tag:theconversation.com,2011:/id/topics/cashless-economy-17822/articlesCashless economy – The Conversation2024-01-22T13:29:16Ztag:theconversation.com,2011:article/2213932024-01-22T13:29:16Z2024-01-22T13:29:16Z‘No cash accepted’ signs are bad news for millions of unbanked Americans<p>How many people don’t have a bank account? And just how difficult has it become to live without one?</p>
<p>These questions are becoming increasingly important as <a href="https://www.chicagotribune.com/business/ct-biz-cashless-backlash-20180710-story.html">more businesses refuse to take cash</a> <a href="https://www.wmtw.com/article/cashless-businesses-south-portland-come-under-fire/40450267">in cities across the U.S.</a> People without bank accounts are shut out from stores and restaurants that refuse to accept cash.</p>
<p>As it happens, a lot of people are still “unbanked”: <a href="https://www.fdic.gov/analysis/household-survey/2021report.pdf">roughly 6 million</a> in the U.S., the latest data shows, which is about the population of Wisconsin. And outside of the U.S., <a href="https://www.worldbank.org/en/publication/globalfindex/Data">more than a billion people</a> don’t have a bank account.</p>
<p><a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">I am a business school professor</a> <a href="https://blogs.bu.edu/zagorsky/">who researches society’s transition</a> from cash to electronic payments. I <a href="https://www.govtech.com/workforce/data-seattle-area-becoming-increasingly-cashless">recently visited Seattle and was amazed</a> by the mixed signals I saw in many storefronts. Numerous shops had one sign proudly proclaiming how welcoming and inclusive they were — next to another sign saying “No cash accepted.” This tells people without bank accounts that they aren’t welcome.</p>
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<figcaption><span class="caption">Not far from Seattle, Mount Rainier National Park stopped accepting cash in May 2023.</span></figcaption>
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<h2>Why not have a bank account?</h2>
<p>Why would someone want to avoid using banks? Every two years, the Federal Deposit Insurance Corporation surveys households about their connections to the banking system and asks people without bank accounts <a href="https://www.fdic.gov/analysis/household-survey/2021execsum.pdf">why they don’t have one</a>. People can respond with multiple answers. In 2021, the top reason — with over 40% of respondents choosing it — was that they didn’t have enough money to meet the minimum balance.</p>
<p>This is consistent with data showing that poorer households are less likely to have bank accounts. About one-quarter of those earning less than $15,000 a year are unbanked, the FDIC found. Among those earning more than $75,000 a year, almost every person surveyed had some type of bank account.</p>
<p>The second- and third-most common answers show that some people are skeptical of banks. Roughly one-third of survey respondents agreed that “Avoiding a bank gives more privacy,” while another one-third said they simply “don’t trust banks.”</p>
<p>Rounding out the top five reasons were costs of dealing with a bank. More than one-quarter of respondents felt bank account fees were too high, and about the same proportion felt fees were too unpredictable.</p>
<p>While many middle-class and wealthy people don’t pay directly for their bank accounts, fees can be costly for those who can’t maintain a minimum balance. A recent Bankrate survey <a href="https://www.bankrate.com/banking/checking/checking-account-survey/">shows basic monthly service fees</a> range between $5 and $15. Beyond these steady fees, <a href="https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html">banks earn $4 to $5</a> each time people withdraw cash from an ATM or need services <a href="https://www.bankrate.com/banking/checking/what-is-a-cashiers-check/#fees-for-a-cashier-s-check">like getting cashier’s checks</a>. Unexpected bills can result in <a href="https://www.bankrate.com/banking/checking/checking-account-survey/#overdraft-fees">overdraft fees of about $25</a> each time an account is overdrawn.</p>
<h2>Being unbanked in America</h2>
<p>The FDIC calls people without a bank account “<a href="https://www.pbs.org/newshour/show/millions-of-unbanked-americans-lack-adequate-access-to-financial-services">the unbanked</a>.” People with a bank account but who primarily rely on alternative services such as check cashing outlets are called “<a href="https://guides.loc.gov/fintech/21st-century/unbanked-underbanked">the underbanked</a>.”</p>
<p>The latest FDIC data shows almost 6 million unbanked and 19 million underbanked U.S. households. Given that <a href="https://www.census.gov/content/dam/Census/library/visualizations/time-series/demo/families-and-households/hh-6.pdf">2.5 people live in the average household</a>, this means there are over 15 million people living in a home with no connection to banks, and 48 million more in homes with only a tenuous connection to banks.</p>
<p>Combining the two figures means roughly one out of every five people in the U.S. has little or no connection to banks or other financial institutions. That can leave them shut out from stores, restaurants, transportation and medical providers that don’t take cash.</p>
<p>The true number of unbanked people is likely higher than the FDIC estimates. The questions on being banked or unbanked are supplemental questions <a href="https://www.census.gov/programs-surveys/cps/about.html">added to a survey</a> given to people at their homes. This means it misses homeless people, transients without a permanent address and <a href="https://www.dhs.gov/immigration-statistics/population-estimates/unauthorized-resident">undocumented immigrants</a>. </p>
<p>These people are likely unbanked because you need a verified address and a government-issued tax-identification number <a href="https://www.federalreserve.gov/boarddocs/supmanual/bsa/bsa_p5.pdf">to get a bank account</a>. Given roughly <a href="https://www.npr.org/2023/12/22/1221006083/immigration-border-election-presidential">2.5 million migrants crossed the U.S.-Mexico border</a> in 2023 alone, there are millions more people in the cash-only economy than the FDIC estimates. </p>
<h2>How many people globally are unbanked?</h2>
<p>While the U.S. has relatively high rates of people with bank accounts, the picture is different in other parts of the world. The <a href="https://www.worldbank.org/en/topic/financialinclusion/overview">World Bank has created a database</a> that shows the percentage of each country’s population that has access to financial services. The World Bank’s definition of being banked is broader than the FDIC’s, since it includes anyone who uses a cellphone to send and receive money as having a bank account.</p>
<p>Overall, the World Bank estimates about <a href="https://www.worldbank.org/en/publication/globalfindex">one-quarter of the world’s adults</a> don’t have access to a bank or mobile-phone account. But that varies dramatically by region. In countries that use the Euro, almost everyone has a bank account, while in the Middle East and North Africa, only about half the population does.</p>
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<h2>A more inclusive economy</h2>
<p>Many of us swipe our credit cards, tap our phones or insert a debit card to pay without thinking. However, there are at least 6 million people in the U.S. and almost <a href="https://ufa.worldbank.org/en/ufa">1.5 billion worldwide who are unbanked</a>.</p>
<p>When businesses stop accepting cash, the unbanked are forced to use payment methods like prepaid debit cards. However, these <a href="https://www.consumerfinance.gov/ask-cfpb/what-types-of-fees-do-prepaid-cards-typically-charge-en-2053/">prepaid cards are costly</a>. For example, Walmart, one of the largest U.S. retailers, <a href="https://www.walmartmoneycard.com/">offers a reloadable basic debit card</a>. The card <a href="https://www.investopedia.com/articles/personal-finance/112315/6-ways-load-your-walmart-money-card.asp">costs $1 to buy</a> and charges <a href="https://www.walmartmoneycard.com/helpcenter/getting-started/why-walmart-moneycard/how-can-i-waive-my-monthly-fee-for-walmart-moneycard">$6 per month in fees</a>, in addition to <a href="https://www.walmartmoneycard.com/helpcenter/adding-money/how-much-does-it-cost-to-use-walmart-rapid-reload">$3 each time someone wants to load the card with cash</a> at Walmart’s registers. Paying a minimum of $10 just to set up a debit card for a few purchases is a steep price.</p>
<p>The next time you see a sign in a shop or restaurant window stating “No cash accepted,” you’re really looking at a business excluding many unbanked and underbanked people. Insisting that all businesses accept cash is a simple way to ensure everyone is financially included in the modern economy.</p><img src="https://counter.theconversation.com/content/221393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A cashless economy is a less inclusive economy.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2175202023-11-14T19:07:09Z2023-11-14T19:07:09ZCash may no longer be king, but the Optus debacle shows it is still necessary<figure><img src="https://images.theconversation.com/files/559240/original/file-20231114-19-t3ysht.jpg?ixlib=rb-1.1.0&rect=19%2C261%2C6421%2C3909&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/search/australian-dollars?image_type=photo">Shutterstock</a></span></figcaption></figure><p>A simple software upgrade went wrong. Across the country economic life ground to a halt. Groceries were abandoned at supermarket checkouts. Commerce was paralysed as the nation waited for its payment system to be brought back on line.</p>
