Cash is being sidelined in South Korea. Whether it be taking the bus, grabbing coffee, or getting paid for a job, almost everything can be done without ever needing to handle a paper bill. Cashless transactions offer the benefit of convenience and security for the everyday person. However, the movement toward rejecting material cash has raised concerns over its side effects, particularly in terms of accessibility and reliability.

The term “cashless” refers to monetary transactions that do not require the use of physical currency issued by the central government. Credit and debit cards are prime examples of cashless transaction methods. With advancements in mobile technology, digital or mobile wallets have become ubiquitous with services being domestically provided by Samsung, Kakao, and Naver. It is easy to spot someone paying for a meal without using a physical medium, either by holding their phone up to a credit card reader or directly transferring money on the spot through their bank application. 

The Elusive Green Sejong 

It is not too surprising that physical currency is falling out of favor when considering the advantages that cashless payment methods hold. Not only do digital transactions transcend physical limitations when it comes to accessing, exchanging, and storing funds, the paper (or electronic) trail that they leave behind also makes it more secure against theft or fraud.

Such convenience and security have helped cashless transaction become the most popular form of payment method in South Korea. According to a 2021 survey conducted by the Bank of Korea (BOK), roughly 77 percent of household transactions were made by credit cards, debit cards or wire transfers—an 18 percent increase from 2015. In contrast, cash transactions dropped to only 20 percent of total spending. It is no wonder, therefore, that some businesses find it beneficial to phase out cash from their accounting.

Cashless stores are led mostly by large retail corporations. Starbucks was the first to implement “cash-free registers” in 2018, selecting 103 stores where cash made up less than five percent of total revenue. Since then, other brands have followed suit. The trend has reached the gates of Korea University (KU) as well, as at least 13 different stores operating around the campus no longer accept cash.

In the public sector, regional governments have started implementing cash-free public transportation systems. The city of Daejeon removed cash fare boxes from all their buses in July 2022, accepting only transit passes and mobile wire transfers. The city government asserted that maintaining a service that costs 150 million Korean Won (KRW) to operate yearly for just 1.5 percent of bus users was uneconomical.

Is Cash No Longer Welcome?

Due to their status as a legal tender for all trade, the ubiquitous acceptance of cash was never seriously contested for a long time. The new rise of cashfree stores, however, throws a wrench into this rhetoric. If paper money loses its position as the universal money it once was, it brings into question the purpose of cash to begin with.

Professor Hyun Junghwan (Department of International Trade, Dongguk University), a notable researcher in the field of cashless economies, shared several reasons why keeping physical currency alive is important. First, cash is the most reliable form of money in emergencies, as it is independent from any digital network. This will especially ring true for those who attempted to use Kakao Pay between October 15 to 20, 2022, when the Kakao service network ceased functioning due to a fire at one of the company’s data centers.

Second, paper money is extremely accessible. Credit and debit cards are unavailable to “unbanked” individuals that lack easy access to bank services. Furthermore, mobile wallets require frequent use of digital devices, making it out of reach for some of the digitally vulnerable class including disabled people, the elderly, low-income earners, and rural residents. None of these restrictions apply when trading with cash.

The Right to Bear Bills

The important roles that cash plays in an economy have prompted some to suggest making cash access a basic right. The discussion is particularly heated in the United States (U.S.) and some parts of Europe that have started experiencing the problems caused by going cashless. Denmark, Norway, and several U.S. states have already codified regulations about when sellers are obliged to take cash.

When asked if Korea should also make cash access a legal right, Professor Hyun replied that such an approach may be inappropriate for domestic policies. He argued that Korea was comparatively well prepared against a cashless society. “For one, over 95 percent of adults own a bank account, a noticeably higher percentage than the U.S. or the United Kingdom (UK). Also, Korea has a strong cash infrastructure, a crucial element in making cash readily available for those who rely on it.” Research by the BOK showed that 93 percent of Korean residents had a working Automated Teller Machine (ATM) within a kilometer’s reach–20 percent higher than the UK and the Netherlands.

Professor Hyun suggests that what Korea should be focusing on instead is understanding and maintaining the existing level of cash availability. “With digitalization sweeping through our society, it is crucial to protect accessibility before it is gone. For money, that means keeping the cash network we already have alive and healthy.” He emphasized the importance of the central bank’s role in spearheading this movement, urging them to lead research and raise awareness to have the public be more involved.

The debate over cashless societies may seem like a trivial matter for most people. However, as a dependable and equitable means of trade, physical currency serves to keep the economy open to everyone, everywhere. Thus, the issue of cash availability should be actively discussed before it surfaces as an irreparable problem. Even though the green and blue bills are being phased out of people’s wallets, efforts should be made to highlight the importance of protecting the most basic building block of the economy.