Media theorist Marshall McLuhan once remarked, “The more data the banks record about each one of us, the less we exist.” That, in a nutshell, explains why so many privacy advocates are concerned about a cashless society. And it also explains why digital innovators are so excited about the potential of new cryptocurrencies, which would theoretically help individuals evade government oversight of their transactions and restore privacy to their online activities.
The allure of a cashless society
It’s hard to ignore that we are now on the path to a cashless society. In many ways, technology is spurring this change toward cashless payments. What started with debit cards and credit cards has only intensified with the introduction of new online payment methods (such as PayPal) and the availability of new mobile banking innovations (such as contactless payments) that make it easier to pay with your smartphone than with a plastic card. With each new technological innovation for cashless payments, it seems, we are getting closer and closer to leaving cash and coins behind.
In the United States, for example, people are simply using less cash when making payments. According to the U.S. Federal Reserve, just 32% of all retail transactions are now handled with cash, down from 40% just three years earlier. Moreover, cash represents just 9% of the value of all payments made by consumers. If you think about this, it makes sense. Who pays their rent with cash? In fact, who even pays for a coffee from the local Starbucks with cash anymore? Cashless payments are the new norm.
The archetype, of course, is Sweden, where cash represents just 1% of the value of all payments, and less than 20% of all retail transactions. It has now become socially acceptable for shop owners to put signs up in their windows, telling people that they don’t accept cash. Some tourist attractions no longer accept cash, and neither do some forms of public transportation. Cashless payments are now an everyday fact of life for the Swedish economy.
The great allure of a cashless society, of course, is the ease and convenience of making these cashless payments. Moreover, economists point out a direct correlation between “cashlessness” and a reduction in crime. Without cash, it’s a lot harder for the criminal underground to flourish. After all, crimes related to gambling, prostitution, and narcotics are all fueled by cash. And without cash sitting around, burglars and thieves have much less incentive to hold up a store for cash or to break into someone’s home.
The privacy implications of a cashless society
But, as with all things in life, there is always a flip side to any argument. While the supporters of a cashless society point to the ease and convenience of these cashless payments, as well as all the societal benefits (reduction in crime, reduction in vice), the opponents of a cashless society typically highlight the surveillance and censorship implications of a world without cash. They also point out the heightened risks for cyber crimes as a result of cashless payments.
Most importantly, cashless payments leave a digital trail and are much easier for government organizations to track. These cashless payments are also more accessible to cybercrime and hackers. Not only that, but government authorities could, for example, choose to cut off any organization or any individual that they choose from the global financial system based on their personal information.