<p>The Optus outage lingers fresh in our minds yet the scene described here is not Melbourne or Sydney in November 2023, but Zimbabwe four years ago when the southern African nation suffered a 72-hour <a href="https://www.herald.co.zw/business-suffers-as-ecocash-still-down/">outage</a> of the mobile money service known as Ecocash.</p>
<p>At a time when up to 96% of the country’s transactions were cashless, EcoCash, owned by the privately held telco, EcoNet, boasted more than three times the number of registered users than there are Zimbabweans who hold traditional bank accounts, and a near monopoly on mobile money payments.</p>
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Read more:
<a href="https://theconversation.com/optus-has-revealed-the-cause-of-the-major-outage-could-it-happen-again-217564">Optus has revealed the cause of the major outage. Could it happen again?</a>
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<p>Occurring soon after a deeply unpopular move towards a cashless economy, this outage, along with a shorter one due to rolling blackouts earlier that same year, exacerbated concerns about the reliability of non-cash payments.</p>
<h2>Abandoning the cashless experiment</h2>
<p>Four years on, Zimbabwe has retreated from cashlessness, with the pandemic facilitating a return to cash in US dollars as the preferred means of payment. While the 2019 outage was not the only reason Zimbabwe returned to a cash economy, increasing frustration with mobile phone transactions contributed to it. </p>
<p>When I talk informally to Australians about these events and their possible implications for our own economic behaviours, I commonly hear some variant of the reply “but Australia isn’t Zimbabwe!” </p>
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<span class="caption">The Optus and other outages raise questions about the benefits of becoming a cashless society.</span>
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<p>But the Zimbabwean case holds some important lessons for us about the undesirability of eliminating cash in the aftermath of the latest Optus outage. </p>
<p>First, these outages highlight a key advantage of physical cash - it never goes down. We can rely on it to be there when we need it in contrast to cashless payment systems such as EFTPOS which suffered disruptions during the <a href="https://www.smh.com.au/money/planning-and-budgeting/in-case-of-emergency-cash-is-gold-20200109-p53q5t.html">2020 fires</a> in NSW and Victoria.</p>
<h2>We’re using less cash but we still won’t let go</h2>
<p>Many Australians might argue for the need to keep cash as a fall back in the event of future natural and technical disruptions but the main reason they want to hang onto it has nothing to do with using it to buy and sell.</p>
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Read more:
<a href="https://theconversation.com/optus-said-it-didnt-have-the-soundbite-to-explain-the-crisis-we-should-expect-better-217302">Optus said it didn't have the 'soundbite' to explain the crisis. We should expect better</a>
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<p>Indeed its use in buying and selling has been in decline for 20 years and continued to decline during the pandemic. The total percentage of economic transactions cash accounted for dropped from 69% in 2007 to 13% in late 2022 according to the Reserve Bank’s <a href="https://www.rba.gov.au/publications/bulletin/2023/jun/consumer-payment-behaviour-in-australia.html">June Bulletin</a> on Consumer Payment Behaviour in Australia. </p>
<p>By contrast, much of the continuing demand for cash can be attributed to its use as a store of value — something you hold onto rather than spend. During the pandemic there was more cash being kept under metaphorical mattresses as a source of security and comfort, than was being spent. </p>
<p>A <a href="https://www.rba.gov.au/publications/bulletin/2021/mar/cash-demand-during-covid-19.html">March 2021 RBA report</a> found from March 2020 to February 2021, the value of banknotes in circulation rose 17.1% to A$97.3 billion because people were holding onto money at home. Moreover, even as its <a href="https://www.rba.gov.au/publications/bulletin/2023/jun/cash-use-and-attitudes-in-australia.html">most recent</a> report on cash usage highlights decreased reliance on cash across all demographics, the percentage of respondents stating they would “experience a ‘major inconvenience’ or ‘genuine hardship’ if cash was hard to access or use” has remained unchanged since 2019 at just over a quarter.</p>
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Read more:
<a href="https://theconversation.com/going-cashless-isnt-straightforward-ask-sweden-or-zimbabwe-146187">Going cashless isn't straightforward. Ask Sweden, or Zimbabwe</a>
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<p>This desire to access cash even as its circulation declines highlights the degree to which doing away with it might be ill-advised and potentially destabilising. Indeed, this is exactly what happened in Zimbabwe — the country went cashless very quickly and without buy-in from most people.</p>
<h2>Other reasons to keep cash, apart from dodgy technology</h2>
<p>Other concerns about going cashless include the lack of privacy in the electronic payment system plus it being more difficult to control spending.</p>
<p>Even as some Australian banks move away from handling cash, other countries, Sweden most famously, have been forced to walk back such measures to respond to the needs of communities left behind by the shift to cashless payments.</p>
<p>These include the elderly, people in regional and remote areas, migrants and people who don’t have a bank account. While these groups are <a href="https://www.rba.gov.au/publications/bulletin/2021/mar/cash-demand-during-covid-19.html">decreasing in size</a> we ignore people who don’t have the knowledge the confidence or reliable access to cashless payment systems at our peril.</p>
<p>The financial transaction process needs to be inclusive. Standard, state-issued currency has historically been a public good that is accessible to all and ideally not a source of profit.</p>
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Read more:
<a href="https://theconversation.com/depending-on-who-you-are-the-benefits-of-a-cashless-society-are-overrated-113268">Depending on who you are, the benefits of a cashless society are overrated</a>
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<p>Going cashless is a form of privatising money. It moves transactions into a world where you must rely on banking institutions to buy and sell things while someone is making money off your financial dealings through fees. We wouldn’t usually think about this as similar to selling off the power grid but in some ways it is.</p>
<p>And as we saw all too vividly with the Optus debacle, a transition to privatised payment infrastructures opens up new kinds of vulnerability to go along with their convenience.</p><img src="https://counter.theconversation.com/content/217520/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article draws on research funded in part by a Macquarie University New Staff Grant and the Wenner-Gren Foundation. </span></em></p>Electronic payments are convenient and are increasingly replacing cash, but when a network fails, the impact can bring a country to a halt.Chris Vasantkumar, Lecturer in Anthropology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2154462023-10-16T19:06:06Z2023-10-16T19:06:06ZThe move to a cashless society isn’t just a possibility, it’s well underway<figure><img src="https://images.theconversation.com/files/553818/original/file-20231015-19-kwyha0.jpg?ixlib=rb-1.1.0&rect=74%2C0%2C5811%2C3902&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/customer-scanning-tag-coffee-shop-pay-1868918989">Shutterstock</a></span></figcaption></figure><p>When was the last time you used cash? For many Australians using cash or even swiping a card has become a rare event.</p>
<p>The move towards a cashless society started 50 years ago with the introduction of the Bankcard and was driven by technological advancements. But it really took off with the COVID pandemic when consumers and retailers were reluctant to handle potentially infected notes and coins.</p>
<p>The federal government last week underscored its recognition of this trend by <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/modernising-payments-regulation">unveiling reforms</a> to regulate digital payment providers. Treasurer Jim Chalmers said:</p>
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<p>As payments increasingly become digital, our payments system needs to remain fit for purpose so that it delivers for consumers and small businesses. We want to make sure the shift to digital payments occurs in a way that promotes greater competition, innovation and productivity across our entire economy.</p>
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<p>From big cities to remote rural corners the shift towards digital payments is evident. This raises the question, is a cashless society inevitable?</p>
<h2>The phenomenal growth of the digital payments</h2>
<p>The convenience of digital transactions has become irresistible for consumers and businesses and has led to the sector eclipsing traditional payment methods.</p>
<p>The relentless march of technology has produced myriad innovative platforms from mobile wallets to buy-now-pay-later (BNPL) schemes, each vying for a piece of this burgeoning market.</p>
<p>A recent <a href="https://www.ausbanking.org.au/wp-content/uploads/2023/06/Bank-On-It-%E2%80%93-Customer-Trends-2023-1.pdf">report</a> by the Australian Banking Association paints a vivid picture of the digital payment industry’s explosive expansion.</p>
