Cashless Korea?

by on March 14, 2016 at 12:35 am in Economics, Law | Permalink

The Bank of Korea is planning a “cashless society” by 2020. If a shopper buys a 9,500 won item and pays with a 10,000 won banknote, for instance, the shopper will be credited 500 won to his or her prepaid card instead of getting a 500 won coin in change.

The trends are indeed lining up:

According to a central bank survey, Koreans carry on average 1.91 credit cards, 2.03 mobile cards and 1.26 check or debit cards. Four out of 10 picked credit cards as the means of payment they use most, up from three out of 10 the previous year. The ratio of those picking cash, meanwhile, continues to fall.

As Koreans are carrying less cash, with the average standing at 74,000 won last year, down 3,000 won from the previous year, the central bank is also issuing less cash. It released 12.3 percent fewer 10,000 won banknotes last year from the previous year, while the issuance of 5,000 won notes dipped 5.9 percent and 1,000 won bills 3.7 percent.

The country is also sufficiently non-diverse that such a transition could be made without leaving many people without means of payment, in contrast to say the Louisiana Bayou.

Here is the piece, via the always interesting Miles Kimball.  Here is a recent piece on cashless Sweden.

1 prior_test2 March 14, 2016 at 12:58 am

‘The country is also sufficiently non-diverse that such a transition could be made without leaving many people without means of payment’

Strangely for a putative libertarian, not a single word about the main disadvantage of such a cashless world – that is, the shutting down of an individual’s cards. Cash represents freedom in a way that governments have pretty much always despised.

2 Nathan W March 14, 2016 at 1:33 am

I imagine the Trumps of the world would love it if they could shut down the cards of individuals who posted anything online which was critical of them, perhaps having to remove such criticism and paying “damages” to the target of criticism before having their payment right reinstated.

In America one might think such things would lead to revolution. But people with such inclinations are not dumb. We would start with terrorists, expand the definition of terrorism slowly slowly, and eventually any anti-establishment statements whatsoever could result in loss of payment “privileges”. Things like holding assets in precious metals or other barter systems could slowly be repainted as evidence of desire for tax evasion and revolutionary intent, devolving into a Minority Report + Enemy of the State sort of situation.

As a skilled teacher in several subjects, I might be able to easily trade for all my non-IT needs by tutoring the children of food producers, skilled tradesmen and landlords, or offering lessons to adults in a handful of subjects perhaps including some agronomy or basic accounting. The rest of you? Good luck. It could be worse than living under the Soviets.

Much vigilance is needed in the transition away from cash. There will always be those who would LOVE to implement such systems, slowly slowly. There is a slippery slope. We are already sliding, and concerned voices are too easily marginalized as half crazed conspiracy theorists.

Viva la cash libre! (My computer slowed to a standstill as I typed this note. I think I have a vulnerability of some sort in my system. Paranoia … gotta reinstall everything …)

3 Aaron J March 14, 2016 at 3:04 am

Tyler used to ban you when you were not really a troll (just very wrong), but now you have become one.

4 Attila Smith March 14, 2016 at 5:32 am

Trump is not President so we can’t know, but all you said certainly applies to Hollande and the socialists who rule Europe. There is much pressure to suppress 500 Euro bills and this is just a first step toward a cashless Western Europe.

5 Moreno Klaus March 14, 2016 at 5:44 am

uuuuh….the evil socialists lool

6 Nathan W March 14, 2016 at 8:13 am

I definitely would not be inclined to view this in a left/right manner. History suggests that all ideologies, when left to run rampant and unopposed in an environment where alternative viewpoints are not strongly protected, are capable of pursuing extreme repression of others. (The ideology of tolerance could even bring its own risks, for its intolerance to intolerance, but I think the risks are far more benign than others.)

One might think that the first amendment in the USA would be sufficient. But in an era where civil forfeiture in a “guilty until proven innocent” atmosphere proceeds nearly unchecked (various police agencies), where security agencies enjoy virtually unchecked access to the backbone of IT infrastructure (NSA and whatever hidden variant exists), and where people not only tolerate but expect increasing mandatory invasions of privacy which they are required to pay for out of pocket (e.g., TSA) to reduce risks which are essentially inconsequential compared to lots of other things that we simply don’t care about (e.g., falling in bathtubs), well, I just don’t find the first amendment to be as strong as perhaps it used to be.

