Why Cashless Economy Tends to Restrict Freedoms and Widen Inequalities


In the latest chapter in the seemingly never-ending pandemic-fuelled global drama, the introduction of vaccine passports in Europe has alarmed many who fear yet another governmental invasion of the private sphere, another attack on our civil liberties and basic freedoms, with some feeling sufficiently outraged to take to the streets in London, Paris and other cities.

Although the ethical debate on such passes during a global health crisis is certainly nuanced, the deeper-rooted issues regarding civil liberties are becoming ever-more prevalent in a global economy in constant motion, evolving exponentially as technological advances create pathways to an ostensibly utopian future.

The cashless debate has often focused on related issues. How can we really be ‘free’ in a cashless society where our entire economic life can be accessed at the behest of the big banks… Our data at their fingertips? How could we ever hope to appear ‘off-grid’ in a society lacking the most basic asset of an unfettered day-to-day economy, namely, cash? Many see cashless as yet another opportunity for governments, the FinTech industry and big banks to assert more control over our daily lives. And you can’t blame them…

Furthermore, concerns about widening economic disparities and financial inclusion have been a constant thorn-in-the-side of the pro-cashless lobby, niggling away at the rollout of their quixotically grandiose digital economic system. With approximately 1.7 billion ‘unbanked’ people around the globe, the advent of cashless economies would surely leave a substantial section of the world’s population ostracised from new, ‘modern’ societies.

Civil Liberties In Peril?

Modern governments already have the technological ability to track our every movement and monitor our electronic communications, a phenomenon seen by many as a slippery slope towards a totalitarian dystopia. Indeed, the dense network of governmental agencies, central banks and financial institutions is considered by many to be deceitful and untrustworthy, not least since the 2008 financial crash.

The European Union’s report on mass surveillance following the Snowden affair in 2013 highlighted this widespread anxiety that unregulated governments and financial institutions were running a free-for-all with regards to people’s personal data, posing a ‘fundamental threat to human rights’.

According to Der Spiegel, “The NSA monitors banks and credit card transactions — sometimes in apparent violation of national laws and global regulations. The European SWIFT financial transaction network is being tapped on different levels, internal documents from the US spy agency show.”

So where does the ‘cashless economy’ fit into all this? Advocates of cashless economies would argue that the decentralization and dematerialization of digital payments systems run by private banks and FinTech companies would remove the risk of overt government interference and the inherent corruption that undermines the current system.

Of course, the reality is that the cashless push is in many cases coming from governments themselves. In China, for example, the ruling party has been pushing hard for the introduction of a centralized digital currency, a digital token issued by the People’s Bank of China that would allow officials to monitor the financial activity of its 1.4 billion citizens. The introduction of this payment system “represents a significant risk to the long-held standards of financial privacy upheld in free societies,” according to a report by the Center for a New American Security.

Such concerns are prevalent across many countries moving towards cashless, such as India, which lacks robust cyber security laws for the FinTech industry, and Venezuela, where the Maduro regime decided to abolish all forms of cash, facilitating the surveillance carried out by its secret police.

The truth is, without cash as a symbol of economic autonomy, we will always be subject to, or at least exposed to, intrusive forays into our personal data from the government-agency-big-bank network. A simple fact unpalatable to many people. As put by Brett Scott in the Guardian, “the desire not to be watched does not mean you have something to hide – just that you like to be alone. So it is with money. Sometimes we like to feel like our transactions belong to us alone.”

An Unequal System?

Unease at government and central bank overreach is just one of many facets of the arguments put forward by the pro-cash lobby. Serious concerns equally exist regarding social inclusion in a cashless economy. From the United Kingdom to India, the rollout of digital payment systems and the slow removal of ATMs have proved highly problematic for certain vulnerable sections of society, namely the poor, the old and the unbanked, or underbanked.

A study by Which? concluded that around 300 cash machines are being closed every month in the UK, with rural communities and the elderly the worst affected. Removing access to cash in effect can be devastating for the most vulnerable members of society, such as refugees, the homeless, or low-income households, who rely heavily on cash for effective monthly budgeting.

Sociologist Dr. Dana Kornberg, who has written extensively on the Indian economic reforms and their effect on the working classes, put it neatly: “India’s working poor rely almost exclusively on cash, with about 97 % of all transactions involving an exchange of rupees. With 93% of the country working in informal off-the-books jobs, most transactions entail personalized relationships rather than standardized forms of legal contract or corporate institutions.”

Furthermore, the poor and the elderly in many case suffer from a lack of digital literacy, access to smartphones and other appliances vital for access to a digital economy. The absence of cash would therefore force these groups to the periphery of society, unable to access basic financial services and once again finding themselves at the mercy of the central banks.

Kornberg concludes: “My work in India leads me to believe that cash plays an important role in our modern economy, particularly among the poor, and those urging a cashless future should do so with great caution.”

These concerns should be enough for proponents of cashless economies to rethink their model, with such a utilitarian approach sure leaving behind vast swathes of the most vulnerable among us. Is that the kind of society we aim to be?