Are we being pushed to adopt cashless economy and digital banking? Will most of the banks shut down their cash machines and branches in future? Many of us are into digital payments today than ever before, with more joining every day. We transact using credit cards, debit cards, mobile payments, and digital currencies such as bitcoin. We are also seeing a rapid and increasing use of digital methods of recording, managing, and exchanging money in business, investment and daily life.
Will the economy completely go cashless in future? We know search engines like Google and Yahoo allow us to access and navigate the internet via their privately controlled search portals. Will we also see a similar trend in the financial world? Will the financial institutions too, make every one of us access and navigate the economy through their systems?
There is an obvious advantage to the Banks. They can lay off staff, cut costs to boost profits and justify the same saying that their customers were anyway turning to digital. Self-service is the new maxim and we are all the time seeing it happen in malls and super markets. Standardised self-service applications allow both the mall managers and the senior managers of the Banks to directly control and monitor interactions with customers. Are they really responding to changing customer preferences or are pushing an agenda?
Digital payments can now be made by methods such as Banking Cards, USSD, AEPS, UPI, Mobile Wallets, Banks Pre-paid Cards, Point of Sale, and Internet Banking. So, what is the true motive? Probably corporate profit. The Banks, the Payments companies such as PayPal, PayUmoney, Paytm, CCAvenue, and many others, all make money. Even intermediaries such as VISA, MasterCard, PayPal, digital wallet systems such as Apple Pay, contactless and NFC payments by electronic card or smartphone are all designed to make money. Are they all, in a way, increasing the inconvenience of transacting in cash, ATMs and branches and then promoting digital banking to the extent that it becomes indispensable?
Is cashless society in our interest? Sometimes yes. Cash is easy to launder and fund anti-social elements. Cash less transactions may avoid all of that. Our country demonetised currency in 2017. This removed a large amount of high denomination cash that is most vulnerable to counterfeit, from the system. UK, US, Canada and Sweden, all did the same at some point of time in their history. Even the European Central Bank no longer issues the €500 denomination euro banknotes as of April 2019.
Digital systems may be “convenient”, but failure is often built into it. Cash doesn’t need external data centres. There is no remote control or remote monitoring and allows an unmonitored space which is why financial technology companies are averse to using it. Have we ever wondered if cash ever crashes? The digital systems crash on the other hand. Bank processes fail like the UK’s Royal Bank of Scotland (RBS) and America’s Knight Capital some years ago. The Payment companies’ networks also fail like that of VISAs recently.
Not everything is good about creating a cashless society. Those without bank accounts will be marginalised and disenfranchised like the poor, disabled, elderly, and the undocumented immigrants, from the support system that cash provided them. There are of course psychological implications too. Cash in hand promotes self-control while digital banking promotes profligacy. Privacy also is compromised with cashless transactions. Everything has a flip side. If cash is associated with crime and tax evasion, with money laundering and financing terrorism, digital payments are also associated with equally serious maladies with technology to boot. If cashless payments eliminate risks of counterfeit money, stolen cards themselves are a risk. If theft of cash by employees, or burglary is a risk, there is a cost to both physical and cyber security.
Cashless society proponents cite difficulty of money laundering, tax evasion, and performing illegal transactions. Is it really so? There are any number of cases that suggest use of digital technology to precisely do the above. Can regulation, restriction, and bans prevent illegal transactions? Cashless or cash, how does one stop large value stored in real estate, antiques, or commodities like diamonds, gold, silver, and platinum, and what if they were to be bartered for activities not necessarily above board?
The government seems to be rather than conducting “costly and periodic” surveys and sampling of real-world transactions, is now collecting “real data” on citizens’, and their spending. The data can assist in devising and implementing policies that are more realistic. It can even better track the movement of the money through financial records which enables it to track the black money and illegal transactions taking place in the country. All very good.
However, with such data, both the government and institutions would have potential access to data that makes the transactions vulnerable, compromising individual privacy. Such transactions allow businesses a way to build a consumer’s personal profiles based on their spending patterns. Data Cashless transactions leave a record in the DB of the company as one makes a payment. This record can be used for prediction of future events. Data Mining then creates or compiles profiles of individuals from the databases. Such data retrieved from transactions can lead to widespread surveillance where individuals can be tracked by both corporations and the government. Such records may even be available to hackers that could be made public after a data breach.
Actually, cashless societies have always existed, maybe from the time human society came into existence. Barter and other methods of exchange were used in the early days of evolution. Even today, countries manage trade deficits and reduce the amount of debt they incur through barter. Even as most financial institutions and governments may want to create a cashless society, we have seen an increase in the supply of money in many countries especially during the pandemic. It is argued that it lowers interest rates, generates more investments and leaves more money with the people to spend. Does digital banking negate the argument?
In the future, with a cashless economy ticking, can a government enforce a transaction tax on every person-to-person payment? Or can it conduct a more effective mass surveillance and prevent certain individuals from buying anything or earning any money or restrict the type of consumer goods that can be purchased with a certain amount of money? Some food for thought.