Is cash still king in the digital world?

At an outlet at a major shopping centre in the capital city of Kuala Lumpur, a sign at the counter informs customers that digital payments are preferred. 

While cash is still accepted, payments must be made out in the exact amount as, according to the shop workers, they have no change to give. 

At an open-air car park nearby, meanwhile, only digital transfers are allowed. 

Such signs are nothing new in the Klang Valley or the country in general, as digital transactions continue to gain currency in the aftermath of the Covid-19 pandemic. 

And the rate at which digital payments are becoming part of the new norm raises the question of whether, in Malaysia at least, cash is still king. 

Speaking to MalaysiaNow, lawyer Derek Fernandez said shops cannot outright reject cash payments. 

"Our legal tender is part of our sovereignty," he said. "It cannot be refused, just as a shop in Malaysia cannot tell its customers that it will not accept ringgit, only US dollars."

Legality aside, there is also the concern that a trend towards a purely digital environment for transactions would diminish the practicality of cash as a medium of exchange. 

But for at least one prominent banker, the shift towards digital payments is inevitable. 

Edward Ling, chief executive of the Asian Institute of Chartered Bankers, also questioned the perception that this would undermine the authority of cash. 

"None of us can deny how quickly things can change and evolve," he said, giving the example of the barter system which was eventually replaced with the use of gold and bronze and, later on, cash as it is known today. 

However, he too said that it was illegal not to accept cash payments at all. 

"For convenience, though, I think it's good," he added. 

Complementary

Yet another question is whether payment systems should be viewed purely in binary terms of either cash or cashless. 

For Fernandez, the two methods should be viewed as complementary and not in opposition to one another. 

Both have their pros and cons – when it comes to cash payments, no data is involved in transactions which Fernandez said could be misused in scams. 

In any case, he said, Malaysia may not be ready to transition to a completely cashless society.

He said such a move would leave the country more vulnerable to hacks and malware. 

"A technologically superior hostile country or criminal could paralyse our financial systems and cripple our economy if we were totally cashless," he said. 

Logistically, it is also easier for criminals to hide their identity and hack into accounts online than it is to break into a bank vault or homes. 

"The current spate of growing cyber crime and cyber scams with only few successful prosecutions proves this," he said. 

Nevertheless, digital payments have the advantage of speed and convenience over traditional cash transactions. 

"Everything is a question of balance to minimise risk," Fernandez said. 

"Digital payments can be encouraged if a person is willing to accept its weaknesses, but this should never be forced."

Ultimately, he said, it was an issue of national sovereignty. 

"Until we develop our own technology to facilitate cashless payments that is safe and secure, we cannot base our nation's future solely on software or hardware developed by foreign nations with evolving geopolitical interests." 

Ling, too, agreed that cash would not disappear immediately. 

Sooner or later, though, he said a cashless environment might be unavoidable. 

"Nobody is 100% ready," he said. "But do we have to do it? Yes."