Follow the Money: Who Really Benefits from Cashless Societies?

calendar iconMay 30, 2023

Many articles talk up ‘cashless societies’ and ask how populations can be convinced to give up cash, with the underlying assumption that everyone should want to. If the benefits to individuals are unclear and unspoken, there is a good reason: the rewards are restricted to the banking and fintech industries.

For people with access to cashless payments, using them is only a choice if there are alternatives. There are many reasons for choosing cards or mobile payments—and the financial landscape is richer for their availability—but in a world without cash, people would be forced to choose between different payment products that benefit specific companies, without the option to dip into their pocket for notes and coins issued by their government and unaffiliated with any business. Journalist and former broker Brett Scott explains the issues in his 2023 article, The Luddite’s Guide to Defending Cash.

In a cashless society, even the smallest local economic interaction benefits Big Finance and Big Tech. So, even if you are under the belief that small local businesses can cut some costs by ‘going cashless’, this comes at the expense of a massive net power transfer to centralised corporations, which negatively impacts the structure of our economy as a whole. If you’re interested in maintaining a degree of diversity and localisation in your economy, then cash—which is inherently local in its circulation, and which yields no fees to an oligopoly of distant central players—is crucial.
"Brett Scott, The Luddite’s Guide to Defending Cash

Some people say they never find themselves reaching for cash. Perhaps there are a lucky few who never have a card nearing its credit limit, or need to buy something sensitive they would rather not have in their digital trail, or find themselves locked out of their banking app due to a system glitch or a forgotten password. It seems unlikely—even if all these other criteria are met—that they will never be in a shop where the internet has gone down, or card payments are temporarily unavailable.

Leaving aside those for whom payment method is a choice, there are also millions of people worldwide for whom cash is the only way they can interact with their local economy. Most people would think it unwise to give children access to their payment cards, whereas handing over a few banknotes will keep their spending within fixed boundaries. Many adults lack bank accounts, or good access to banking facilities, and use cash for all their expenses. Elderly and disabled members of society can find digital payments less accessible than cash. Victims of domestic abuse whose spending can not only be tracked and controlled by companies, but also their abuser, can hide cash away to facilitate an escape. The list of people for whom cash represents a path to freedom is extensive.

Among those who can freely use different payment options, there are increasing numbers of people—especially younger generations—who are finding value in reconnecting with physical money. From childhood, the tangibility of cash teaches crucial lessons about spending versus saving, and how to manage a budget. ‘Cash stuffing’ is a hugely popular trend among those who feel detached from their incomings and outgoings when everything is digital.

Privacy is also a hot topic in a digital world. Many people appreciate the anonymity of cash, in contrast to cashless payments that are routinely tracked and monetised by the companies providing them. There are also times when a record of payment for certain things—such as medical procedures restricted under certain governments, or travel to a location where anti-government protests are taking place—could lead to serious consequences. The option to use cash can help keep people safe.

Cash has clear benefits to individuals. It also underpins national economies, offering a resilient way to exchange value should electricity or internet fail, due to temporary problems, natural disasters, or even deliberate attacks on infrastructure. It brings equality to the financial world, enabling people of all ages, social and personal backgrounds to transact on an equal footing with everyone else. Professor Bill Maurer, Dean of the School of Social Sciences at University of California, Irvine, describes cash as ‘a magical technology’ for precisely these reasons.

Cash always works. It’s a really magical technology for value transfer. All I have to do is give it to you, and then I have transferred value to you.
"Professor Bill Maurer, Dean, School of Social Sciences, University of California, Irvine, and Director, Institute for Money, Technology & Financial Inclusion

What cash does not offer is a person’s transaction profile, which is regularly monetised and, if needed, restricted and controlled. It is not a financial product that can have hidden charges attached, either for individuals, or businesses accepting payments. These are benefits for individuals, but are not advantageous to banks and fintech companies, nor governments seeking to examine and manage the spending of their populations.

Payment choice is paramount to ensuring freedom and equality, and cash is an irreplaceable part of it. Whether examining the impact of demonetisation in India, the implementation of cashless payments in Nigeria, or declining cash use in Scandinavia, the question that should always be asked is: who benefits, and what is the societal cost?

Last Updated: Jan 12, 2024