The unintended consequences of a cashless society

November 17, 2017

As we move closer to a cashless society, with electronic payments becoming the norm even for small transactions, some of the side effects of this evolution raise questions about the nature of money, and who has access to it.

Things have been going that way for a while, but have been accelerated by the spread of contactless payments. Add the rise of account-based systems like Uber and Amazon, and we’re heading towards a situation where financial transactions are only possible through certain approved channels.

What effect does it have on our spending? Are we even less likely to see it as real money, leading us to spend more? The credit card has helped to shape the modern economy, and I suspect that the decline of cash will reshape it in ways that are hard to predict.

As we get closer to a corporate takeover of all our transactions, it may get harder for individuals and small organisations to do business. What effect will there be on informal transactions like charity donations, begging, busking, and car boot sales? What impact will it have on undeclared cash-in-hand jobs? How will it affect illicit trades like drugs and prostitution?

The effects are already visible. When a beggar asks if we’ve got any spare change, many of us are likely to say no, but that line is becoming more and more likely to be true. I was initially hesitant about contactless, mainly for security reasons, but the speed and convenience has won me over, and I’m less likely to be carrying cash. The convenience of contactless may make us more likely to spend money in places that accept it, but it is also making us less likely to spend it in places that don’t - anecdotally, the frequency with which I buy the Big Issue has decreased.

eBay and PayPal have already revolutionised the second hand market, but can the same thing happen for other areas? Even if it’s possible, is it desirable? Do we really want all of our transactions to be logged against our name?. This desire for anonymity may be one of the reasons for the rise of cryptocurrencies, but there’s something to be said for the simple, almost visceral, nature of handing over cash.

In a variety of areas, more and more money will be funneled through the platform economy, and the platform owners will take their percentage. For charities, systems like JustGiving may make it easier to raise funds, but most of them take a slice of the pie. Streaming services like Spotify help more people to discover musicians’ work, but the lion’s share of the money goes to the platform, rather than the artists.

Cash is an important part of the informal economy, and informal places are where strange and interesting things are more likely to happen. Just as the open web is in danger of being usurped by the walled gardens of social media, and public space is being replaced by privately owned pseudo-public spaces, cash-based interpersonal markets are in danger of being forced out of existence.

Sweden is further down this road than the UK, and apparently most people there seem happy about it, but there are dissenting voices asking similar questions.

Am I being unnecessarily pessimistic? Perhaps Patreon and Kickstarter are allowing individuals and small groups to connect with potential customers in says that weren’t previously possible. Perhaps we aren’t doomed to a homogeneous future, with real and virtual shopping malls the only places available for human interaction.

As with most things, the truth is probably somewhere in between the black and white of the headlines, and besides, rumours of the demise of cash are probably greatly exaggerated.