The Great Pandemic of 2020. It has left millions of people worldwide living at least part of their lives in isolation.
Of all the pandemic’s long-term economic outcomes, the worst might be the complete eradication of cash.
Cash hasn’t been very useful during the Covid-19 season. Under the shadow of lockdowns, many stores and restaurants have become delivery-only services. Cashless payments have become not just convenient but indispensable.
Even if we could use cash just now, most of us are nervous about handling paper notes and coins.
Of course, we were moving incrementally toward a digitally-driven economy well before Covid-19. In 2016, only 34% of payments in the UK were made in cash. In Finland, cash is already considered outdated. In 2018, Sweden’s central bank announced that it would like to be cash-free “in three to five years.”
Sexy mobile apps have made it possible for us to spend without carrying even a credit card - and to do it on the same devices we use for entertainment, education, communication and so much more.
Meanwhile, virtual cash systems like Bitcoin are now so widespread that they are considered a new class of assets. An estimated 100 million people own Bitcoins and 400,000 people trade in Bitcoin every day.
There’s no doubting the convenience of cash-free platforms, but is the cashless revolution all that it’s cracked up to be? Would a fully cashless society really be such a good idea? What would it mean for our financial viability and security, our mental health and our civil liberties?
Who Would Lose Most in a Fully Cashless World?
Some people still prefer cash, despite the streamlined sophistication of online payments. Elderly people, for example, often have problems with numeracy related to mental decline. They find it easier to deal with money they can see and feel as opposed to digital cash, which exists only as numbers on a screen.
For some of them, working with mobile apps is unthinkable - they were raised with different tools.
Poorer people in our society will also lose if we eradicate cash. One and a half million people in the UK have no bank account. According to the Financial Inclusion Commission, more than half of the 2.7 million people who rely mainly on cash have a household income of less than £15,000.
Many people who do have a bank account are without ready access to the internet. A study by Which? found that nearly 3,000 bank branches closed across the UK in the three years up to 2018. ATM cash-dispensers disappeared at a rate of 500 per month in the first half of 2018. Where will the technology have-nots go for their money?
Is Cashless Good for Us?
Some law enforcement experts claim that cashlessness is better for society because it cuts down money-laundering and tax evasion. The risk of losing money, they say, is lower with cashless payments because credit cards and mobile wallets can be blocked if stolen. Lost cash is largely impossible to recover.
Other experts point out that the data we generate when making cashless transactions ensures that we receive more targeted and helpful marketing information.
This is all very well, but might the supposed benefits be outweighed by the disadvantages?
For example, diverting digital money may actually be easier and cheaper for criminals than stealing cash. Digital thievery can be done without the perpetrator leaving home. The risk of getting caught may be lower because of the ease with which thieves build false digital identities and locations. Taking the time to track them puts serious strains on already stretched police resources. (And studies show that most people aren’t confident that police will follow through when the amounts stolen are small.)
Hacking, phishing and spoofing are all highly effective criminal practices. In December 2011, Chinese hackers reportedly gained access to 15 to 20 million accounts within their nation’s most popular lifestyle and payments app, Alipay.
With phishing, targets are contacted by email, telephone or text message, by people claiming to represent legitimate institutions. They’re lured into providing sensitive data such as banking and credit card details and passwords.
Spoof websites are also popular among scammers. A 2014 study described how Chinese hackers inserted spoofing malware into what looked like genuine security updates for cashless systems. The spoofing enabled hackers to obtain users’ real names, identity numbers, account passwords and, yes, their money.
Cyber-criminals often steal small amounts from many accounts at once. They net huge rewards, knowing that there’s almost zero chance of their crimes being investigated, much less solved.
Cashless: More Harm Than Good?
What other so-called cashless “blessings” might turn out to be curses in disguise?
On a society-wide basis, say some security experts, cashless systems hinder the production of black money, limiting corruption. Arguably, though, this underestimates the cunning of financial criminals, who will always find ways to commit theft and fraud.
The fact that cyber-security is now an £8.3 billion industry in the UK alone - up by 46% since 2017 - is testament to the capacity of criminals to adapt to new technologies.
There are a number of other ways in which moving to a fully cashless financial system might well do more harm than good.
Whenever you make a cashless payment, information about you becomes available to the business in question. This includes not only data about the specific purchase you've made, but often also your account number, phone and address details and more.
As with all electronically generated and stored data, there is no guarantee against hacking by criminals, or the loss or compromise of your data by the business in question.