<p>The use of digital wallet payments on smartphones and watches has soared from $746 million in 2018 to over $93 billion in 2022. Cash only accounts for 13% of consumer payments in Australia as of the end of 2022, a stark contrast to 70% in 2007.</p>
<p>Digital wallets are popular with most age groups. Young Australians aged between 18 and 29 are leading the pack, with two thirds <a href="https://www.rba.gov.au/publications/bulletin/2023/jun/consumer-payment-behaviour-in-australia.html">using digital wallets</a> to pay for goods and services. </p>
<p>About <a href="https://www.ausbanking.org.au/almost-40-leave-wallets-at-home/">40% of Australians</a> are comfortable leaving home without their actual wallets or even credit or debit cards, as long as they have their mobile devices with digital wallets.</p>
<p>The astonishing speed at which Australians have embraced digital payments places the country among the top users of cashless payments globally, surpassing the United States and European countries.</p>
<p>Digital wallets are not the only players in this space. The use of BNPL products is also growing rapidly in Australia, which was where many of the large-scale products in this category started.</p>
<p>The Australian Securities and Investment Commission (ASIC) reports the total value of all BNPL transactions increased by <a href="https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-672-buy-now-pay-later-an-industry-update/">79% in the 2018–19 financial year</a>. This continues into 2022 with an annual growth beyond 30% according to the <a href="https://www.rba.gov.au/publications/annual-reports/psb/2022/the-evolving-retail-payments-landscape.html">Reserve Bank of Australia</a> (RBA).</p>
<p>PayID and PayPal payments are also claiming their shares in this space. </p>
<h2>Are government regulations necessary?</h2>
<p>The government’s planned regulation of the system, contained in amendments to the Reforms to the Payment Systems (Regulation) Act 1998, is a big step towards establishing a secure and trustworthy cashless society in Australia.</p>
<p>It will subject BNPL and digital wallet service providers like Apple Pay and Google Pay to the same oversight by the RBA as traditional credit and debit cards.</p>
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Read more:
<a href="https://theconversation.com/no-spare-change-how-charities-buskers-and-beggars-arent-feeling-so-festive-in-our-cashless-society-151024">No spare change: how charities, buskers and beggars aren’t feeling so festive in our cashless society</a>
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<p>The regulations will require providers meet clear standards for security measures, data protection and dispute resolution to give Australians confidence their funds and personal information are safeguarded.</p>
<p>With increasing concern over cyber attacks, the regulations will help reduce the risk of fraudulent activities and money laundering and help identify suspicious transactions, maintaining the integrity of the financial system. </p>
<p>Also, regulation will promote fair competition and market stability by levelling the playing field and by preventing monopolies.</p>
<p>While banks support the forthcoming regulation, new market players are less positive. For example, Apple Pay says it is merely <a href="https://www.afr.com/companies/financial-services/new-rba-powers-to-regulate-apple-google-payments-20231010-p5eb6d">providing technical architecture</a> rather than payment services. </p>
<p>The current regulatory debate is not new. When credit cards made their debut in Australia in the early 1970s, there were hardly any safeguards for consumers. This led to card users being hit with high interest rates on money owed, sneaky fees and aggressive marketing tactics.</p>
<p>Consequently, regulations were introduced to hold card providers to a standard of responsible behaviour. Today, they must openly disclose interest rates, fees and charges, and follow stringent guidelines in advertising their products and services.</p>
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Read more:
<a href="https://theconversation.com/chinas-experience-with-mobile-payments-highlights-the-pros-and-cons-of-a-cashless-society-201177">China's experience with mobile payments highlights the pros and cons of a cashless society</a>
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<p>Regulating digital wallet providers strikes a crucial balance between innovation and accountability, ensuring life-changing technology continues to serve the public interest.</p>
<p>The shift towards a cashless society in Australia isn’t just a possibility, it’s already well underway.</p>
<p>The blend of technological advancements, changing consumer preferences and regulatory adaptations has set the stage for this transformation. The new regulations will help Australians navigate this transition more confidently.</p><img src="https://counter.theconversation.com/content/215446/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Angel Zhong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Regulating the increasingly popular digital payment providers will bring them into line with other payment services and help protect consumers.Angel Zhong, Associate Professor of Finance, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2032822023-04-07T17:29:51Z2023-04-07T17:29:51ZI tried to pay my taxes in cash – here’s what happened, and why the IRS should make it easier to do so<figure><img src="https://images.theconversation.com/files/519957/original/file-20230407-24-e52vep.jpg?ixlib=rb-1.1.0&rect=176%2C193%2C5431%2C3539&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It turns out paying taxes in cash ain't easy.
</span> <span class="attribution"><span class="source">nikom khotjan/Moment via Getty Images</span></span></figcaption></figure><p><a href="https://www.irs.gov/newsroom/filing-season-statistics-for-week-ending-december-30-2022">About two-thirds of all U.S. residents who file</a> federal income taxes typically get a refund. Unfortunately, this year I am among the other third who owe the Internal Revenue Service money. </p>
<p>So I tried something I’ve never done before and few people do: I wanted to <a href="https://theconversation.com/is-doing-your-taxes-making-you-crazy-heres-why-it-shouldnt-114572">pay my tax bill</a> in cash – that is, with real paper currency. </p>
<p>In our <a href="https://www.pcbb.com/bid/2023-02-15-is-the-us-moving-toward-a-cashless-society">nearly cashless society</a>, this might sound like a hassle.</p>
<h2>Why pay taxes in cash</h2>
<p>For one thing, I’m an economist <a href="https://blogs.bu.edu/zagorsky/">writing a book</a> explaining the <a href="https://theconversation.com/in-defense-of-cash-why-we-should-bring-back-the-500-note-and-other-big-bills-85880">advantages of using cash</a>, and I was simply curious what might happen. </p>
<p>But beyond my own <a href="http://businessmacroeconomics.com/">book-related</a> interest in paying taxes in cash, I had other reasons for wanting to do so. For years while teaching students about money, I noted the front of every piece of U.S. currency declares: “This note is legal tender for all debts public and private.”</p>
<p>The statement seemed ironic since I couldn’t <a href="https://theconversation.com/if-cash-is-king-how-can-stores-refuse-to-take-your-dollars-63516">figure out how to pay</a> income taxes, one of people’s most significant public debts, with currency. </p>
<p>I also wondered how difficult it is for the unbanked to pay taxes. <a href="https://www.fdic.gov/analysis/household-survey/index.html">Federal Deposit Insurance Corp. data shows</a> about 6 million households have no connection to the formal banking system.</p>
<p>The IRS does not publish data on the methods people use to pay their taxes, but several IRS employees I spoke with told me almost no one pays the IRS in cash. </p>
<figure class="align-center ">
<img alt="a one dollar bill" src="https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=277&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=277&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=277&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=348&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=348&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519952/original/file-20230407-3779-6wvjhi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=348&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Every U.S. bill declares that it can be used to pay any debt.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/one-us-dollar-bill-royalty-free-image/87243724?phrase=close%20up%20of%20dollar%20bill">Peter Dazeley/The Image Bank via Getty Images</a></span>
</figcaption>
</figure>
<h2>How to pay in cash</h2>
<p>The IRS certainly doesn’t make it easy to do so.</p>
<p>Recently, a student of mine pointed out where the <a href="https://www.irs.gov/payments/what-to-expect-when-you-pay-cash-at-an-irs-office">instructions for paying the government with paper money</a> are buried, so I gave it a try. The five-step set of instructions hinted that paying cash directly is a time-consuming process and that I needed to start a month or two before taxes are due.</p>
<p>Following the instructions, <a href="https://theconversation.com/why-most-of-us-procrastinate-in-filing-our-taxes-and-why-it-doesnt-make-any-sense-39766">I completed my taxes early</a> and learned I owed a bit more than US$1,000. Then I called on the phone to <a href="https://www.irs.gov/help/contact-your-local-irs-office">schedule a face-to-face appointment</a> with the IRS to see when and where I could pay.</p>