Like, in the FBI’s recently published recommendations for triggering additional scrutiny of high school students (, they mention anti-establishment sentiment as something worthy of additional scrutiny (however, they do highlight that things should be considered holistically, and do not seem to promote algorithmic thinking for surveiling high school students, whereas I presume they apply algorithmic thinking to others…).

On the 500 euro notes: I would be more supportive of the measure of proponents of eliminating the 500 euro note were these proponents to make much noise about the vital importance of anonymous transactions for privacy and avoiding undesirable future outcomes, in advocating for what would be a first and only move in this direction. But they make no such noise, and so I do not trust them.

7 Jeffrey Deutsch March 14, 2016 at 9:22 pm


By the way, John Stuart Mill pointed out over a century and a half ago that if the central government controls, ultimately, everyone’s money, it doesn’t matter how much free speech, free press and popular election of [Congressmembers] we have — this country would be FINO. Free In Name Only.

One of our own Founding Fathers put it more succinctly: Power over a man’s subsistence is power over his will.

Under those circumstances, the First Amendment is just another parchment barrier.

8 wiki March 14, 2016 at 6:59 am

How odd to say this, when it is the liberals and progressives who have been busy banning people they disagree with. RE: Chicago and Twitter.

9 Nathan W March 14, 2016 at 8:18 am

People get banned from right wing outlets too.

If you don’t like the policy of Twitter, a private company which is not required to play mailman for perspectives they do not want, then you might like to open up an alternative called RacistNote to compete with them.

I don’t imagine a lot of sponsorships or investment interest would be attracted to RacistNote, but hey, it’s a free market, why not stump up your cash and take an investment risk?

10 Alain March 14, 2016 at 11:50 am

There we go again: it isn’t about any deep principle with you. It is all about your team.

Also, wrt. your post above about how the lack of cash will cause people to hoard metals, barter, and that people with teaching skills will end up on the top of this new world order shows indications of PPD and delusions of grandeur.

Good luck to you, you sad sad failure.

11 Nathan W March 14, 2016 at 1:12 pm

Entirely predictable Alain. You should be bowing down with profuse thanks to those willing to put up with being attacked as having some variety of mental illness, such as those originating from yourself, in our advocacy against a dystopian future.

And five years ago, when people were claiming that security agencies were probably spying on everyone based on the mere observation that they held the technological ability to do so (hello! I’m one of those guys! But I’m no genius in this regard, I just get updates from EFF about what’s proven and what’s plausible given existing technologies and legal frameworks), I bet you called them crazy crazy PPD people too. But then Snowden happened and now there is incontrovertible proof that it’s true, proof of hundreds of thousands of documents that cannot be written off as some odd exception to the rule. Following up on this “paranoia”, after taking a few initial steps to prepare for a full reinstall, I’ve been under a relentless hacker attack since posting the message, attempting to exploit a whole number of vulnerabilities through softwares with access to the internet, none of which yet successful (I think/hope), and attempts to install things on my computer which originate from an IP address located near a high-tech industrial base in NE China (I’ve already blogged some more details about this attack).

And … I wasn’t advocating for two wrongs make a right about banning people. I was countering the apparent claim that this is some special characteristic of the left. Both left and right are doing censorship these days, with the exception that the right does so surreptitiously and with no clear policy for why, whereas the left puts in plain words why and how, and sends press releases to explain why they think it’s the right thing to do. Big difference.

I don’t have a team. I don’t like teams. Unless there’s, say, five or ten of us and we are all working on our maximum specializations and engaging in open, mutual and extensive critique of how to do the most badass amazing job we can do.

Hahhaa, and holy smokes, your team seems obsessed with promoting the belief in teacher incompetence, and someone suggests they can teach children a few different subjects and basic skills to adults in a couple others, and you see … “delusions of grandeur”. Are you so far removed from any ability that you cannot imagine being able to teach people some important basics in a few different subjects? If so, man oh man, you’ve gotta open some books, go try some different experiences, go learn something.

