Will the poor be even poorer in a cashless society?
The growing move against cash seems unstoppable. Banks see financial benefits, while payments companies see mounting opportunities to extract fees. But who is being left behind by this drive to cut out cash and move increasingly towards digital payments?
Sweden, with just 19% of payments being made using cash, compared with a European average of almost 80%, is leading the charge towards cashlessness. Some companies imply that this is a result of public desire, the Swedish economy shifting with a consensus on making use of greater numbers of electronic payments. This is a misleading position, at best, as Ron Delnevo observes:
“The decline in cash use cannot be said to be solely as a result of the Swedish public exercising free choice. The example of the increasing use of cash on buses immediately prior to that use being banned is a perfect illustration of choice being removed.”
Just as in the UK, with MasterCard and Visa competitively strangling Link into closing droves of ATMs nationwide, Sweden has also seen a reduction in the number of available bank branches, and many branches no longer handle cash at all.
“Given a choice, millions of us will continue to use cash for decades to come, but Visa and Mastercard are determined to take that option away,” David Clarke said, speaking with The Guardian. “Banks and card companies stand to make greater profits if cash disappears,” he argued. “And their moves to slash funding for the cash network have seen machines close at an alarming pace.”
The reduction in requirements for those who need to transport, process, and protect cash, makes a cashless society highly-appealing. These groups drive the movement, along with similarly motivated stakeholders. Those with privilege have decreed that this change is not just better for all, but that it is arriving by popular demand. One issue, however, is that with the move to digital payments, come those who are eliminated inadvertently from the economy.
“If you begin to insist on cashlessness, it does put pressure on you to be banked and signed up to the financial system, and many of the poorest are likely to remain outside of that system. So, there is this real danger of exclusion,” Dominic Frisby said, when speaking with The Guardian.
It is not easy to spare a few coins for the homeless or to give to charity when you only carry your phone and cards. Similarly, what is the unbanked homeless person to do when they begin to be faced increasingly by ‘no cash’ signs in shops, as has become an issue in Sweden and China for example. The impetus to bring about this change has become so strong among the Chinese that the central bank has had to warn people that it is illegal to refuse cash payments. Currently, the figure in the UK stands at around 1.5 million adults without bank accounts, and 1.7 billion adults world-wide. For these people cash is not just preferred, it is essential.
“Digital exclusion involves the unequal access and capacity to use information and communication technologies (ICTs) that are seen as essential to fully participate in society,” write the authors of ‘The role of digital exclusion in social exclusion,’ a report commissioned by the Carneige UK Trust with the help of Ipsos MORI. Digital inclusion is already a problem, with social inequalities driving “low levels of access and skills to use the internet.”
What will happen to similar vulnerable groups when the cashless society brings with it digital-financial exclusion: those without the adequate technological literacy to use apps and digital payments? As is often the case, the fluency with which social groups utilise newer technology is reliant on relative levels of education, among numerous other factors. Using the internet is already difficult for certain people with low exposure and opportunity, and this gives them disadvantages socially and professionally. Soon this will no longer simply affect their ability to access public services and participate in online communities. It may lead to them being further unable to contest with others in the economy, piling on to their disadvantages, and it could see them struggling to participate in basics like buying grapes at the supermarket and paying bills.
The elderly and low-income families stand to lose the most, with 78% of the two lowest household income groups relying on cash several times a week, and 80% of retirees using it frequently, according to a Which? UK survey. While the financial services and the payments industry revel over the possibilities of a cashless society, once again the greed of big business is going blind to the cost for the most vulnerable. It seems that when they say that everyone will prosper in a cashless society, what they mean is everyone who already has money will have some more. And at this stage, we would do ourselves a disservice in being surprised.