<p>The operator, who told me her name was “Ms. Johnson,” was cheerful and helpful – but tried her very best to dissuade me from paying in cash. She offered to walk me through the steps on the phone so that I could <a href="https://www.irs.gov/payments/direct-pay">pay online</a> and not have to come into my local IRS office.</p>
<h2>Alternative ways to pay ‘in cash’</h2>
<p>For example, the IRS suggests cash payers can “<a href="https://www.irs.gov/payments/pay-your-taxes-with-cash">Buy a prepaid credit card and pay online</a>.” </p>
<p>This sounds easy but turns out to be costly. For example, Walmart, one of the largest U.S. retailers, offers a <a href="https://www.walmartmoneycard.com/">reloadable basic debit card</a>. The <a href="https://www.walmartmoneycard.com/legal-info/fee-plan">card costs</a> $1 to buy, $6 per month in fees and $3 to load with cash. Once the card is loaded with money, the <a href="https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card">businesses the IRS uses to accept debit card payments charge</a> around $2.50 for each payment, with payments <a href="https://www.irs.gov/payments/frequency-limit-table-by-type-of-tax-payment">limited to two per year</a>.</p>
<p>The <a href="https://www.irs.gov/payments/pay-with-cash-at-a-retail-partner">IRS also has partnered with national chains</a> like CVS, Walgreens, 7-Eleven and Family Dollar to accept cash on its behalf. Their service fees are less, either $1.50 or $2.50 per payment. However, the steps needed to <a href="https://fed.acipayonline.com/index.jsp">navigate the online program</a> before you can show up at a retailer seemed almost as difficult as filling in the tax forms.</p>
<p>More importantly, this program has a $500 per payment limit and a $1,000 maximum amount accepted per year. This made the method impractical for me and for most people who owe the IRS money. <a href="https://www.irs.gov/pub/irs-soi/20in33ar.xls">The latest IRS figures</a> show people who owe income taxes on average pay over $6,000.</p>
<p>Or, I could <a href="https://www.irs.gov/payments/pay-by-debit-or-credit-card-when-you-e-file">use a credit or debit card</a>, but these methods charged around 2.5% more for the convenience. </p>
<p>After I declined all of Ms. Johnson’s alternative payment offers, she told me I was lucky. There was an appointment available at the downtown Boston <a href="https://apps.irs.gov/app/office-locator/">taxpayer assistance center</a> in a few days. Her schedule showed many other centers around the country were booked until May, long after taxes were due.</p>
<figure class="align-center ">
<img alt="a stone block has the letters internal revenue service carved into it behind the green leaves of a tree" src="https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519958/original/file-20230407-18-iuxkz7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The author had to go to an IRS assistance center to try to pay his taxes in cash.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/TaxSeasonBegins/98cf9ddeb9214107ad0fd1318e7bb74b/photo?Query=irs&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=2485&currentItemNo=43">AP Photo/Patrick Semansky</a></span>
</figcaption>
</figure>
<h2>An arduous process – but a successful one</h2>
<p>I had cash at home, but not enough. I went to the bank and made sure I got exact change in crisp new bills to make the transaction as easy as possible.</p>
<p>My goal was not to cause pain like the Virginia man who <a href="https://www.bbc.com/news/world-us-canada-38603615">used 300,000 coins to pay his motor vehicle bill</a> or the California man who pushed in <a href="https://abcnews.go.com/blogs/headlines/2013/01/california-man-pays-off-13000-property-tax-bill-in-coins-dollar-bills">wheelbarrows filled with $1 coins to pay his $13,000 property tax bill</a>. Nor was I interested in recreating the famous but fictional <a href="https://cap-press.com/sites/pj/articles/ThePractice2.htm">British case of Board of Inland Revenue v. Haddock</a>, in which Haddock tried paying his tax bill by writing a check on the side of a cow. <a href="https://www.snopes.com/fact-check/check-on-side-of-cow/">Although it never happened</a>, the case is still cited in legal circles.</p>
<p>I made it to the IRS building, went through airport-style screening and checked in on time. The receptionist was polite and again told me all the ways to pay without cash. After I declined, he asked me to take a seat in the waiting area filled with people clutching paperwork. As I walked away, the receptionist did a facepalm while shaking his head, which was not a positive sign.</p>
<p>After a 30-minute wait, another polite IRS worker came out and told me they could not accept cash that day because no courier was scheduled. Current IRS rules require that a courier take all cash immediately to the bank because they said “holding cash was not safe.” This is surprising given the federal office building was swarming with armed guards and required screening to enter.</p>
<p>I came back a week later when another cash payer was showing up. This time I had more success. It took 30 minutes, but after completing a multipart carbon form by hand, I got a receipt that said my taxes were paid.</p>
<h2>A simple solution</h2>
<p>Paying the IRS with cash is possible, but it turned out to be onerous and time-consuming. </p>
<p>I believe there is a simple solution. The <a href="https://www.law.cornell.edu/uscode/text/26/6302">Code of Federal Regulations</a>, which governs the IRS and other agencies, allows authorized banks to accept tax payments. The law doesn’t specify payment only by check or other methods. This means if procedures existed, taxpayers could walk into major banks, hand the teller cash and have the bank inform the IRS of the amount paid.</p>
<p>For people without bank accounts, their only option for paying taxes shouldn’t require paying fees to credit card processors or retailers – especially since they are likely among the poorest taxpayers.</p>
<p>If the government wants everyone to pay their taxes, why doesn’t it make it as easy as possible?</p><img src="https://counter.theconversation.com/content/203282/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the US increasingly becomes a cashless society, it’s getting harder to use currency to pay for things – including taxes. One fearless economist gave it a try.Jay L. Zagorsky, Clinical Associate Professor, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1756052022-02-22T14:21:22Z2022-02-22T14:21:22ZUganda takes another step on e-payments path: five things you should know<figure><img src="https://images.theconversation.com/files/442350/original/file-20220124-23335-22ag2j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A Ugandan woman sending money by phone. Godong/Universal Images Group via</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/ugandan-woman-sending-money-by-cell-phone-uganda-news-photo/924736304?adppopup=true">Getty Images</a></span></figcaption></figure><p><em>Long periods of limited physical contact under COVID-19 lockdowns triggered new interest in alternative payment methods beyond existing options. The Bank of Uganda is among institutions that have taken steps to promote a shift towards a cashless economy. It recently <a href="https://twitter.com/BOU_Official/status/1480467201291341825/photo/1">ordered</a> commercial banks to reduce by 50% the maximum amount customers can transact by cheque – from an upper limit of US$5,500 to US$2,750 – starting January 15. This move reflects a slow-rolling process across East Africa towards electronic payments. Mercy Muendo has studied information technology and law. We asked her to unpack five key points in the Bank of Uganda’s move</em>._</p>
<h2>1. What is e-payment?</h2>
<p>These are electronic payments for transactions made on the Internet. From a legal standpoint, it’s any form of payment made on the internet and conveyed via the internet. </p>
<p>With the advent of COVID-19 and ensuing restrictions on physical contacts, e-payments have been widely embraced. This has become a key catalyst in the ongoing shift towards a ‘cashless society’, a state when the economy no longer relies on notes and coins. </p>
<p>Traditional electronic payments entail the use of cards, real-time gross settlement system and electronic funds transfer (EFT). These require linking of transactions to physical bank accounts. Modern forms of e-payments include mobile money, and use of third party platforms.</p>
<p>Thanks to the invention of mobile money, many people have embraced e-payments. Third party platforms such as Pesapal, PayPal and Stripe, have also offered people alternative to the use of debit or credit cards.</p>
<h2>2. Is Uganda still very cash-dependent?</h2>
<p>A <a href="https://web.stanford.edu/%7Epdupas/BankingTheUnbanked.pdf">study</a> revealed that, by 2018, only 28% of Ugandans had bank accounts. The rest were literally <a href="https://www.ntv.co.ug/ug/news/national/experts-seek-to-bank-the-unbanked-3705314#:%7E:text=With%20just%206%20million%20bank,according%20to%20banking%20sector%20professionals.">unbanked</a> and dependent on cash and barter. This had made transition away from cash much harder. </p>
<p>In 2020, Uganda passed the <a href="https://bou.or.ug/bou/bouwebsite/bouwebsitecontent/acts/supervision_acts_regulations/Payment-Systems-Act/The-National-Payments-Systems-Act-2020.pdf">National Payments Systems Act</a> that governs electronic payment services. The Act seeks to safeguard consumers from harm that may arise from use of e-payment platforms. </p>
<p>It requires all electronic service providers to apply for licences, and have a physical trust account or minimum account balance. It also provides for regulatory sandbox framework for new entrants into the industry. </p>