You are either naive as f**k or supportive of supremely dodgy crap. Doesn’t it seem suspicious to you that several common mental illness checkboxes are essentially identical to what one would say if they were legitimately being targeted by state or non-state actors and 100% knew it? (Yes, I know these are sem-legitimate as well for some people who have some abnormal brain functioning.) Go take a look at the checkboxes. Imagine yourself for five minutes in the situation that you extensively and actively advocate against things which bad and powerful people don’t want to change. Imagine what they might do to discourage you. Now tick those boxes and call yourself crazy. You can call me crazy a million times, and so long as you do so, you will remain nothing but a fool.

(post script – my internet got cut before I could post this message. But you cannot maintain plausible deniability if it never comes back on, because I’ll just call the tech guy and it is impossible that the connection doesn’t work after all the appropriate troubleshooting and/or repairs. Eventually this message will go through.)

Oh, but let’s welcome the police state in order to oppose things which are less dangerous to public safety than slippery bathtubs.

Fools. Hope you enjoy your “security”. I want freedom, and it pains me that naive assholes like yourself will benefit so much from what sooo many other people fight for.

12 Nathan W March 14, 2016 at 1:28 pm

“that people with teaching skills will end up on the top of this new world order … delusions of grandeur”

Ummmm… managing to feed and house yourself as an enemy of the state is hardly king of the castle. Like prostitution, farming and soldiering, teaching is a timeless profession. It will always be in demand by any person who wants to provide their children with an advantage. Anyways, I doubt it will come to that. We cannot possibly be that dumb. I hope.

13 too hot for MR March 14, 2016 at 10:05 pm

Yes, when the time comes for gold, guns, and grain, the first person we’re all going to call is Nathan the Skilled Teacher. In any fort I’d hope to end up in, you’d be punted off the nearest parapet.

14 Nathan W March 14, 2016 at 10:47 pm

too hot for MR suggests I should be an early target for extrajudicial killing in such a system.

Does this not seem like a mode of thinking that suggests caution in moving forward?

15 TMC March 14, 2016 at 9:09 am

I agree with what you are saying, but Trump? Projecting much?

16 Nathan W March 14, 2016 at 11:54 pm

Based on his stated desire to change laws to make it easier to sue journalists who publish criticism of him. He doesn’t even have the nomination, and he’s already THAT bold. What other tools would he use against those who criticize him, were those tools available?

17 ABV March 14, 2016 at 1:44 am

Prepaid cards would not suffer this deficiency. You could buy them with your bank account and have them hidden under your mattress for a rainy day.

18 Jb March 14, 2016 at 6:35 am

Because in this world, they wouldn’t track who bought which prepaid cards and be able to shut them down too?

19 Ray Lopez March 14, 2016 at 1:30 am

I have a thread at Kitco’s gold forum on this topic as well, I will link this post as well.

Given that I think money is largely neutral, I don’t think this cashless society move is a ‘big deal’, and will only hurt drug dealers and help gold, though I agree it’s an invasion of privacy. But nowadays the Facebook crowd, which posts intimate details on their lives, don’t care much about privacy.

20 Nathan W March 14, 2016 at 1:43 am

The impact on less valuable metals could be important too. It’s hard to pay for lunch with gold, but silver, for example, can be more easily partitioned into amounts relevant for day to day purchases. Of course, if we can get whipped up into a paranoia about a war on plants (drugs), I’m sure they can convince a lot of people of the need to get in on a war on metal (prison time for precious metals users, etc.). Start with some stories about how criminals and terrorists are using previous metals as a means of exchange, establish the link that anyone who uses precious metals is probably a criminal or terrorist, and voila! Public support for outlawing previous metals. I hope we’re not that dumb …

21 Bryan Willman March 14, 2016 at 1:56 am

So how does a scheme based on credit-card/debit-card work in a society (like the US) were there are meaningful numbers of people who are “unbanked”???

Will we have a new US For All Bank were every citizen has an account, and a debit card?

What will Korea do with their unbanked? Is their society of many millions so seemless that there is nobody left out? Or do they just not care if those people starve?

22 Gafiated March 14, 2016 at 6:03 am

Subsidize those who get a bank account and tax those who refuse. Easy peasy.

23 BHO March 14, 2016 at 9:00 am

If you like your bank, you can keep your bank. Period.

