The bank note is dead: Electronic money rules

Banks are forcing us towards a cashless economy–, and, really, what’s wrong with that? The banks are wining in their campaign to cut their costs by changing the way we handle money and pay our bills. They are keeping us out of their branches, killing off the cheques, moving us onto the internet, making money less tangible, and pushing us towards the cashless economy.
But their efforts to change our banking behaviour are assisted by a powerful factor: for all but the most set in their ways, the new ways of handling money are more convenient. On average, the big four banks charge $2.50a pop for a counter withdrawal (once you have exceeded the limit of free transactions). That’s up by $1.50 since 1995. The message is that if you need cash you should go to an automatic teller machine. There is nothing new about ATMs, but the number of them has increased by three quarters in the past five years. So ATMs now outnumber the branches by almost three to one.
Returning to bank’s tariff of monetary crimes, the next most sinful act is writing a cheque. The average charge for this is now $1 a pop. This has been hugely effective in discouraging the use of cheques. As recently as 1995, cheques accounted for more than 80 percent of the value of all non-cash payments, but now they’re down to less than 30 per cent.
So what’s taking their place? Well, value-wise, not plastic–debit and credit cards– you would expect. Rather, electronic ‘direct entries’. These now account for about 70 percent of the value of non-cash payments. Almost all of us now receive our wages in the form of direct credit to our bank accounts and all government welfare payments are made by direct credit rather than cheque. Direct debits occur when you authorise some outfit (for example, an insurance company or Telstra) to make regular payments to itself direct from your bank account.
The best way for you and me to reduce the cheques we write is to set up direct-debit arrangements for regular bills, or use B-pay to pay bills by telephone or internet banking. On average, telephone banking transactions costs you only 45 cents a pop, but internet transactions are cheapest of all: 25 cents. Do you see what’s happening with all this? There are two kinds of money: Currency—notes and coins—and mere numbers on bank statements. With employers paying us direct into our bank accounts and an increasing amount of our spending involving electronic payments from our accounts, money is becoming less tangible. Less cash in the hands means–more changing numbers on bank statements. The cashless economy is still a long way off, but don’t kid yourself—it’s definitely getting close.
Answer the following questions:
Question 1: What is money? What are the different forms of money mentioned in the article? Consider the properties desirable in anything that is used as money. Do the forms of money mentioned in the article have those properties?
Question 2: Explain the factors determining demand and supply for money and what effect does the demand and supply of money has on equilibrium in the money market?
Question 3: Cheques once accounted for more than 80 percent of the value of all non-cash payments, but now they are down to less than 30 percent. Can yon explain the reason for this trend?
Question 4: What are the motivations of holding money? Is the ‘cashless economy’ getting closer, as the author of the article states? Justify your answer.
Question 5: The heading declares “the banknote is dead”. Do you agree with this title? Explain why or why not and justify your answer with the amount of usage of cash versus other forms of payment.

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