<p>A sandbox is a temporary licence that allows a new entrant to test innovative payment before meeting all the market operation requirements. If the central bank feels that the product is harmful to the public, it can revoke such a licence. </p>
<p>It’s still too early to say what effect the law has had.</p>
<p>In December 2020, the Ugandan <a href="https://www.businesswire.com/news/home/20211220005413/en/Uganda-Mobile-Money-Industry-to-2026---Profiling-MTN-Uganda-and-Airtel---ResearchAndMarkets.com">mobile market</a> reached US$46 billion. The Bank of Uganda <a href="https://www.bou.or.ug/bou/bouwebsite/PaymentSystems/dataandstat.html">data</a> indicates that commercial banks accounted for 58% of the mobile transactions (USh93 trillion or US$26.7 billion), a growth from zero in 2010 and US$12.5 billion (USh43 trillion) in 2016.</p>
<p>This is a clear indication that the segment is fast expanding in the economy. </p>
<p>In neighbouring Kenya, the transition away from cash is well advanced. The country is the e-payment revolution leader in East Africa. <a href="https://www.knbs.or.ke/wp-content/uploads/2021/09/Economic-Survey-2021.pdf">Official data</a> shows a heavy reliance on mobile money during the COVID-19 lockdown. Total mobile money payments (transfers and e-commerce) almost tripled, from US$5.1 billion (Ksh5.1 trillion) in 2016 to US$14.6 billion in 2020.</p>
<h2>3. Why are central banks encouraging the switch?</h2>
<p>Central banks have the role of maintaining trust in the financial sector, overseeing transactions and curbing crimes such as money laundering. E-payments make it easy for banks to keep trail of transactions. Cash transactions traditionally involve a lot of paper work, and have to be verified through a number of entry documents. </p>
<p>For e-payments, the transactions are recorded in real time. One can also trace them via data interchange, commonly known as the mobile money or bank money transfer. </p>
<p>Another driver is financial inclusion. This means mass access to affordable products for transactions, payments, savings, credit and insurance. According to the <a href="https://www.worldbank.org/en/topic/financialinclusion">World Bank Group</a>, e-platforms have the potential to lower costs by maximising economies of scale. This increases speed, security and transparency of transactions. It also allows for evolution of tailored financial services that serve the poor. </p>
<p>In Kenya, a Central Bank <a href="https://www.centralbank.go.ke/uploads/financial_inclusion/2064908903_2021%20FinAccess%20Survey%20Report%20Launched_15%20Dec%202021.pdf">report</a> shows that access to formal financial services and products expanded, from 26.7% in 2006 to 82.9% 2019. That growth was mainly due to innovations like mobile money and mobile banking, states the report. It adds that access to formal financial services went up to 83.7% in 2021 “as a result of the effects of the evolving COVID-19 pandemic”. </p>
<p>Banks are also <a href="https://www.businessdailyafrica.com/bd/markets/market-news/number-of-atms-falls-to-8-year-low-3543278">increasingly</a> turning to electronic platforms as a cost-cutting measure. Costs such as staffing, maintaining ATMs and security that go with physical branching, are avoided. </p>
<h2>4. How have other countries promoted the switch?</h2>
<p>The quest for e-payment - and a cashless society - has <a href="https://www.un.org/africarenewal/magazine/may-july-2017/africa%E2%80%99s-quest-cashless-economy-gains-momentum">gained momentum</a> in Africa. A number of countries have introduced policies that discourage cash transactions and drafted regulations that protect e-platform users from overcharge, fraud and cyber attacks. </p>
<p>Rwanda, has a <a href="https://www.mfw4a.org/publication/rwanda-payment-system-strategy-towards-cashless-rwanda-2018-2024">national payment system strategy</a> that seeks to achieve a cashless economy by 2024. I would say that Rwanda is on the right track after it brought the private sector on board. The value of<a href="https://www.bnr.rw/browse-in/statistics/payment-system-statistics/mobile-payment/"> Rwanda’s</a> mobile payments grew nearly seven-fold, from US$1.78 billion (FRw1.8 trillion) in 2018, to US$7.085 billion (FRw7.1 trillion) in 2020.</p>
<p>Elsewhere, South Africa has already <a href="https://www.gov.za/speeches/south-african-reserve-bank-discontinuation-cheques-18-nov-2020-0000">banned</a> cheques, and has a <a href="https://www.usb.ac.za/usb_news/is-hard-cash-on-its-way-out-in-south-">policy</a> to guide its steps to becoming a cashless society by 2030. </p>
<h2>5. What are the risks?</h2>
<p>The shift to e-payment platforms comes with a whole network of intermediaries that act as facilitators of transactions. These parties rely on embedded chips, magnetic stripes and touch pads, which are vulnerable to hacking and other forms of cyber attacks.</p>
<p>The involvement of many intermediaries also exposes users to crimes such as fraud and money laundering, especially where the market is not regulated properly.</p>
<p>For instance, Interpol Uganda <a href="https://observer.ug/news/headlines/71555-11bn-lost-as-hackers-wreak-havoc-across-ugandan-banks">reported</a> that USh 14.4bn was lost in the year ending December 31, 2021, due to cyber attacks. </p>
<p>Most of these were insider attacks, arising from hacking and siphoning of mobile money from double SIM (subscriber identity module) cards. These are classified as insider attacks because they normally originate from the phone SIM card industry. </p>
<p>To mitigate risks, governments need to:</p>
<ul>
<li><p>regulate the issuance of SIM Cards and mobile money accounts</p></li>
<li><p>take an active role in determining unaccounted for accounts and finances</p></li>
<li><p>apply preventive and proactive measures to curb risks</p></li>
<li><p>use of directives and regulations to reduce likelihood of risks arising from new finance technologies</p></li>
<li><p>introduce diverse enforcement measures that are proportionate to the risks, but fostering growth at the same time</p></li>
<li><p>enforce know-your-customer-better requirements</p></li>
<li><p>adopt international financial standards that incorporate cybersecurity best standards.</p></li>
</ul><img src="https://counter.theconversation.com/content/175605/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mercy Muendo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>E-payments make it easy for banks to keep trail of transactions because they are recorded in real time.Mercy Muendo, Lecturer, Information Technology and the Law, Daystar UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762832022-02-13T07:14:04Z2022-02-13T07:14:04ZWhat it would take for more Ghanaians to adopt mobile payment systems<figure><img src="https://images.theconversation.com/files/445108/original/file-20220208-24-1oq7io8.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mobile operators also offer money sending and receiving services</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Mobile_operators_also_offer_money_sending_and_receiving_services.jpg">Waligorahim/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The introduction of information and communication technologies has created an opportunity for consumers to pay for products and services online and offline using mobile phones.</p>
<p>Transactions carried out through wireless and wired data transmission networks give consumers access as well as convenience to large amounts of products and services. </p>
<p>The introduction of these technologies in Ghana has created an enabling platform for consumers to use their mobile phones to pay for goods and services. Ghanaians have taken to e-commerce because of the convenience it provides for customers to pay and receive goods and services.</p>
<p>Unlike the developed countries, Ghana doesn’t have a well-developed infrastructure for the use of e-cards (debit or credit cards) for business transactions. So, consumers and businesses mostly rely on cash. This exposes consumers to risks, including health and theft as a result of having to carry physical cash. There is the need therefore to consider other safer methods of making and receiving payments. Mobile payments are one option.</p>
<p>Mobile payments have been in existence in the developed economies for some time and have been linked to improved business transaction. Consumers are able to shop 24/7 online in the comfort of their homes or businesses. This has resulted in increased transactions for businesses. </p>
<p>A recent <a href="https://www.accenture.com/%20t20151021T165757__w__/us-en/_acnmedia/Accenture/next-gen/na-payment-survey/pdfs/Accenture-Digital%20Payments-Survey-North-America-Accenture-Executive-Summary.pdf">study by Accenture</a> shows that in the coming years traditional payments will decrease in favour of digital payments. The study further predicted a significant increase in the use of retail apps (8%), Apple Pay™/Samsung Pay™ (7%) and PayPal (6%). </p>
<p>The reason for the sharp rise in mobile payment sales according to the report is due to the rapid growth of use of mobile payment technology.</p>
<p>Notwithstanding the abundance of literature on M-payment in the developed economies, few empirical studies have been carried out on the use of mobile payments in developing markets including Ghana. Again, an understanding of mobile users’ intention to adopt M-payment system in developing economies such as Ghana appears to be sparse or non-existent.</p>
