ESSA

ESSA

The cashless economy: convenience, or an instrument of control?


Sarah Abell

By

June 5th, 2016


Being able to pay for everyday items quickly and easily without having to enter a PIN is one of modern life’s great conveniences, and a welcome alternative to carrying around cash. However, does the likely rise of the cashless economy have its downsides?


Arriving at your favourite cash-only coffee shop at uni only to open your wallet and find you are $1 short of a flat white is a familiar experience for plenty of uni students. It is true that many of us have changed our behaviour to preference those card friendly coffee shops to avoid using an ATM that will spit out a $20 note for a $3.20 purchase. Recent CommSec analysis has showed that ATM use has declined at an average rate of 7% per year for the last four years. In the US banks have taken action, in light of new technologies such as PayWave and PayPass software, to scale back the availability of ATM machines. Although no such moves have been made in Australia, there is nonetheless a case for predicting that our economy will be cashless in the not so distant future.

Despite these technologies that make smaller transactions easy by card, many retailers maintain a cash only system or EFTPOS minimum. Research by Edelman Berland suggests that a quarter of Australians now refuse to use cash – only business, with half saying they find these business a hassle to deal with. This study posits a number of reasons why consumers have moved from cash only businesses. It claims that Australian consumers would save an average of 3 hours and 54 minutes every month by using tap and go to pay rather than inserting the card into the machine and completing the transaction in this, now rather dated, manner.

More obviously, where consumers see further convenience and no extra cost to them utilising card rather than cash to pay, they are likely to avoid cash only businesses. Whereas most consumers would carry with them most of the time their credit or debit card, in this new age where cash is not necessarily as required as it once was, not having enough cash for whatever item they are looking to consume is at best unlucky and at worst, for some, a normal occurrence. It is reasonable to suggest further that the more tap and go becomes prevalent within the market, the less likely consumers are to carry cash – especially where obtaining cash can become difficult when locating an ATM that, for example, will not charge fees, given that most wages now come in bank transfer form. This slowly pushes cash – only retailers out of the market as consumers can no longer purchase items at those places by virtue of not having cash. As this study suggests, already consumers are beginning to change their behaviour to preference retailers with card facilities over those without and even those with inconvenient card facilities. We are already seeing a market driven move towards a cashless economy.

Although many of us have applauded this new age of convenience and ease, others have concerns about what kind of negative impacts it may have. Concerns about security and fraud are at the long list of issues some have with an economy that relies on digital systems rather than paper notes to make transactions. Tap and go technology makes it significantly easier for credit card thieves to use others’ money, and Victoria Police have suggested that the PayWave capability on a credit card should be an optional extra. Although this may seem a trivial concern, especially where most banks provide customers with effective systems for combatting these kinds of frauds, there are more existential concerns about how the cashless economy operates.

The decline of cash inevitably gives governments a better capacity to control individuals and their interactions with the economy. A key argument for the cashless economy is its impact to reduce crime, as where there may have been muggings and break ins it is more difficult for criminals access money on a card than in cash, and it is more difficult to ensure that illegal transactions remain untracked. But these same mechanisms used to control the behaviour of criminals can also control the behaviour of ordinary citizens. In the wake of the Global Financial Crisis, Australians could be seen withdrawing extraordinary amounts of money from ATMs in an effort to insulate their money from whatever doom may have been impending. The idea that people may hide cash under their mattress to prevent damage being done by potentially flawed government policies or untrustworthy banks is done away with in a cashless economy. What defence, then, do people have against the potential for another recession or financial crisis, where a near perfect way of protecting their money was by keeping it in cash on their person?

Just as this kind of economy works to control people who want to do wrong by society, it also works to control everyone who is in the process of transacting with that society. Already governments are using the idea of a cashless economy to control behaviour. Throughout Australia, trials have been conducted to test the effectiveness of a cashless welfare system, where the Australian government can quarantine up to 80% of an individual’s welfare to be used only on essential items by putting it on a debit style card and preventing it from being used at particular retailers, such as alcohol retailers and gambling outlets. For some, this is an effective way to ensure that welfare payments are helping the individuals they are designed to support. For others, predominantly tested in Indigenous communities thus far, it has already attracted criticism as being a means by which the government has attempted to unnecessarily control behaviour and remove agency from marginalised people.

Whatever the outcome of these trials, they nonetheless signify a new era of policymaking that is harnessing the cashless economy as a tool of social control. But further than this – the cashless economy also contemplates a highly stratified one. An individual using a welfare card is made to feel as a second class citizen as they approach the checkout at the supermarket. Similarly, a consumer that approaches the checkout with an American Express is clearly more wealthy. Where there is cash, there is very little way for outsiders to speculate as to an individual’s level of wealth. There is no way for us to know whether what someone hands over is their last $5, or one of many $50 notes. This may lead to more forms of discrimination, where previously cash could be somewhat of an equaliser, where cash can mask a individual’s level of poverty. The kinds of social stigmas associated with the cashless economy as a tool of government policy for those on welfare look set to continue where this is people’s only means of accessing consumer goods in a future cashless economy.

Moreover, what is to happen to individuals that have come to rely on cash? Buskers, homeless people and charity collectors are all groups that, currently, can only take cash donations. Where people do not carry spare change, how will these people make any money? Furthermore, part of the reason individuals are willing to give up their money for these ventures is the perception that a few coins does more harm than good just weighing down your pockets, and is better off in someone else’s hands. Where homeless people and charity collectors have to prepare a PayPass machine for you to give them what was previously spare change, it is perhaps true that less people will partake in such an effort.

The cashless economy seems fun for those of us whose dispensable income is mainly used to buy coffee and food. However, it needs more consideration, and perhaps further technological development, before we commit to it in the long term. It may seem like a very convenient future, but it also seems like a dangerous one, if we do not put in the necessary safeguards.

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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