Given the Risks of a Cashless Society, Why Not Just Keep Cash?
Sep 29, 2023
A recent article on fintech website Finextra presents a substantial list of challenges faced when implementing a cashless society—including negative impacts on national security and personal privacy—all of which beg the question: why not enjoy the benefits of both cash and cashless options, so everyone can win?
In ‘The challenges of implementing a cashless society’, David Hensley of financial consultancy Enryo Limited opens with one of the great problems currently surrounding cashless payments: accessibility. In every country there will be people who do not have a bank account, or are otherwise ineligible to access digital payment methods, for example due to a bad credit rating. Additionally, individuals and businesses alike may struggle to access the required technology and the always-on internet connection required to transact digitally.
The next challenge highlighted it security. If an economy operated solely on cashless transactions, power or internet outages will bring it to a standstill until services are restored, and cyberattacks would be similarly damaging. In an economy with cash and cashless working together, when the latter is unavailable, people can continue to make essential purchases using cash.
A cashless society would rely on a complex network of digital systems, which would be vulnerable to cyberattacks. If these systems were hacked, it could have a devastating impact on the economy.
Privacy is the third challenge raised. Cash can be exchanged anonymously, leaving no digital trail. This offers people a choice for any given transaction, enabling them to ask: is this purchase safe and unproblematic to appear on statements and form part of my digital trail? If not, they can use cash. Additionally, with transaction tracking, there is the possibility of financial data being misused, either for fraudulent or other criminal use, or by unscrupulous organisations. In a cashless world, a government could track an individual via their spending, and even cut them off, leaving them unable to pay for goods and services. Even today, cashless spending opens the possibility of analysis by third parties not involved in a transaction. For example, an insurance company could adjust an individual’s premiums based on how much junk food and alcohol they have purchased in the past year.
When people pay with cash, their transactions are anonymous. However, when people pay with digital methods, their data is stored on a central server. This data could be used to track people’s spending habits, which could have a negative impact on their privacy.
The fourth challenge is inclusivity, with Hensley pointing out: ‘some economists argue that a cashless society would lead to increased inequality, as the wealthy would be able to benefit from the convenience of digital payments while the poor would be left behind.’ Clearly, this is already an issue, but with cash accessible and usable by all, everyone has the opportunity to participate in the economy. By removing cash, the risk of excluding people becomes unavoidable.
In conclusion, Hensley also mentions cashless payments require infrastructure that may not be available in all parts of all countries, they pose technological challenges—with a need to develop more secure payment methods and ensure systems are fully scalable—and also present social and cultural challenges, with many people currently relying on the tangibility of cash to help them budget.
He suggests that ‘despite these challenges, the move towards a cashless society is likely to continue.’ However, there is a critical difference between a future in which cash and cashless options continue to operate side by side, and one in which cash is neither widely accessible nor widely accepted. The former would allow people choice in how they pay and ensure vital low level economic functions could continue in emergencies such as nationwide cyberattacks or natural disasters impacting infrastructure. The latter would depend on 24/7 connectivity and solutions provided by for-profit organisations with agendas, exposing societies to all the risks discussed above.
These points make a strong case for the preservation of payment choice, with the best possible future economy being one which supports both cash and cashless options, harnessing the benefits of each and allowing people the freedom to select how they want to pay on a transaction by transaction basis.