<p>In Ghana, mobile money has become one of the most widely used mobile payments methods. Mobile money services has been in existence for over a decade. However, its use has shot up astronomically over the last couple of years as more consumers are using the services for payments of goods and services. It is estimated that about 38.9% of the population (15 years +) in <a href="https://www.statista.com/statistics/1175988/mobile-money-accounts-ghana/">Ghana</a> had a mobile money account as at January 2021. </p>
<p>Our <a href="https://www.researchgate.net/publication/356567739_Exploring_Consumers%27_Intention_to_Adopt_Mobile_Payment_Systems_in_Ghana">study</a> sought to close the gap in the literature on M-payment in developing economies such as Ghana. We developed a model to find out the determinants of mobile payments system adoption intentions among consumers in Ghana using three of the most popular theories used to explain online shopping behaviour. They are the <a href="https://www.sciencedirect.com/topics/medicine-and-dentistry/theory-of-reasoned-action">Theory of Reasoned Action </a>; <a href="https://www.sciencedirect.com/topics/social-sciences/technology-acceptance-model">Technology Acceptance Model</a>; and <a href="https://sphweb.bumc.bu.edu/otlt/mph-modules/sb/behavioralchangetheories/BehavioralChangeTheories3.html">Theory of Planned Behaviour</a> . </p>
<p>We wanted to know which factors would influence consumers adoption of mobile payment as a payment option for goods and services payment in Ghana. </p>
<h2>What we found</h2>
<p>We found that consumers’ intention to adopt mobile payment was indirectly influenced by other peoples’ perception and usage of the system. That is, when consumers saw celebrities and other social influencers adopting or using the system, they were likely to do the same. </p>
<p>This finding is in line with the assertion by some <a href="https://www.tandfonline.com/doi/full/10.1080/1331677X.2017.1305784">researchers</a> that consumers’ intention to adopt a particular technology is dependent on two factors. Firstly, the belief and trust a consumer has for people a consumer admires (the reference group). Secondly, the desire to imitate the reference group’s actions towards a product.</p>
<p>We also found a strong correlation between a product or a service’s perceived usefulness and the attitude and behavioural intention of consumers towards mobile payment adoption in Ghana. That is, consumers’ intention to adopt a mobile payment method is influenced by the consumers’ perception of the usefulness in achieving a desired result or outcome. The desired result could be the user’s ability to transact on the platform successfully. Another <a href="https://www.tandfonline.com/doi/full/10.1080/1331677X.2017.1305784">study</a> also made the same finding.</p>
<p>Our study also found that perceived ease of use had a significant positive effect on attitudes and perceived usefulness. Consumers would thus adopt a mobile payment method if they perceived the system as being easy to navigate. This result <a href="https://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-18762012000100008&lng=en&nrm=iso&tlng=en">concurs</a> with a study that found that perceived ease of use has a strong positive influence on technology adoption.</p>
<p>Attitudes and perceived security also influence consumers’ behavioural intention towards mobile payment system adoption. A 1% increase in a consumer’s attitude increased their intention towards mobile payment adoption by 22.7%. The same percentage in perceived security of the product or service, increased consumer intention towards mobile payment adoption by 15.8%. Failure to convince consumers about the safety and security of their transactions would have a negative effect on their likely adoption of a mobile payment system. </p>
<h2>How to improve mobile payment services</h2>
<p>Policy makers and service providers can learn from our findings. Perceived ease of use is regarded as one of the most important determinants of new technology adoption. The platform should therefore be designed in a way that consumers would find it easy and comfortable to use. Once consumers find the new technology easy to use and also realise the benefits they will have no problem in switching from the traditional mode of payments method to mobile payment option. </p>
<p>Perceived security is an important factor in the acceptance of new technologies. Implementation of adequate security measures to win consumer trust in the system and increase the chances of adoption and use of mobile payment system as a payment method should therefore be a priority.</p>
<p>Finally, government, businesses, and organisations should encourage the acceptance and use of m-payment system to complement existing payment methods and augment consumers’ payment behaviour. Moreover, it is mandatory that service providers and marketers recognise the implication of cultural values on intention towards M-payment system adoption.</p><img src="https://counter.theconversation.com/content/176283/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The introduction of these technologies in Ghana has created an enabling platform for consumers to use their mobile phones to pay for goods and servicesMasud Ibrahim, Lecturer, Management Studies, AAM University of Skills Training and Entrepreneurial Development Robert E. Hinson, Acting Director, Institutional Advancement, University of Ghana, University of GhanaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1721532021-11-18T14:13:47Z2021-11-18T14:13:47ZGhanaians should brace themselves: the electronic transactions tax is here to stay<figure><img src="https://images.theconversation.com/files/432590/original/file-20211118-21-1s4bvbs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Electronic payments have expanded the Ghanaian economy</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Ghana’s finance minister Ken Ofori-Atta has <a href="https://www.zawya.com/mena/en/story/Ghana_to_introduce_175_levy_on_all_electronic_transactions-TR20211117nL8N2S84CBX3/">announced</a> that the government intends to introduce an electronic transaction levy (e-levy) in the 2022 budget. He said this was to “widen the tax net and rope in the informal sector”.</p>
<p>The proposed levy, which will come into effect on 1 February 2022, is a charge of 1.75% of the value of electronic transactions. It covers mobile money payments, bank transfers, merchant payments and inward remittances. The originator of the transactions will bear the charge except for inward remittances, which will be borne by the recipient. There is an exemption for transactions up to GH¢100 (US$ 16) per day. </p>
<p>According to the Finance Minister, the total digital transactions for 2020 were <a href="https://www.myjoyonline.com/1-75-applicable-rate-to-be-charged-on-all-electronic-transactions-finance-minister/?param=">estimated</a> to be over GH¢500 billion (about US$81 billion) compared to GH¢78 billion (US$12.5billion) in 2016. Huge growth in just five years. </p>
<p>While the justification for this new levy is to widen the tax net, since the <a href="https://www.tandfonline.com/doi/full/10.1080/23311886.2019.1656383">majority of the population</a> make a living in the informal sector, it seems a convenient means to increase government revenue. Initial response to the announcement of the levy has been one of displeasure and fears that it will affect the country’s current digitisation agenda.</p>
<p>I do not expect these responses to lead to a reversal, as was done <a href="https://citinewsroom.com/2021/11/reversing-benchmark-values-justified-reduction-caused-more-harm-john-kumah/">recently</a> with the payment of benchmark values at ports. However, the government may revisit the implementation and subsequent charges given the existing cost on mobile money. </p>
<p>There are a number of reasons why the government is not likely to backtrack. Ghanaians should brace themselves for this levy.</p>
<h2>Why government may not backtrack</h2>
<p><strong>No viable alternatives:</strong> Though this e-levy may force some people to resort to the use of cash, for the majority, there is no viable alternative. At the moment, electronic payment, especially mobile money, is the most efficient and cost effective means of transferring money since it is <a href="https://www.modernghana.com/news/1073072/gh5718bn-momo-transactions-recorded-in-2020.html">widely accessible</a> in Ghana. Its wide use is because of its convenience especially in rural areas. The only alternative is to use banks, which have limited branches. And banks themselves are now digitising their services to minimise the use of cash. </p>
<p>My <a href="https://www.sciencedirect.com/science/article/abs/pii/S0166497220300365?via%3Dihub">research</a> into the use of financial technology in Ghana has shown that in the absence of practical alternatives, mobile money is the only means for many people to access financial services. The research also indicates that the cost associated with mobile money is not an inhibitor. Thus, irrespective of the e-levy, people will still use mobile money. </p>
<p><strong>Easy means of generating revenue:</strong> Successive governments have failed to find innovative solutions to expand the tax net to include the informal sector, although this sector employs the <a href="https://www.sciencedirect.com/science/article/pii/S2590291120300838">majority of Ghanaians</a> at about 85% of the urban economy. As many people, including those in the informal sector, use mobile money, the government <a href="https://www.mofep.gov.gh/sites/default/files/news/2022-Budget-Statement.pdf">sees</a> it as an easy way of taxing the informal sector. <a href="https://citinewsroom.com/2021/11/ghbudget-1-75-levy-slapped-on-momo-other-electronic-transactions/">Estimates</a> show that in 2020, the total volume of mobile money transactions was over US$99 billion (GH¢561 billion) far <a href="https://www.myjoyonline.com/momo-transactions-outstrip-cheque-by-gh232bn-in-just-four-months/?param=#:%7E:text=Total%20value%20of%20mobile%20money%20transactions%20far%20exceeded%20the%20value,about%20GH%C2%A2180%20billion.">surpassing cheque and cash transactions</a> which stood at US$29 billion. </p>