Technical problems like internet or phone network outages have from to time left many people stranded, without access to their own funds. In March 2020, four of the UK's largest phone service providers went down for five hours. Millions of people were unable to make payments while working from home during the first Covid-19 lockdown. This is just one of many such instances.
Some banks, businesses and other institutions charge a fee for digital transactions. This despite the fact that they encourage people to go cashless because they say it cuts costs, on activities like counting cash.
If we continue to move quickly toward a completely cashless society, levels of personal debt will almost certainly rise.
Various studies have shown that paying for something with a credit card is less painful for people than paying with cash. It is easier to say goodbye to something intangible.
Digital payment systems encourage people to spend more with less forethought. This favours the merchant, not the consumer. It has never been easier to separate people from their funds - while telling them that their lives are getting easier.
The bulkiness of cash, often cited as a downside, is actually one of its USPs. It has weight and substance, which means we can readily see when our supply is running low. Digital coinage is a collection of 1s and 0s that most of us don't understand and certainly can't see.
According to a 2019 report by Cifas, a leading fraud prevention service, identity theft has become a national epidemic. In 2018, 190,000 cases of identity fraud were reported in the UK. This represents an increase of 8% from the previous year. Most cases involved victims under the age of 21 and over the age of sixty. (https://www.fool.co.uk/mywallethero/your-money/learn/identity-theft-in-the-uk-how-bad-is-it/)
Plastic cards are the most targeted products for identity fraud. In 2018 alone, there was a total of 82,608 cases – an increase of 41% from 2017. It won’t be long, surely, before mobile digital platforms take over this mantle.
A thief can steal your cash without gaining any advantage in terms of personal information about you. That’s certainly not true of most forms of digital payment. If we continue to push toward a completely cashless economy, identify theft will become an even greater concern.
Cashless payment systems rely on our engagement with digital technologies. Yet studies suggest that there are serious questions to answer about the impacts of these technologies on our cognition and productivity.
Some of these studies talk about the emergence of Digital Dementia.
Until very recently, dementia was thought to become apparent only in people over the age of sixty-five. However, the results of a ten-year research project released a few years ago challenged that thinking. It found that the onset of dementia commonly occurs in people as young as forty-five.
I wonder whether another decadal study, launched today, would find that what we called dementia in 2020 became the normal state of mind in 2030? And would it attribute such marks of decline as spatial confusion, problems with numbers and shrinking vocabularies - all symptoms of dementia in today’s terms - to an over-reliance on machines?
Arithmetic, spelling and navigation are just a few of the brain disciplines we have ceded to AI and mobile machines. Meanwhile, much of our interpersonal communications are mediated via screens rather than face-to-face interactions.
The question is: what happens to the parts of our brains associated with these activities as we hand them to machines? The laws of nature suggest that they will atrophy.
Beyond Cashless: Biometric Payments
Contemporary studies suggest that a post-cash world might struggle with civil liberties.
The Chinese approach to cashlessness provides a troubling case study into how payment providers – and perhaps governments - might use cashless systems to control troves of sensitive user data.
As you might expect in a one-party political system, it's very difficult to ascertain just how closely payment platforms like Alipay are connected to the Chinese government. However, one thing is fairly clear: as this and other platforms become more essential to consumers, the threat of government intrusion grows.
Is there any reason why the Chinese government might not, at a time of its choosing, suspend bank or cybercurrency accounts of activists and others who question government policy?
In years to come, China's use of cashless payments will likely provide a classic example of “technology creep”. This is where a tool is first introduced to the public as a way of solving a particular problem, but is later used in ways the public hadn’t imagined.
Chinese authorities are already investigating how their society might move beyond app-based platforms toward biometric payment systems. Alipay’s executives have said that they aim to use fingerprint, facial recognition and other forms of biometric identification within their payment systems.
The fact that Alipay collaborates with Huawei on this technology and that the latter has possible connections to China's military, raises troubling questions about civil liberties. Moreover, Alipay has investigated a potential feature known as "smile to pay". It allows a user to use a selfie as a means of authenticating an account.
The use of biometrics in cashless systems is a potential problem even for more liberal governments. Western governments have enough trouble regulating today’s BigTech companies, which regularly use data in ways that are unsanctioned by users. Imagine the difficulty authorities will have regulating groups that use biometrics to gather even more personal data and potentially control financial accounts?
Can Money Make You Sick?
Of course, if cash is to remain a viable means of exchange, we need to know that it can be trusted in health terms. Can cash and coins make you sick?
