Cash Combats ‘Payments Censorship’
Sep 4, 2024
‘Digital payments can be used to turn people off,’ warns author and economist Brett Scott. While cashless options add choice to the payments landscape, they can also be abused to take choice away, making cash a crucial tool of financial freedom.
In his article ‘The Outsider’s Guide to Payments Censorship’, Scott explains how financial institutions and payment processors choose to block transactions based on various criteria, and often under the influence of external pressures or regulations. Beyond individual transactions, other financial limitations can be placed upon people, including accounts being frozen or access to financial services—such as bank accounts or loans—being denied.
Cutting off money, blocking transactions, and seizing wealth to prevent action is a pretty ancient phenomenon, but the most prominent modern form is economic sanctions. This is a mode of coercion sometimes used indiscriminately against entire movements or nations, regardless of whether their individual members are even involved in a conflict.
While there is a balance to be found between ensuring regulatory compliance and giving people economic autonomy, there are major risks inherent in removing an individual’s ability to affect that balance. Cash can be used anonymously—without the need for electricity, an internet connection, or approval from any third parties—and this empowers individuals to spend and save as they choose. Cashless options do not offer this freedom.
Unlike cash, digital payments can have conditions and restrictions placed on them, largely because they go through intermediaries—the card companies, banking sector and (fin)tech firms—who have the ability to monitor them, limit them or block them (or receive orders from a government to do that).
Scott also notes that—beyond the obvious dangers for individuals and businesses, especially those in controversial or sensitive industries—the poorest citizens of a nation are often subjected to financial control, with digital payments opening new avenues of potential.
He points to ‘early forms of payments programmability’ such as the US food stamp program, which offered coupons with ‘inbuilt conditions that limited their redeemability to certain things in certain places’. Early in the pandemic, a small town in Washington handed out ‘wooden dollars’ to people by way of support grants. These were only usable in small, local businesses, meaning ‘welfare recipients were corralled into spending locally, which could help create a local multiplier effect that might boost local employment too.’ While these examples are ‘relatively benign’, Scott points out there are more obviously discriminatory and damaging possibilities.
Much more controversial… was the Australian Cashless Welfare Card, a VISA card scheme set in motion by members of the conservative government of Tony Abbot. It was explicitly designed to limit the spending choices of the poor—which disproportionately includes indigenous Aboriginal Australians—by blocking them from buying things like alcohol and cigarettes.
While this system—referred to as ‘the Class Welfare Card’ by community activists—was abolished in 2022 following a change in government, it remains a clear illustration of how easily financial freedom can be limited using cashless methods. With cash-based welfare, such control is not possible.
Scott concludes that there is a need for proactive measures against unjust censorship, ‘and, by extension, to protect the cash system that provides a buffer against it.’