Pay Cashless, Pay Twice
In a recent opinion piece, Holger Regenbrecht of New Zealand’s University of Otago weighs the democratic, economic and privacy implications of a move to cashless economies. His conclusion? While the technological infrastructure may be sufficient, societies are not ready to go cashless.
Cash-free payments offer some appealing features. They are convenient, and some can be integrated into phone apps or multipurpose cards that can help minimise the things that need to be carried when leaving the house. On the other hand, Regenbrecht points out, they do come at the cost of ‘privacy, economic power, and democracy at large’.
When paying cashless, I am revealing my shopping behaviour to others… I, as a customer, am paying twice: with financial, dollar currency and with my user data.
A payment made in cash is anonymous. Typically, only those immediately involved in the transaction know its details. When making cashless payments, details of the transaction are automatically shared far more widely, and users must agree—implicitly or explicitly—to reveal details of their shopping habits in a ‘largely opaque process’ that does not sit comfortably alongside people’s expectation of privacy and choice in how their information is used.
Regenbrecht observes that New Zealand’s Privacy Act 2020 could be a good starting point to address this privacy issue, and the European General Data Protection Regulation could be even better, but still feels more work is needed to effectively control privacy.
If we, as a society, go cashless at large, then not only are commercial entities monitoring and modelling us as individuals, but also the government—as the currency issuing regulator—is in full control of the actual value of money.
Noting that cash enables balance between government and society in deciding the value of money, Regenbrecht argues that ‘a cashless society will distort this balance’. He gives the hypothetical example of New Zealand’s Reserve Bank deciding to introduce negative interest rates. Today, people have the option of withdrawing their money from banks and storing it in their homes or a safety deposit box. In a cashless world, there would be no such choice.
Cash is a public good, empowering people on a personal and societal level. Choice is a consumer right, which makes offering cash alongside cashless payments essential. Removing that choice restricts people’s freedom and infringes on their right of self-determination. It also hurts those who lack access to the regular banking system, and for whom cash is their sole payment option.
The availability and acceptance of cash provides the equilibrium necessary to maintain a stable and equitable payments landscape. While technology may be ready for cashless, the world is certainly not.