Digital Payments Need Discipline

The rise of cashless payments has raised the concern that some consumers will be induced to spend beyond their means. As monthly income is spent over the course of a month, if consumers are aware of their reducing balance, they are likely to constrain their spending. The Swiss National Bank has published a paper that explores differences in how freely people spend between people who pay in cash and digitally and how their awareness of their balances affects their cash management ¹.

Central banks, and others, have concerns about digital payments, particularly as they dominate payments and are now squeezing out cash. Can central banks continue to guarantee safe and reliable payments to the universe of consumers? Can they maintain monetary sovereignty?