March 29, 2023
Spread the love

The risks and benefits of going cashless

Do we choose to pay for our coffee with cards rather than cash? Most consumers would say they do. But Brett Scott disagrees.

In his book Cloudmoney: Cash, Cards, Crypto and the War for our Wallets (“Cloudmoney: Cash, Cards, Crypto and the War for our Wallets”), campaigner pro-cash claims that digital payments are a foregone conclusion, chosen for us by tech companies and big banks. Therefore, promoting the use of cash, which is unfashionable, is a way of limiting corporate power. The book raises burning questions, but Scott’s arguments are unlikely to be convincing enough to halt the trend towards a cashless society. Paying electronically rather than using paper money and coins introduces new risks. Power outages and technological breakdowns – such as the 10-hour outage of the Visa card network’s European systems in 2018 – have left people who depend on card payments scrambling for cash. Cyber attacks often expose online accounts to public view. But Scott makes a more general criticism.

He begins by attacking banks and corporations as profit-seekers who do not have their customers’ interests at heart. Financial institutions find it expensive to serve the poorest people. Then comes digitization, enabling banks to replace human-staffed branches with standardized smartphone apps. Payment networks, technology companies and banks benefit from charging digital transactions. Scott accuses them of waging a “war on cash” to make customers more dependent on these systems. It is true that this shift is leaving behind people who rely on a cash economy. But it underestimates the fact that the convenience of digital payments has changed consumer behavior.

Around 70% of merchants would like to be allowed to refuse to accept cash for transactions, according to a survey by Payments Europe, partly because handling notes and coins is less convenient. These factors as well as the global pandemic have contributed to a decline in cash, which accounted for only 26% of total transactions worldwide in 2021, down from 40% a decade ago, according to a JPMorgan study.

Brett Scott has stronger arguments when he warns about the dangers of monitoring and monitoring payments. The ability for governments and corporations to monitor people’s financial activities has never been greater. Regulations prevent financial institutions from exposing sensitive data to third parties. However, payment companies such as PayPal may share information with 600 organizations, Scott says, citing data from Wolfi Kristl of Austrian research house Cracked Labs. Large corporations can also make ostensibly political decisions. For example, Visa and PayPal refused to process donations to the WikiLeaks website.

However, this transparency can also have benefits. Data sharing can help governments track suspicious payments and fight tax evasion. The sweeping sanctions following Russia’s invasion of Ukraine have shown that electronic payment networks can be a powerful weapon.