,000 are prohibited.3 Other European countries, such as Germany, are also considering cash restrictions. The cash restrictions have been met with resistance in Germany because of privacy concerns. Politicians that condemn the cash control efforts in Europe argue that the measures are attacks on privacy and security. Konstantin von Notz, a German Member of Parliament, tweeted that “Cash allows us to remain anonymous during day-to-day transactions. In a constitutional democracy, that is a freedom that has to be defended.”4
Consumers have legitimate concerns about the privacy of their private financial information. Unlike cash, which cannot be traced, noncash payment methods, such as digital currency, always leave a trail. There has even been a push for increased privacy in the world of cryptocurrencies. Companies now offer virtual currency “mixing” services in order to add an additional layer of anonymity to the publicly visible blockchain. For a fee, mixers receive virtual currency from their customers, commingle it with virtual currency from others, and then disburse it back to the original owner.5
Regardless of the reason behind the trend, innovation will likely make it even easier and safer to use noncash payment methods on a daily basis.
Gianvito Grieco has served in a variety of roles in investment banking, financial services, and law. Gianvito holds a Bachelor of Science in Finance from the University of Florida, and a Juris Doctor from Stetson University College of Law. He is also fluent in English, Italian, and Spanish.
1. 2013 Federal Reserve Payments Study, Federal Reserve System, https://www.frbservices.org/files/communications/pdf/research/2013_payments_study_summary.pdf.
2. Fighting Crime by Going Cashless, Bloomberg, https://www.bloomberg.com/view/articles/2014-04-29/fighting-crime-by-going-cashless.
3. France Steps Up Monitoring of Cash Payments to Fight Low-cost Terrorism, Reuters (Mar. 18, 2015), http://www.reuters.com/article/us-france-security-financing-idUSKBN0ME14720150318.
4. German Plan to Impose Limit on Cash Transactions Met with Fierce Resistance, The Guardian, http://www.theguardian.com/world/2016/feb/08/german-plan-prohibit-large-5000-cash-transactions-fierce-resistance.
5. Virtual Currencies: Key Definitions and Potential AML/CFT Risks, FATF, http://www.fatf-gafi.org/media/fatf/documents/reports/Virtual-currency-key-definitions-and-potential-aml-cft-risks.pdf.