mgt411 Solution

Moving Toward a Cashless Society


"Money - in the traditional sense no longer exists. It died two decades ago when Richard Nixon forever abolished the gold standard. Since then, money as we once knew it has been replaced by an unstable new global medium of exchange that is called 'megabyte money'... megabyte money is a threat not only to our country's long-term growth and prosperity, but to the individual as well."
- Joel Kurtzman, The Death Of Money, 1993


During 1995 we saw some of the most profound changes that the world has ever known move out from the shadows of secrecy and intense preparation. The world of finance led the way in such changes. The most basic area of finance presently undergoing massive change is the very means by which transactions take place - the use of money itself.

We all have used paper to obtain goods and services that we need and desire but have we ever thought about why the use of paper in the form of bank notes entitles us to cars and entertainment and food and shelter? The only way that paper with writing on it can entitle us to goods and services is through our faith in the ability of the Reserve Bank, the government, or private individual to redeem or back that paper with something of value.

What if you were told that you would no longer be able to use that paper and would be forced to rely upon electronic technology for every single transaction you were to make? Would this make you more efficient in the manner in which you conducted your affairs? Would you be pleased to no longer carry paper or coins? How would this affect your freedom and privacy? The following investigation looks at these questions and reveals the alarming dangers to individual freedom posed by the drive toward a cashless society.



The Gradual Replacement of Cash

Kevin SigRift, a U.S. economist at Norwest Corp., says there are many products now available to the general public that are ushering in the use of electronic money in favor of its paper counterpart. "Certainly there are jumps in technology that have facilitated this. For instance, a product that we market at Norwest is a debit card. It is a Visa Card (credit) but it's a debit card, so the money comes out of your checking account," he explained.

The card Mr. SigRift described is a fairly common bank card that allows you to spend your own money from an account you hold and with that same card being able to charge an item while shopping. Mr. SigRift said these cards are being used more often.

"This year [1994] across the country, Visa's volume (the number of times that the Visa Card is used) is up massively. Check writing is up only two percent in comparison. There has been a structural shift from checks to debit cards and credit cards," he said.

Is the convenience of a card that prevents you from going through your pocket fumbling for paper bills and loose change and at the same time allows you to borrow money in an instant worth the interest payment? What if you were able to do all of your banking and purchase from your home? Would your participation in a cashless society then be feasible?

"Nothing would suit me better than to have some route that would allow me to transfer funds from my bank account to somebody else with the touch of a button from my PC (Personal Computer) so that I could do all my banking by sitting in front of my PC. I could do it on the spot instead of having to write out checks," said Al Smith, senior vice president and principal economist for NationsBank. Mr. Smith sees the move toward a totally electronic economy as a sign of the times, a choice of a new generation.

"I think there is an age difference. Most older people don't even know how to type, but the 20 and 30 year-olds think nothing of sitting in front of a PC and typing something and keeping a record. I think the age difference is slowing the transition (from cash to electronic currency) but we are moving pretty rapidly into an age where the chip is the king and check is passe," he said.

The chip that Smith mentioned is the vehicle being used to drive the world into an electronic economy. The June 27, 1994 edition of Fortune magazine spoke of its role: "The heart of this new economy is the tiny microprocessor, the transistor-packed silicon chip that combines with clever software and laser optics to make possible what we globally call the Information Age."

Not everyone is enthralled by some of the ramifications of the Information Age. Paul Richard of the San Diego based National Centre for Financial Education, sees little reason to switch to a cashless system and is concerned about it. Mr. Richard's ***** provides investment, financial and spending information to the public.

"The real danger is too heavy a hand watching over your life. It's nobody's business where you spend your money so long as you earn it legally. No government entity should know where you spend money for groceries," he said.

The government would be able to monitor purchases, spending habits and businesses patronized, Mr. Richard explained. People have concerns about the misuse of such extensive, personal information, he said, adding, "It's really frightening when you think about it."

Matt Ziebro, manager for Operation Strategy magazine, a monthly financial magazine, said that the move from cash to electronic money is a part of a well-organized attempt to unify the world and control it through its currency. He said the media and government are playing a role in the move to a cashless world and that the government has a history of creating so-called "bad guys" in order to enact certain legislation or influence the public to call for major changes.

Mr. Ziebro cites the "smart card" that will be used as a form of electronic money that has other uses that border on the invasion of privacy. "The 'smart cards' are ready to go. They are able to store information on a credit card with the use of a microchip. The 'smart card' would then hold your bank account, all of your identifying information, everything about you...," he said.


