The Cost of a Cashless Future
Don’t have cash? Pay by card. Don’t have your wallet? Pay with your phone. You forgot your phone! Pay with your Apple Watch.
The ease of purchase is the defining feature of a digital society. Many countries like South Korea and Sweden are already heading towards a life where coins no longer rattle in your purse; the need to carry your wallet around is void.
However, in a place like the UK the speed at which major cities are going cashless is more detrimental than progressive.
ALIENATION OF KEY SOCIETAL GROUPS
Whilst many stores enjoy the benefits of using tap and go technology, their customer bases become narrower as cashless technology has grown motre popular. This has left some falling through the gaps of innovation.
In a comment to The Guardian, Ross Clark, author of The War Against Cash, said: “One in 10 of the population has never used the internet. Only 19% of over-65s own a smartphone. This is a real demographic who find [cashless] difficult. Yet the government seems to think it acceptable to cut them out of the economy.”
The elderly, remote residents, teenagers and vulnerable members of the economy are the ones falling through the cracks of a cashless society finding themselves excluded from the cheeky ice cream at the park or the funny book at that store. A cashless society limits the experiences some can have in an economy they contribute towards.
Yet, for most businesses, the lost profit from those who cannot buy from them doesn’t affect sales that much. This the mindset a digital future dangerously fosters.
The former Bank of England chief cashier, Victoria Cleland, confirmed Clark’s belief in a 2017 speech: “Cash is vital in supporting financial inclusion.”
SAFETY OF CASH & OVERSPENDING YOUR BUDGET
In a city like London, the move towards a cashless society creates a wider problem.
Despite the soaring rate of card transactions, The Bank of England reports that the volume of cash in circulation is at an all-time high. The number of British people who deal solely in cash (approx. 2.7m), is also rising. While there are arguments that people are hoarding money in fear of yet another crash, the fact stands that people see greater security in cold hard cash than they do in an online balance on their mobile screens.
In a comment to The Guardian, Jesus Rosano, a representative at G4S said: “People trust cash; it’s free to use, readily available, confidential. It can’t be hacked and it doesn’t run out of power.”
The convenience of tap-and-go cannot diminish the reliability of cash, especially when many members of the public are still paid cash-in-hand, and others, like freelancers, prefer to keep cash for better budgeting.
Moreover, card-only spending leads people to overspend since most contactless and tap-and-go payments do not produce receipts for customers, making their transactions less tangible.
This is something banks can leverage by incentivising businesses to go cashless. Incentivising businesses to go cashless is linking together a chain where businesses become reliant on online banking, internet connections and contracts with online merchants (iZettle excluded). This presents a challenge to those businesses that cannot afford to make these links or whose primary customer base falls into the less card-friendly bunch.
In fact, these initiatives are on the rise today. Last year, Visa, as an example, introduced a ‘cashless challenge’ in the US. It offered $10,000 each to 50 food businesses if their owners opted to go cashless.
NATIONAL SECURITY
The incentives brought to the owners of these food businesses were clear: owners could reduce overheads and ease transactions for their customers.
The simple, easy and quick management of cash flow and customers is the ultimate reason many businesses across the UK are going cashless. And, there are benefits in this for the economy, too.
On average, maintaining a cash-friendly society costs 0.5% of the annual GDP and creates fewer loopholes for those who are looking to evade taxes. But, without considering the implications for those left out of the economy, introducing a cashless society drives wealth division deeper, invades data privacy but also, creates a reliance of the economy of the provision of fast and accessible internet connections nationwide, leaving the economy susceptible to cyber attacks. This is a series of infrastructural changes most economies are not prepared to invest in today.
As an economy, the type of infrastructural reform necessary to create a stable and secure digital financial system, safe from hacking and cyber attacks, is immense. Perhaps, as coronavirus reveals, currently unattainable. This is a national security problem before it is a national efficiency.
DATA PRIVACY & DEMOCRACY
In less democratic societies, the following suit in becoming cashless becomes a risk for the individual.
For the same reason which a cashless society can shine a light on those evading tax, it can also trace anybody’s transactions and store a permanent record. This type of data is easily worth double what your Google search history data is worth.
In a video by The Economist on cashless societies, Matthieu Favas, a finance correspondent at The Economist said: “Let’s assume that a country becomes undemocratic and someone wants to monitor the citizens more closely. They will try to infer from what you buy, your political leanings. Generally speaking, just monitor what you’re doing in ways that they should not be.”
The abolition of data privacy means government tracking for those in less democratic societies and electronic money trails going up for bidding between large tech companies looking to profit off any slither of human digital behaviour.
Favas further said: “There are worries that private companies might use this data in ways that are not safe or you might not like. And for some sectors, knowing what you do with your money is very important.”
Ultimately, until the majority of the world agrees on a cashless society that works and introduces better cybersecurity to safeguard a cashless society, it remains a dream. Meanwhile, we can watch countries like South Korea trial run bio-payments using your hands and companies like Amazon trial run cashier-less stores, and feel the excitement of technological progression, without attempting to pave it into entire economies right this second.
PS. This would most certainly abolish the tip as well as that’s not good. :)
