The perils of a cashless world

The banks want to scrap cash, something which would hand yet more power to the financial sector. Cash costs the banks a lot of money. Simply counting and moving it is expensive. But they must not be allowed to phiase out cash – they are there to serve us, not us them.

If the banks have their way every payment you make will be traceable, so that governments, banks or payment processors would have potential access to that information, ushering in the potential for Orwellian levels of surveillance.

Cash empowers its users, enabling them to buy and sell, and store their wealth, without being dependent on anyone else, particularly at a time when interest rates are low. They can stay outside the financial system, if so desired. There are many reasons, both moral and practical, to want this, but an immediate concern is that consumer borrowing (in the UK), bad economic policies, and stagnant wages are threatening another financial crisis. We should have the option to take cash out of a bank.

However, billion people have a mobile phone, and need no bank account or credit to get one. A mobile phone and its airtime can be bought with cash and you have pretty much everything you need to participate in e-commerce (internet access) except the connection with Big Finsnce.  Which is why there will be an important role to play in the future for new forms of digital cash – from Kenya’s M-Pesa to bitcoin– money you can use even if you are not financially included.

Cash has its uses for small transactions uneconomic to process by other means. It will always be the fastest and most direct form of payment there is. Small start-ups and poor people need the cash economy. Cash means total financial inclusion, a luxury the better-off take for granted. Without financial inclusion – and there will always be some who, for whatever reason, won’t have it – you are trapped in poverty. So beware the war on cash – it is a war on the poor and unincluded.

What are the outward and visible signs of winding down cash transactions? The relatively new technology which allows you to touch a terminal in a shop with your debit card, without having to use a password, for transactions previously using cash. Convenient? Yes! Now watch the banks increasingly lower the amount that qualifies. It doesn’t take a genius to work out what the baks are trying to do, convenient though it is at the moment.

3 Comments

  1. Personally I’m quite a bit fan of technologically advanced ways of paying people. It’s far easier to send people precise sums of money using my phone, simply because the chances are I won’t have the right amount of cash needed. I also like the fact I can use my phone to pay for London’s tubes and buses.
    It isn’t just banks who are making the transition to a cashless world. Waitrose recently opened its first cashless store in West London. As you quite rightly point out, its cheaper than having to physically transfer cash to a bank.
    Having said all that, I think it’s important we allow people to pay by cash for things. Partly because the older generation aren’t comfortable with relinquishing their cash, and we don’t want them to be even more culturally alienated from modern society than they already are. But also because cash can be the best way of keeping track of your spending. Without it, many people simply can’t control their spending habits. It’s no surprise that in Britain, household debt and consumption has risen and saving has fallen along with the demise of cash.
    In Germany, there is a cultural aversion to a cashless world. The legacy of the Weimar-era hyperinflation still scars the country. Many people view cash as a necessary aspect of security. A love of cash is a part of the country’s high savings rate and low rate of personal consumption and debt. Germans are a very privacy-conscious people; electronic payments are never truly anonymous.

  2. “If the banks have their way every payment you make will be traceable, so that governments, banks or payment processors would have potential access to that information, ushering in the potential for Orwellian levels of surveillance.”
    = = = =
    Add to the above internet dangers, the fact that financiers and corporations, dominate currency, credit, and other financial instruments. How does the essence of democracy–accountability–survive such a nexus of powers?

    • Since we can’t ban electronic payments, the only answer is regulation, preferably on a supranational scale. There should be strict rules regarding the viewing, distribution and sale of personal information. Financial companies should be subject to regular audits regarding the use of their clients’ data.
      I suppose the one upside of all this is the decline in tax avoidance as a result of people paying cash in hand. It becomes far easier to tax people if all payments are made online.

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