<p>Given the potential revenue the government can generate and as it is unable to devise any innovative solution to tax the informal sector, mobile money taxation appears to be the easy way out.</p>
<p><strong>Digital payment institutionalisation:</strong> In recent times, the government has embarked on <a href="https://theconversation.com/ghanas-new-mobile-money-rule-could-derail-financial-inclusion-but-there-are-answers-158770">digitalisation projects</a> to reduce the use of cash. Among these is the <a href="https://www.bog.gov.gh/wp-content/uploads/2021/08/CBDC-Joint-Press-Release-BoG-GD-3.pdf">e-currency (e-cedi) project</a>, in which the Central Bank will issue its “own version of mobile money”. The roll-out of the e-cedi may further limit the use of cash, forcing people to use electronic payments, so people will have to pay the e-levy. </p>
<p>The government is also moving to a digital only payment option for its services, to curb corruption and revenue leaks. This means that without digital payment, people may struggle to access certain services such as getting a passport or driver’s licence, registering a company or clearing goods at the port. It’s another reason people will have little choice but to pay the e-levy. </p>
<p><strong>Digital payment normalisation:</strong> With emergence of COVID and imposition of restriction on movement and the fact that mobile money, bank accounts and cards have become more <a href="https://telecomschamber.com/news-media/industry-news/ghana-launches-mobile-money-interoperability-system">closely linked</a>, many people resorted to digital transactions and payment for most of their day to day economic activities. The government <a href="https://www.mofep.gov.gh/sites/default/files/news/2022-Budget-Statement.pdf">asserts</a> that the <a href="https://www.modernghana.com/news/1119368/full-text-2022-economic-policy-and-budget-statem.html">value of digital transactions</a> rose by 120% between February 2020 and February 2021. In the previous year it rose 44%. The government is aware that most people are now accustomed to online transactions. They are convenient and people will find it difficult to revert to physical transactions. </p>
<p>Many people will not be in favour of the e-levy because of existing charges on mobile money. There is also the risk that it could derail the growth of the Ghanaian FinTech ecosystem by making Ghana unattractive for FinTech startups. For instance, this e-levy will reduce the profit margins of FinTech startups who may not wish to pass on the cost to consumers. In 2021, <a href="https://www.myzeepay.com/">Zeepay</a>, an indigenous Ghanaian FinTech Firm alone attracted about US$7.6 million <a href="https://africafeeds.com/2021/07/01/zeepay-completes-series-a-fund-raise-at-7-9-million/">investment</a>. </p>
<p>Given the direct and indirect benefits FinTech contributes to economies, this e-levy will become an additional problem for already struggling FinTech startups. It appears that the government is only thinking of short term revenue gains. Thus, government should relook at the implementation and strategically target the tax instead of the blanket e-levy on digital payment. It should be guided by lessons from other countries like <a href="https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/16727/ICTD_WP123.pdf?sequence=1&isAllowed=y">Uganda</a> who have also implemented mobile money tax.</p><img src="https://counter.theconversation.com/content/172153/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>PK Senyo receives funding from Innovate UK, ESRC, and UKRI. </span></em></p>Taxing electronic payments is key to raising revenue form the informal sectorPK Senyo, Associate Professor in FinTech & Information Systems, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1510242020-12-17T19:07:55Z2020-12-17T19:07:55ZNo spare change: how charities, buskers and beggars aren’t feeling so festive in our cashless society<figure><img src="https://images.theconversation.com/files/375547/original/file-20201216-23-lu6ktw.jpg?ixlib=rb-1.1.0&rect=15%2C0%2C5160%2C3445&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Collectors for the Paralympic Games carried donation buckets ahead of the recent Santa parade in Auckland, asking for gold coin donations. Onlookers shrugged them off: “Sorry, no cash on me!” </p>
<p>To the rescue, a charity volunteer waved a contactless “tap-and-go” machine that could connect straight to users’ bank accounts. But only a few people reached for their wallets to pull out their cards. </p>
<p>This anecdote reflects a global trend. As the Salvation Army reports, the usual American holiday fundraising drive has struggled in 2020, with <a href="https://www.npr.org/2020/11/24/938095233/with-less-money-in-its-red-kettles-the-salvation-army-rallies-to-save-the-holida">50% fewer donations</a> than last year. </p>
<p>Cash is changing hands less frequently than ever before. In the US, it accounted for <a href="https://www.retailcustomerexperience.com/articles/the-pandemic-and-cash-use-what-are-the-facts-2/">30% of retail purchases</a> in 2020, down from 40% in 2009. In the UK, the change has been even more rapid: only <a href="https://www.bankofengland.co.uk/quarterly-bulletin/2020/2020-q4/cash-in-the-time-of-covid">23% of payments</a> are made in cash, down from 60% in 2009.</p>
<p>We may be becoming a cashless society, but <a href="https://easychair.org/smart-program/AMS_AC47/2019-05-30.html#talk:89714">our research shows</a> people are also less receptive to using contactless technology when casually solicited by charities. What happens when your traditional business model relies on bills and coins? </p>
<h2>Cash is running out</h2>
<p>Cheques and bank cards have been around for decades, but financial technology (fintech) innovations have increased exponentially in recent years. From tap-and-go card readers at retail sites and e-banking apps on smart phones, to peer-to-peer payment apps such as <a href="https://venmo.com/">Venmo</a> and PayPal that allow one-touch cashless money transfers, it’s a digital consumer world.</p>
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Read more:
<a href="https://theconversation.com/brand-activism-is-moving-up-the-supply-chain-corporate-accountability-or-commercial-censorship-151749">Brand activism is moving up the supply chain — corporate accountability or commercial censorship?</a>
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<p>COVID-19 has <a href="https://www.forbes.com/sites/michaeltae/2020/11/30/lessons-from-the-fintech-revolutions-of-the-past-and-winning-post-covid/">further fuelled</a> the cashless revolution. In the early days of the pandemic, the World Health Organization had to <a href="https://www.marketwatch.com/story/who-we-did-not-say-that-cash-was-transmitting-coronavirus-2020-03-06">deny reports</a> that cash was spreading the coronavirus, but advised people to wash their hands after touching real money. Digital finance and fintech apps saw a <a href="https://www.zora.uzh.ch/id/eprint/187776/">24-32% boost</a> in daily download rates as the pandemic surged.</p>
<p>The declining velocity of cash transactions even led to the US Federal Reserve rationing certain denominations in mid-2020, telling commercial banks it was <a href="https://www.economist.com/finance-and-economics/2020/11/21/why-money-is-changing-hands-much-less-frequently">running out of spare change</a>. Cash withdrawals fell precipitously in the UK, with <a href="https://www.bankofengland.co.uk/quarterly-bulletin/2020/2020-q4/cash-in-the-time-of-covid">40% fewer people</a> withdrawing money from ATMs than in 2019.</p>
<p>By November, “contactless preferred” signs had become the new norm for consumers. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=364&fit=crop&dpr=1 600w, https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=364&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=364&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=458&fit=crop&dpr=1 754w, https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=458&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/375480/original/file-20201216-19-u4t2t4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=458&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A street performer in Boston soliciting both cash and P2P app donations.</span>
<span class="attribution"><span class="source">Author provided</span></span>
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<h2>Overcoming consumer resistance</h2>
<p>While retailers and online merchants have benefited from cashless payment options, donation-seekers are left rattling an empty cup. </p>
<p>Aside from people carrying less cash, our research <a href="https://easychair.org/smart-program/AMS_AC47/2019-05-30.html#talk:89714">suggests</a> another major reason is that people simply don’t expect to see beggars or buskers with a swipe machine, or a QR code or Venmo symbol on their signs. </p>
<p>We tested this using simple measures of reaction time. People responded faster to cashless options in retail settings or with institutional charities, but took the longest to respond in casual situations, such as street appeals or requests for cash outside malls and shops. </p>
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Read more:
<a href="https://theconversation.com/woke-washing-what-happens-when-marketing-communications-dont-match-corporate-practice-108035">Woke washing: what happens when marketing communications don't match corporate practice</a>