Smart Cards

While large purchases have been the domain of credit cards, small purchases are to be targeted by the so-called 'smart cards' or "stored-value cards".

"Store-value cards have a microchip embedded in them that allows the cards to 'load' money at a bank machine and dispense it through a retailer's equipment at the point of sale," writes Jim Silver in The Australian, 22/8/95. "The goal is to get people to use the new cards for purchases such as fast food, bridge or mass transit tolls and vending-machine items," he adds.

In the future, there will be no need to stop at a tollway. Your special vehicle-mounted transponder, which contains a microchip or a slot for a 'smart card', will be automatically read and an amount deducted when you pass under highway scanners. Other 'smart cards', already developed in Australia, enable you to make a purchase by simply tapping your card on a retailers card-reader. The enclosed microchip and antennae "talks" via radio signals to the card-reader and deducts the required amount.

Who's behind the production of 'smart cards'? According to a report in Bloomberg, "A coalition of United States financial services and technology companies plans to use leading banks to develop stored-value cards that can replace cash for small purchases. MasterCard, 11 banks and two technology companies... said they would form SmartCash, a company that would develop and distribute stored-value cards." A more apt description might be a coalition of various agents of the 'New World Order' seeking to monopolise the distribution of this latest mod-con of control!


Implants

Possibly the most frightening aspect of the movement toward a cashless society is the emergence of technology that would allow a microchip to be placed in the human hand that would identify every human being on the planet and allow them to buy and sell without coins, paper or a card.

One expert on this new "biochip" technology charged that the U.S. government will introduce a national I.D. card, supposedly to end illegal immigration, that will extend into commercial activity. This card will be the last step before the government will move to place a biochip in the right hand of every American, said Terry Cook, a retired Los Angeles deputy sheriff and a former fraud investigator.

Already throughout the world, a number of biochip programs have been instituted on animals. In Los Angeles, the name of the program is INFOPET. In this program an I.D. chip is injected into animals in order to identify them. The chip is made by a Destron company based in Boulder, Colorado. Destron was taken over by Hughes Aircraft Corp. of southern California. Hughes is a major defense contractor of the U.S. government. Destron also has licensed computer giant Texas Instruments. These are the two largest manufacturers of this type of technology in the world.

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Cashless Society

I. MOVING TOWARD CONVENIENCE
The Canadian Bankers Association (CBA) estimated that in the last fiscal year, ending June 30, 2000, over 85 per cent of consumer banking transactions were done electronically. CBA statistics show that since 1994 internet banking use has gone up 10 per cent annually and is rising.

E-commerce options are continuing to grow for the consumer and smart card technologies offer the user and the financial institution many applications and the required security.

Studies conducted by the Interac Association have shown that Canadians are avid users of Interac Direct Payment (IDP). In 1999, there were 54.3 IDP transactions per Canadian, compared to 44.2 in the Netherlands, 41.3 in France and 27.5 in the United States.

The convenience of IDP is a strong draw for Canadians, who used it over 1.96 billion times from over 310,000 merchant locations in 2000, according to a consumer survey conducted by the Interac Association.

IDP statistics suggest that a cashless society is not as farfetched as it sounds. A recent study shows that 42 per cent of Canadians use IDP as a method of payment, compared to 35 per cent of Canadians who use cash for payment transactions.

II. SMART CARD APPLICATIONS FOR E-COMMERCE
Electronic purses, wallets, e-cash and pre-paid debit cards are examples of stored value cards. The user transfers cash from a bank account and the amount is stored on the card for future purchases.

Pilot programs have shown that the most promising application results were from stored cash value in closed environments like school campuses, malls and airports. Application results were also promising when smart cards were used for parking meters, vending machines and coin-operated laundries. This will expand to general usage when a national smart card infrastructure is put into place, allowing Canadians access to the convenience of smart card applications on a national basis.

Financial: stored value, e-money, home PC banking, telephone banking, e-commerce signature and verification methods.

Telecom: pre-paid phone cards, SIM cards in cellular phones and storage for personal phone directories.

Education: campus identification, stored value, vending machines, physical and data access, library and meal plans.

Transportation: stored value for public transit, tolls, parking payments, fare allocation and rolling stock allocation.

Travel: payment applications, ticketless airline travel and frequent flyer loyalty programs.

Retail: gift certificates, bill payments and loyalty programs.

Gaming and Entertainment: lottery tickets, television top boxes, PAY TV de-scrambling and payment applications.