The problem with a cashless society, according to central banks

Aug. 22, 2018 Share Source

Cybersecurity concerns are rising at an alarming rate. Central bankers warn that a cashless future would leave individuals and institutions vulnerable to hacker attacks as well as network failures. 

While trends in cash use vary region-by-region, G4S' World Cash Report reveals that, globally, cash is the most used payment method. Despite this, commercial interests and consumer hype for digital technology contribute to a push away from cash - even though the role that tangible cash plays cannot be replaced digitally.  

 Excerpt from Politico article

Europe’s central bankers are warning that a gradual phase-out of cash in many countries poses a serious threat to the financial system, as relying too heavily on digital payment systems exposes them to catastrophic failures in the event of cyber attacks.

“If there is for instance an energy blackout, cash is the only surviving way of payment.”
" Ewald Nowotny Governor Austrian National Bank

Regulators are also weighing in to say that IT failures, systemic hacking risks — and the fact that more vulnerable members of society would be alienated in a cashless world — all argue in favor of keeping a robust system in place — ie., cash.

“A severe operational incident, such as an IT failure or a cyber incident, can impair processes and data supporting these services, and therefore put financial stability at risk,”
" Financial Stability Report Bank of England

Small cybersecurity crises have nudged central bankers to work on backup systems and roll out cyber stress tests. Cash looms large in most contingency plans.

Read full Politico article here

Last Updated: Oct. 17, 2018