Understanding the War on Cash
Though cashless payments make valuable contributions to the financial landscape, no one way of transacting is without its flaws. The push to eliminate cash holds significant risks for individuals and societies alike, and is driven by financial bodies that profit from non-cash transactions. Journalist and former broker Brett Scott spoke to financial platform The Motley Fool about who wins and who loses in a cashless scenario, and why cash matters.
Scott acknowledges the convenience of digital payments, but argues that cash remains essential thanks to its unrivalled resilience. Should power or internet connectivity be lost—either due to a temporary glitch or a longer-term problem such as a natural disaster—payments that depend on such infrastructure become unusable. Cash can be used as a transfer of value
I might find it useful to use an elevator to get to the top of a skyscraper, but that doesn’t mean I want the emergency stairs removed. In many senses, cash is like emergency stairs: the resilient payment system that doesn’t go down when the hurricane hits.
Regarding the question of who is pushing the idea of cashless societies, and why, Scott identifies four major groups. First is the banking sector, which operates the infrastructure underpinning mainstream digital payments. A combination of fees charged for providing this service, and the sale of data collected during transactions, strongly incentivises banks to encourage cashless over cash.
Next, payment companies such as Visa and Mastercard have an obvious stake in boosting cashless transactions, since anyone paying cash is outside their system and thus are not paying directly with fees, nor indirectly with personal data.
Financial technology or ‘fintech’ companies are the third group. Scott explains that as well as providing payment services, much of their business is in automation of processes such as loan agreements and insurance claims. ‘Cash, as an offline form of money, doesn’t gel well with automated systems,’ Scott says.
He identifies the final beneficiary of cashless payments as being governments, the specific agendas of which can vary by country and even within different departments of the same central authority. While a central bank may be pro-cash, recognising its key role in a stable and resilient economy, there are other areas of government—for example those responsible for security—that see benefits in being able to track or even control payments, which is largely impossible with cash.
Regarding those who stand to lose in a cashless society, the privacy and autonomy of every individual is at risk. Tracking, recording and monetisation of personal data is standard within most digital payment networks. Cash is also the only payment method that functions completely independently of its issuer, meaning that without it, every transaction would be beholden to at least one organisation, which may have its own agenda and—in a worst-case scenario—could limit or block payments to better serve it.
If you’re a citizen of an authoritarian country, you very quickly understand the implications of a cashless society. It means all your transactions go through institutions that can be watched, and you can be stopped from doing certain things.
Removing cash would also pose serious risks to an economy, given the reliance of digital payments on electrical and internet infrastructure. Any event that cut an area off from these would render cashless payments impossible, leaving people unable to pay for essentials such as food and medicine. It would also render nations especially vulnerable to cyberattacks, since a successful strike could not only bring banks and fintech to halt, but also prevent even the most basic, everyday transactions.
Finally, the most immediate victims in a cashless society would inevitably be the most vulnerable, who are less likely to have access to or trust in banking facilities, and may not be eligible for many forms of digital payment. These individuals are already finding themselves shut out of businesses refusing cash, and were their society to become entirely cashless, their freedoms would be dangerously restricted.
For most ordinary people, they want options to remain open. Nobody wants a reduction in payment options, they want an increase. It’s only the industry that has an incentive to destroy the ability to use cash.