Here’s a riddle for you:
Question ‘What loves money, but hates cash?’
Answer ‘Governments and banks.’
Governments love money – your money – because it helps them to bribe electors. Not for nothing has modern democratic politics been dismissed as the art of redistributing taxpayers’ money. There is no such thing as ‘government money’ – just your hard-earned dosh, taken from your pocket by law. As Louis XIV’s Minister of Finance, Jean-Baptiste Colbert, put it so elegantly, ‘The art of taxation is in plucking the goose so as to obtain the largest amount of feathers with the least amount of hissing.’
But modern governments, like banks, hate real money. This deep-seated dislike of cash in people’s pockets is because governments cannot control it. Money is mobile; money is anonymous. Money is running loose out there in the wild. For the control freaks of every government and their snivel serpents, money is an untidy, reckless, irresponsible commodity, out of government control and, horror of horrors, in the hands of ordinary people. Cash makes all those illegal economic activities easier – from terrorist activities to criminals using cash to pay for drugs, because it cannot be traced; in any cashless economy, counterfeit notes would be useless. So it’s no surprise that governments around the world want to eliminate cash because all transactions have to be linked to bank accounts that can be taxed.
Banks in their turn dislike hard cash, albeit for different reasons; all those dirty banknotes and coins need to be counted and added to ledgers. Money needs branches where you can visit to check on your dosh or negotiate a loan with a human being. However branches require staff – expensive staff. Replacing them with self-service apps allows the senior managers of financial institutions to control customers directly and, of course, such a system cuts costs and boosts profits. For the big banks, what’s not to like?
So ‘Big Finance’, enthusiastically backed by the man in Whitehall, is pushing hard for what they see as the bright new future of a cashless society; a world where IT and digital communications can get the customers to do their work for them without recourse to all that messy money. The most powerful advocate of change is the payments industry, with its credit card companies and banks. Every transaction that is done using cash is really a missed opportunity for Visa and MasterCard to earn another 2.5%. Unsurprisingly it is in their interest to trumpet that cash is redundant, inconvenient and inefficient.
However, the cashless society is a con – with Big Finance behind it. Already, all over the Western world, banks are trying to shut down branches and ATMs. They are trying to push you into using their own digital banking infrastructure to make digital payments. Financial institutions want to force everyone to put all their money through the banks’ digital systems to be recorded and harvested. Cost cutting and control is the order of the day, and our brave new digital world is making it possible. IT has made a cashless society a reality – and this demands some hard thought, because the cashless society will change all our lives.
For a start, in many cases, money as a traditional exchange of value is losing ground. Money is becoming much more a concept of ‘credit reassignment’ rather than a transfer of physical material. Everywhere today people are using credit and debit cards on a regular basis in everyday situations, such as shopping. These are cashless transactions. The question is, ‘What exactly is this cashless society?’ This leads to real impacts of living in a cashless world?
Perhaps the best finance model to consider is Sweden, which is fast becoming the world’s first completely cashless society. For example, none of the banks around Stockholm’s main Odenplan Square handle cash any more. If you want a cup of coffee and Kanelbulle in the country’s largest café chain you can only pay by card or by using your smartphone. No money please! Also, there is no chance of using coins or notes if you want to hop on one of the shiny blue busses purring past – contactless payment swipe only. Tak!
The Swedes see nothing unusual about this cashless phenomenon. Most Swedish banks have long stopped allowing customers to withdraw or pay in cash over-the-counter. A quarter of people living in Sweden use cash only once a week. Sweden’s cashless trend has been praised as the way of the future, mainly by banks and the credulous commentariat, and is increasingly being copied in places as far apart as Idaho and India.
However, not everyone is convinced that the Nordic nation’s embrace of living by technology is quite the happy Valhalla claimed. There are growing concerns about the pace of change. For example, many older Swedes are becoming alarmed amid concerns that this cashless society is causing problems for the elderly and other vulnerable groups.
‘As long as it is legal to use cash in Sweden, we think people should have the option to use it and be able to put money in the bank,’ says Ola Nilsson, of the Swedish National Pensioners’ Organisation and its 350,000 members. ‘We’re not against the cashless society, we just want to stop it from going too fast.’
They are right to be wary; because the cashless society hides some very dangerous trends. The debacle of TSB and Visa’s disastrous IT switchover is a cautionary tale for our potential cashless future. The more we rely on technological solutions, the more we will have a problem when they fail.
Moreover, there are some clear downsides to a cashless world. First, it will alienate a lot of people and put them on the fringe of society, if not make them outlaws. Not everyone has a smartphone, a bank account or even a permanent address.
Nor do all developed countries wish to go down the Scandinavian route. Switzerland, for example, rejects non-cash transactions as an invasion of privacy. The Swiss were not even keen on cashless train travel cards, worrying that the government could snoop on their travel habits. Many people wouldn’t want their day-to-day spending habits recorded and monitored.
Then, there is the serious matter of censorship. There is already an ugly precedent. In February 2016, Uganda blocked the popular Money Mobile app during its elections. The allegation was that the opposition would use it to buy voters. The real reason was to block donations to the opposition party. In another instance, Bank of America, Visa, MasterCard, PayPal and Western Union blocked donations to Wikileaks, which has seen its revenue dip by over 95%.
Finally, cash is an important safeguard against economic disaster. When things go wrong, when confidence in the banking system crashes, citizens like to withdraw their cash in wadges and stuff it under the mattress. A run on the banks is governments’ worst nightmare: remember the Northern Rock debacle? A cashless society makes that impossible – and, paradoxically, it also makes it impossible for governments to control money flow and unable to inject money (i.e. ‘print banknotes’) to stimulate the economy.
The conclusion is that because of its reliance on electricity, electronics, software and IT, modern society is becoming more and more fragile, and vulnerable. Cyber-attacks are increasingly common, as is theft by hacking. So real money will remain a bulwark against technological vulnerability. In 2017 the average amount of cash carried by people was £33; that has now fallen to £21 in 2018. However, when technology goes wrong, hard cash still remains the safest way to make basic transactions.
So ignore those ‘nudging’ you towards purely digital services – it’s really all for the banks’ benefit, not yours. Obviously, plastic and helpful IT have their part to play, but we should not get carried away by the vision of a cashless society.
The signals say, ‘proceed with caution.’