The answer is: yes and no. According to Amesh A. Adalia, M.D., senior scholar at the Johns Hopkins Centre for Health Security, "You can find any germs on money - anything that can be on your hand can be on money. [But] you have to draw a distinction between what you can culture off of a coin or bill versus what poses an infectious disease threat."
The fact that notes and coins carry germs doesn't mean those germs will make you sick when you encounter them on money. Flu viruses, for example, can survive on hard surfaces for 24 hours but they can only survive on surfaces like tissue for 15 minutes. On your hands, they survive for even less time.
Generally, unless you handle cash and then almost immediately put your hands in your mouth, you're unlikely to catch a cold or flu from money. There are, of course, important differences between the flu virus and Covid-19. The school is still out on just how much of a threat paper money is when it comes to Covid-19. What is clear is that coronavirus, like colds and flu, usually spreads from an infected person via droplets that are released through coughing or sneezing.
Should we sanitise our money? According to Dr Adalia, a Fellow of the Infectious Diseases Society of America, there's no indication that actually cleaning your money will make much difference. That said, it's worth knowing that hard currency can be cleaned.
Today’s more resilient polymer banknotes, made of thin, flexible plastic, offer an important step forward in this regard. Polymer cash was first introduced to Britain in 2016 with the introduction of new £5 notes. The £10 polymer note followed a year later and plans were in place to introduce £20 and £50 notes shortly thereafter.
In early adopter nations like Australia, polymer notes have proven to be very hard-wearing and able to handle most methods of cleaning. They’re also more hygienic than paper notes because of their resistance to moisture and dirt.
Polymer notes can be washed using a vinegar and salt solution, or with soapy water or antibacterial spray. (You shouldn’t, however, try to clean them using microwave ovens, high temperatures or corrosive chemicals like bleach or chlorine.)
By comparison with notes, coins are even easier to clean. All you need is some warm water, dishwashing detergent and a toothbrush.
How Can We Avoid Over-Spending During the Pandemic?
Making longer-term moves to retain cash may be worthwhile, but that may not help us much during lockdowns. How can we avoid digital debt in the present season?
Use apps that limit your spending
For some people, the best method uses mobile apps that allow the to set upper limits on what they spend digitally.
These are very convenient, but as with cashless payments themselves, they require that you spend more time online. As we’ve seen, this poses challenges to your cognition and productivity over time.
In using these apps, you may also be generating data; providing information to platforms that may use it in ways you hadn’t imagined.
Give your spending substance using Token Stacks
One of several great benefits of using cash at least part of the time is that it makes money a tangible token. You can feel your cash reserves growing lighter as you spend. When you’re unable to use cash you can still give some physical aspect to your spending. Here’s one way of doing it.
Look at your weekly spending habits and budget. Work out how much you spend each week on, say, recreational or discretionary items. These are items that are desirable, but not necessarily essential. For example, on average, UK householders spend between £50 and £75 per week on recreation and culture - including package holidays - TV and streaming subscriptions, sports, and pets.
Set up at home a stack of books or other physical items to represent this recreational spending. Assign to each book or item a set fraction of the total.
If your recreational spend is £60 per week, you might have six large books in your stack, each representing £10 spent. Position this stack where you’ll see it everyday - on a kitchen bench, or near the TV. Then, as you spend on recreational items, remove one or two books from the stack.
This gives your spending substance. What you spend digitally becomes more tangible, which provokes an emotional response.
Cash or Spending Envelopes
This method is popular with people who only use cash, but it can also be used with cashless systems.
The basic steps are much the same as with the Token Stacks method. Assign each category of your weekly recreational or discretionary spend to an envelope. Fill the envelopes with specific amounts of cash you’ve set for each category. (Use tokens in place of cash if you prefer).
Once you’ve removed all the cash from any given envelope don’t spend any more in that category until your next payday. You need to behave as if once the cash is gone, it's gone. Again, this method gives your money substance.
The Buck Shouldn’t Stop Here
The expediency of cashless payment systems shouldn’t spell the end of cash. We can use both in a balanced lifestyle.
Virtual money systems may seem sexy, because they’re relatively new. But abandoning cash altogether would open a Pandora’s box of challenges - to our civil liberties and autonomy. It would create potentially higher levels of digital debt and lower levels of financial security.
It would leave us open to greater intrusion on the part of BigTech and big government. It would expose us to insidious criminal activity and, through an over-engagement with technology, challenge our cognitive skills.
Do yourself a favour: don’t give up on cash because of Covid-19. Enjoy the convenience of cashless payments, but don’t consign cash to the history books just yet.