24 John March 14, 2016 at 12:32 pm

The unbanked that get paid have no really different positoin whether they get a check and got to the bank that has that paryrole account or if they get a payrole reloadable prepaid card in terms of getting to the ability of spending money in most day-to-day purchases. There will be an issue with payments to others who cannot accept such fomrs of payment (but we’re already seeing work arounds on the — Paypall would support such a P2P transfer). Smartphones and digial wallets are also rapidly changing that landscape as well.

While I do get that the banks and transaction processors have a large vested interest in caputure the trasnaction fees for what were previously cash exchanges it’s not clear that is where the payments infrastructure will end up unless one buys into the view that there really is not semablence of a free market for personal exchange.

25 Ricardo March 14, 2016 at 4:04 pm

Bank accounts in a literal sense are not necessary for cash-free transactions. Smart cards that can have cash value loaded onto them already exist as in the Octopus Card in Hong Kong and mobile money has also been in use in some countries where anyone with a SIM card can have an e-wallet maintained by the mobile provider that is tied to one’s phone number. The Thai government is proposing that smart card technology be integrated into the national ID cards that all citizens are required to hold. It’s not a stretch for other governments to do the same or to mandate that anyone who earns a salary or draws government benefits (e.g. almost all citizens and legal resident aliens) get a smart card if they don’t have a bank account. Once ATMs are modified to load money onto smart cards instead of dispense cash, it is easy to imagine some places being mostly cash free within five to ten years. For better or worse, of course.

26 louis March 14, 2016 at 5:08 pm

You had me until ATMs.
Why would someone go to an ATM in a cashless society?

27 Bryan Willman March 14, 2016 at 1:59 am

As a further note – why does anybody actually believe the elimination of cash will be of any lasting value in fighting drug dealers, terrorists, etc?

There was a story in some respectable place about a very poor county in the SE somewhere, where the main currency for illegal trade is … case of pepsi. As in, people buy pepsi with their welfare/disability check/cash/debit-card, and then trade it for drugs, services of prostitutes, etc. Apparently it doesn’t actually get drunk, it’s just traded around.

28 Ted Craig March 14, 2016 at 6:49 am
29 Nathan W March 14, 2016 at 8:31 am

Point well taken, but it’s a lot easier to stash 100,000 euros in 500 euro notes in your underwear than to transport 100,000 euros worth of pepsi or tide. I don’t doubt they will find a way. I wonder if they had any problems with counterfeit pepsi …

30 Jeffrey Deutsch March 14, 2016 at 9:32 pm

Folks could invest in large refrigerators and put them into service as Pepsi storage lockers. For a small fee of course.

If you’re storing enough people’s respective Pepsi stashes you’ll want to give each of them receipts. Receipts that they can put into desk drawers, or carry around…and sign…and give other people.

Paper money is dead. Long live paper money.

31 Nathan W March 15, 2016 at 8:31 am

Lol. Brilliant closing.

32 Aaron J March 14, 2016 at 3:08 am

I think people are less thrifty with cards and digital payments. Could lower savings rates.

33 Clc March 14, 2016 at 4:57 am

Cashless Korea? Have they lived here? So much of life takes place cash only…

34 ivvenalis March 14, 2016 at 1:04 pm

Yeah, and the government wants a cut.

35 chuck martel March 14, 2016 at 5:52 am

The increasing millions that won’t be able to pass background checks will develop their own medium of exchange for use in their parallel economy and it will be outside of the tax system, which operates on the enpixelated dollar. Felons, for instance, will be paid in unofficial currency for their gray market work and spend it on rent, food, clothing and booze in markets built to service their needs. They might actually even use paper US currency, which will remain in circulation since it will never go to a bank.

36 Nathan W March 14, 2016 at 8:41 am

It would be sort of funny if the parallel economy developed a more reliable means of exchange than the formal economy (e.g., no negative interest rates, no all-pervasive transaction records, etc.). The number of forks of where it could go from there are very interesting to consider, as I’m sure plenty of Bitcoin enthusiasts have thought through extensively.

37 Mike in Shenzhen March 14, 2016 at 9:45 am

I find it curious that recently Larry Summers floated the idea of getting rid of the $100 bill within weeks of Europe debating to do away with it’s 500 Euro note. Japan also recently mentioned possibly going to a cashless society. Is money laundering and drug dealing so much worse than 10 or 15 years ago, that now we hear this chorus aimed at eliminating cash?

