With increasing numbers of consumers moving online to shop during the COVID-19 pandemic, and global cash transactions down by four to five percent, a shift towards cashless economies risks leaving behind underrepresented people who lack the documents required to open bank accounts and conduct transactions.
A recent Forbes article observes that the creation and maintenance of trusted identities are crucial in a digitised world. For merchants everywhere, each transaction relies on being able to trust a customer is who they say they are. For banks, the issue of dependable identification is even more critical. Most of us can produce an identity card, passport, driving license or some other widely-accepted and trustworthy ID and proceed without issue. But what about those who can’t?
The World Bank estimates 1.7 billion adults currently lack access to a formal financial system because they don’t have valid ID, they face geographic obstacles, or they have low financial and technological literacy.
If every economy became cashless, this sizeable minority, who depend on cash, would immediately face insurmountable challenges to living and working. Clearly this is an unacceptable situation.
The U.S. MOBILE Act of 2017 aimed to address the problem by permitting financial institutions ‘to record personal information from a scan, copy or image of an individual’s driver’s license or personal identification card… for the purpose of verifying the identity of the individual.’ Aside from the privacy issues this raises, it also does not cover those who do not have such forms of identification.
In Kenya, Africa’s first national digital ID scheme was launched in 2019, with the aim of supporting a digital economy. Once again, privacy concerns proved a stumbling block, with the Kenyan High Court soon having to prohibit the collection of DNA and GPS coordinates during the registration process. A similar scheme is also under way in India, where troubles with privacy and authentication failures are hotly debated.
There are steps that need to be taken to support the unbanked and underbanked populations of the world, and it is encouraging to see they are not being left out of discussions around the move towards digital economies. However, to protect those who will inevitably slip through the net, and to preserve the privacy and freedom cash provides everyone, we must ultimately preserve cash as a choice for all, now and in future.