Member Article

Digital payments and an end to cash: how will this affect the poorest ?

“What we hope ever to do with ease, we must learn first to do with diligence.“ Samuel Johnson was referring to practice through careful repetition, but perhaps we should consider his words in how they inform our adjustment to using digital payments technologies. Certainly, due to the automaticity of transactions these days, more diligence should be paid to developments in payment methods, but the ease with which we perform the relevant actions makes this difficult. It is reminiscent of the seductive forces at work when our screens compel us to watch yet one more video on YouTube or Netflix, against our best interests. The difference, however, is that apps and cards induce higher spending in the moment and contribute to the accelerating apparatus now at work marginalising and excluding society’s most vulnerable.

Every change we make to our world and society, be it the use of Twitter, artificial intelligence, or contactless card payments, each is an experiment: we don’t have the benefit of time to test the shifts and effects that will result. Nor do we have time to consider properly the motivations of those behind emerging technologies. Companies like Visa, MasterCard, and Apple make profit each time we transact through their platforms. The importance of this cannot be understated. Unfortunately, as consumers, we do not have the luxury of due diligence before we start doing things simply because they are easy.

Each day the societal ebb towards digital payments mediums grows more profound. Non-cash payments around the world are expected to accelerate at a compound annual growth rate of 12.7 percent until 2021. Not unlike the wilful disregard of the oil companies from the 60s and 70s, those behind the digital payments push are heedless to the harm that this will cause to the poorest people in our society – an end to cash is an attack on the most disadvantaged among us as it excludes them from the system.

While companies like iZettle are putting funds into positive spin pieces, featuring in, for example, the Guardian newspaper, it is hard to conceal the potential issues emerging from a cashless society. If you have ever been in a cash-free shop – often they are uptown establishments serving creative vegan dishes of cultural fusion – and you have looked around at the demographic, it’s difficult to miss the signs. Everyone will be wearing the attire of the modern innovator-cum-business class, on their lunch break-escape from an office which includes a Ping-Pong table.

Paying by tap or app is only an option for those with bank accounts and smart phones. It might be difficult for certain people to conceive it, but 1.6 million adults in the UK are unbanked. The latest smart phone banking app is going to be of zero value to them: they rely entirely on cash. As such, the growing trend for businesses which refuse to accept cash is likely to present them with an obstacle.

The effect of such changes for early-stage cashless nations like the UK, is an emerging manifestation of the class divide, one in which certain people are logistically prohibited from enjoying specific businesses. In Sweden, digital payments are the norm, but it is also a country with a far more equal society, with an inequality index 44 percent better off than the UK. This fact has softened some of the harsher effects of cashlessness, given the lower levels of extreme poverty in Sweden. According to recent surveys in the Scandinavian nation, only 13 percent of people recently used cash, down from 40 percent in 2010.

Cashlessness in Sweden is at one of its most advanced stages in the world, even paying to use a public toilet with cash has become nearly impossible. Christina Tallberg, the president of the Swedish National Pensioners’ Organisation, says that in many bars and restaurants if you won’t pay with debit cards or the Swish system, you’re basically unable to participate in transactions. This affects pensioners, homeless people, and even those with specific disabilities.

“This is both a personal problem, but it’s also a problem for the civic society,” Tallberg says. “As long as it’s legal to pay with notes and coins, it must be up to the individual to choose how you will do your payments.”

When CEOs of global debit card companies declare their unbridled war on cash, they are taking aim at certain people’s ability to spend money. Robbing them of their agency is permissible in the pursuit of profits it seems. But are we okay with the idea that money itself is being privatised by payments industry companies?

This economic metamorphosis affects everyone, not just the most extremely poor. In our struggling economy, many middle-income families are trying to keep pace with the ever more challenging cost of living. In the post-Brexit period, the UK economy is expected to take a withering hit. People, as always, will want to control their spending and keep an eye on their finances, and the best way to do this is by using cash. The connection between card payments and higher spending is well-documented. If cash is no longer an option, the risk of cycles of perpetual spending problems among lower-income households is almost guaranteed.

This was posted in Bdaily's Members' News section by Robert Holloway .