If I was the tinfoil hat wearing type, I might say that it sounds as if the global financial elite have gotten together in some kind of meeting and collectively decided that they wanted to move away from cash. Its a good thing that those kinds of global financial elite (Davos) meetings only happen in spy fiction and conspiracy nut blogs. i would also say that is an incredible coincidence that this is occurring just as we are beginning to hear more about the possibility of negative interest rates.

Nah, I’m sure things are going to end well.

38 Nathan W March 14, 2016 at 10:05 am

Under widely broadened Know Your Customer (KYC) regulations, requirements to flag multiple small transactions in order to capture laundering which attempts to bypass flags for transaction thresholds (10k USD), and hugely expanded scrutiny for politically exposed persons (PEPs), I cannot imagine that laundering is worse than it used to be.

I don’t imagine there is a vastly collaborative conspiracy, but in observing consumer trends away from cash, I imagine that various groups are eyeing the trend towards a cashless society, some with more altruistic motives than others. I think the ones with altruistic motives are being naive as f**k because they do not take sufficient consideration of the fact that they will not always be the string pullers.

I’ll take a good dose of terrorism and violent criminality over the all-pervasive spy state (or even a very small risk of it in any relevant timeframe) any day. I mean, if a terrorist kills me, I’m just dead. If a criminal breaks my face while he mugs me or robs my house, I’ll heal, and maybe even get vengeance through the legal system. That’s nothing, really, compared to what a cashless society could become.

39 Yancey Ward March 14, 2016 at 11:49 am

There is literally no fucking mystery here- it isn’t about criminal activity- it is all related to the recent forays the last two years into negative nominal interest rate policy. Physical cash puts a real floor under the ability to go very far below zero. Some of the writers advocating this elimination of cash openly tell you that, though others do lie about the motivation.

40 ivvenalis March 14, 2016 at 1:12 pm

Criminal finance is harder than ever, but it’s not impossible. Abolishing cash might be a drastic step, but diminishing marginal returns haven’t stopped silly policies before. Look at how afraid governments still are of airline hijacking.

41 Axa March 14, 2016 at 10:26 am

Resources are spent to make coins and bills (, resources are spent count and handle cash in stores (, more resources are spent to transport and distribute cash (armored trucks, ATMs) and cash is lost through employee theft (

Yes, cash is free.

42 Nathan W March 14, 2016 at 11:29 am

Plastic is not free. Credit card charges for retailers are in the 3% range, for smaller online outlets upwards of 6%, and there are also high merchant costs for bank transactions. While technically illegal in Canada because all means of payment are supposed to be treated equally by merchants, some retailers charge a premium to use plastic, which is the same as saying that cash is cheaper for them.

Cashless is only easier/cheaper if you’re running a multi-billion dollar multi-national operation and plan to do intensive data analysis to make sure you can profit as much as possible from each individual client.

43 Rob March 14, 2016 at 12:39 pm

This can only have evil intent. No one wants the government snooping on every dollar they spend and all sorts of trivial transactions become a lot more trouble: How do you tip the bellhop? Give money to a street musician? Buy ANY small product or service that you want to keep private, off the books from your wife / husband / significant other? Buy small charity-related goods from sidewalk vendors (e.g., Girl Scout Cookies)? Pay your illegal alien gardner? How is grandma supposed to slip a ten dollar bill into a birthday card?

Cashlessness will be much harder on poorer people, who tend to work off the books or for ad-hoc tips (where there is no “bill” to add a tip to). It’s just another way for our “betters” to keep tabs on us, punish us as they see fit and profit from us as they please.

There may come a point, you know, where people quit putting up with more and more of this nonsense…

44 ivvenalis March 14, 2016 at 1:10 pm

I guess they can either use some sort of portable card reader — these already exist — or they can pound sand. Maybe the revenue generated by increased tax revenues from transactions previously hidden from the government would provide for more welfare funds, but I’m not convinced that taxing what is now the black market would be a fiscal game changer for any developed country.

I agree with the poster above that this is probably ultimately about negative interest rates. I just wonder what will be done about precious metals or other means of exchange outside government control.

45 Yancey Ward March 14, 2016 at 2:03 pm

Should those barbarous relics regain a footing in everyday transactions, they are sure to be outlawed. They are already subject to capital gains taxes for the law abiding.

46 prairie economist March 14, 2016 at 1:59 pm

So how does cashless stack up in a disaster?

Here in the U.S. South, we have hurricanes. Other places have earthquakes. In the days right after a disaster—when software connectivity could be kaput—how does a cashless society work? I have visions of looting on an end-of-the-world magnitude.

Cybersecurity is a whole other (valid) matter, which others have raised…one which could create said disaster…

47 chuck martel March 14, 2016 at 10:12 pm
48 Cooper March 14, 2016 at 2:50 pm

Given how common identity theft has become, going cashless is a bad idea.

Imagine that all of your accounts get frozen because someone has attempted to take out a loan in your name. It can take weeks for that mess to get sorted out.

In the mean time, you’re unable to buy groceries.

Although fortunately there will never be a truly cashless society. There will always be some alternative currency floating around in the background. Gold might be too heavy but prepaid debit cards or thumb drives of Bitcoin can be a working backup currency for those in the know.

The people who lose out will be the low level people working under the table, attempting to scrap out a living.

49 JK Brown March 14, 2016 at 3:38 pm

“And the only other difference is that the negro slave was under the orders of one man, while the subject of socialism will be under the orders of a committee of ward heelers. You will say, the slave could not choose his master, but we shall elect the ward politician. So we do now. Will that help much? Suppose the man with a grievance didn’t vote for him?”

It is common practice now for the government to freeze then seize the accounts of those who have drawn the government’s disfavor. We like to think this only happens to very bad criminals, but it only take an official filing paperwork. Can you survive for the several years it takes to clear things up via the courts, assuming the courts are still honest?

50 JK Brown March 14, 2016 at 3:35 pm

North Korea is probably very happy with these events. Let cashless become the norm, have your agents set off a wide spread power outage, have others rabble rouse against the government’s failure to repair or to provide food and water, let the economic output decline a bit, then foment the government’s collapse.

It is genius to make your economy synchronous so that any disruption in electricity or telecommunications grinds it to a halt and leaves the people without a way to purchase existing stocks of food, etc. Cash is asynchronous. When it is produced, it’s validity as an exchange medium, it’s amount is isolated from the functioning infrastructure of society, assuming people retain faith that the guaranteeing government will be restored.

51 Nathan W March 15, 2016 at 12:08 am

Stated as a potentially systemic risk, how expensive does decentralized power generation (e.g., solar) seem, especially as compared to the vast sums spent to mitigate other risks which, rationally speaking, are quite low, like plane hijackings, terrorist prevention or instigating wars against anti-American regimes?

52 Derek March 14, 2016 at 7:33 pm

I’m surprised that in this entire discussion, no one has even mentioned bitcoin as a potential cash-alternative in the event that a cashless society emerges.

53 Derek March 14, 2016 at 7:34 pm

Found 2 entries actually, there were a lot to search – but to me, it seems like the obvious substitute for cash in this situation.

54 JK March 14, 2016 at 8:03 pm

Having lived there for nearly a decade, this is more motivated by tax enforcement. It is still common to haggle in the various street markets, the most common way to negotiate the price down is to offer a cash payment (so they can avoid taxes on the sale).

One way the government has been attacking cash transfers has been, since the early 2000s, giving businesses free wireless credit/debit readers. They were ubiquitous. Even in 2003 the pizza delivery guy could slide my card at the door.

The other thing they tried to do was issue every citizen a “receipt” card. Whenever you use cash, you have the vendor slide the receipt card under the guise of the customer getting a tax rebate at the end of the year.

Another innovation was that every time a customers debit card was used, a text message was sent to their phone saying when, where, and how much. This kept down fraud. At the time SMS plans in the US were either too expensive and/or capped. It simply would not have worked here.

One other insight: bank transfers. These are very cheap in Korea. It would be common to pay for tuition, airline tickets, parking tickets, even new tires with a bank transfer. I was getting over the flu once, forgot my wallet, couldn’t pay the expressway toll: sent a wire transfer, problem solved.

Also they don’t use personal checks. The ones they do have (Soo-pyo) are a fixed amount.

55 Brad March 14, 2016 at 9:53 pm

Clc is correct. Many of the markets like Namdaemun and Dongdaemun operate on Won not credit. Same goes for many mom and pop restaurants.

56 Shane M March 15, 2016 at 12:07 am

I had to check. It seems available!

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