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<p>This makes sense: it feels relatively normal at a formal charity gala, for instance, to use cashless payment methods. For casual fundraisers and the needy, however, it is a major obstacle.</p>
<p>Unlike other kinds of charitable donation, giving to the homeless and needy is almost exclusively impulsive. People typically donate spare change if and when they have it. It’s hardly surprising, then, that beggars and panhandlers have been <a href="https://www.telegraph.co.uk/news/shopping-and-consumer-news/11634608/A-cashless-society-could-be-a-nightmare-for-the-homeless.html">seeing less spare change</a> since 2015. </p>
<h2>A question of trust</h2>
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<a href="https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="panhandler with sign" src="https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=699&fit=crop&dpr=1 600w, https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=699&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=699&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=879&fit=crop&dpr=1 754w, https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=879&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/375473/original/file-20201216-15-hs4ur6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=879&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A Boston panhandler soliciting donations through the Venmo payment app.</span>
<span class="attribution"><span class="source">Author provided</span></span>
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<p>However, there are initiatives aimed at helping donation-seekers adapt to the new normal. Salvation Army bell ringers in the US now accept Apple Pay and Google Pay, while some buskers list their Venmo handles on their instrument cases.</p>
<p>In China, WeChat QR codes are <a href="https://www.businessinsider.com/alipay-wechat-pay-china-mobile-payments-street-vendors-musicians-2018-5">distributed to the homeless</a> to allow mobile donations. And in California, <a href="https://europepmc.org/article/med/30530464">32% of homeless people</a> have been gifted smart phones from <a href="https://www.fcc.gov/lifeline-consumers">social programs</a> to help them access social and governmental services. </p>
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Read more:
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<p><a href="https://www.dipjar.com/">Dipjar</a> is a one-swipe credit card machine that bundles transactions for non-profit organisations. And <a href="https://busk.co">The Busking Project</a> offers a peer-to-peer payment app that allows fans to connect to street performers and make in-app donations.</p>
<p>Yet <a href="https://easychair.org/smart-program/AMS_AC47/2019-05-30.html#talk:89714">scepticism and prejudice</a> tend to greet old-fashioned donation-seekers using modern payment methods. There is an element of trust involved in swiping a credit card, and our research suggests these solutions will have limited practical effect for the foreseeable future. </p>
<p>We need to remember, of course, that consumer acceptance of credit, swipe and other non-cash payment methods has <a href="https://press.princeton.edu/books/hardcover/9780691168685/money-talks">evolved over 50 years</a>. The next time a worthy group or needy individual asks for your help and presents a swipe machine or an app, your response will help determine the pace of this next evolutionary step.</p><img src="https://counter.theconversation.com/content/151024/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Christmas is traditionally a time of giving, including to charities and the needy. But what happens when so few of us carry cash anymore?Spencer M. Ross, Assistant Professor of Marketing, UMass LowellSommer Kapitan, Senior Lecturer in Marketing, Auckland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1408992020-10-07T18:13:36Z2020-10-07T18:13:36ZLack of ID can endanger already vulnerable people during COVID-19 pandemic<figure><img src="https://images.theconversation.com/files/360403/original/file-20200928-24-11pmtkm.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3594%2C2596&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">COVID-19 restrictions like physical distancing and cashless payment are making life more difficult for those already vulnerable. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span></figcaption></figure><p>Rod Maxwell, a young Indigenous man from northern British Columbia, was forced to live on the streets of downtown Vancouver last March <a href="https://www.cbc.ca/news/canada/british-columbia/indigenous-man-stranded-dtes-1.5504544">after his personal identification was stolen</a>. Maxwell had travelled to the city to access health-care services unavailable in his rural community. After his identification was stolen, he was left with no alternative but to live on the streets of downtown.</p>
<p>He now lives and sleeps in close proximity with other people experiencing homelessness and unable to practise effective physical distancing. He doesn’t have the money to replace his personal ID. Even though family members want to purchase a transportation ticket for him, without identification he is unable to get on a bus or train. There are organizations in Vancouver that would normally help with replacing his ID, but due to COVID-19 these services have been temporarily suspended. </p>
<p>This case sheds light on the issue of personal identification for marginalized and underserved people who are made further vulnerable because they lack forms of official identification. Ultimately he is a bureaucratic hostage. An apt metaphor for someone rendered exceedingly vulnerable and marginalized due to being without identification at a time when it is vital to have but nearly impossible to obtain.</p>
<h2>Surviving COVID-19 without ID</h2>
<p>Individuals living without personal identification are unable to access most, if not all, of the health, social and economic supports available during the current pandemic. There are many individuals living without forms of essential identification like a birth certificate, health card, social insurance number (SIN) and driver’s licence. Without these forms of ID <a href="https://doi.org/10.3390/ijerph16040567">it is nearly impossible to access necessary income and health supports.</a></p>
<p>Government agencies like <a href="https://www.theglobeandmail.com/politics/article-ottawa-considers-shutting-down-service-canada-centres-as-employees/?utm_source">Service Ontario and Service Canada have reduced their hours in response to COVID-19 restrictions</a>. Non-profit organizations that <a href="http://neighbourhoodlink.org/partners-for-access-and-identification-paid/">normally hold ID clinics,</a> cover the costs of obtaining personal identification or provide a mailing address have been forced to reduce or altogether eliminate their services during the pandemic. </p>
<p>To avoid creating more bureaucratic hostages in a time of crisis, policy and emergency responses must deal with the needs and circumstances of the most marginalized people in our society.</p>
<p>Businesses and essential services have implemented physical distancing rules to limit person-to-person contact. Notably, many are <a href="https://www.bnnbloomberg.ca/covid-19-could-accelerate-shift-to-cashless-experts-say-1.1442318">asking customers to pay using debit and credit cards or e-transfers</a> instead of cash. This comes along with increased efforts by government agencies to transition to e-banking for the distribution of income supports during the current pandemic. </p>
<figure class="align-center ">
<img alt="A phone being used to make a cashless payment" src="https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/348995/original/file-20200722-30-1gaa5z3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many businesses have moved to cashless payment due to the pandemic. But that often disadvantages those whose only option is paying by cash.</span>
<span class="attribution"><span class="source">(Jonas Leupe/Unsplash)</span></span>
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<p>Discouraging the use of paper money and unnecessary face-to-face contact during the pandemic is reasonable. However, there are many people who are unable to go cashless. Such measures risk excluding individuals who are already vulnerable. </p>
<p>Many people live without access to financial institutions for a variety of reasons including a lack of birth certificate or other forms of personal identification. In Canada, for instance, <a href="https://www.canada.ca/en/financial-consumer-agency/services/banking/opening-bank-account.html">financial institutions require two pieces of personal identification to open an account</a>: a photo ID with signature (not including a health card) and a SIN. However, a birth certificate is required to obtain the required forms of ID. To get a SIN, for example, individuals need at least a birth certificate and access to a broad range of parental information that some may not have, <a href="https://www.canada.ca/en/employment-social-development/services/sin/before-applying.html">including primary documents (not photocopies)</a>. Without these forms of ID it is virtually impossible to obtain a bank card, effectively barring people from the cashless economy.</p>
<p>Many individuals and families who are experiencing economic hardship during this period rely on food banks. <a href="https://vancouversun.com/news/local-news/starting-april-1-food-bank-users-will-need-to-prove-low-income-status-and-address/">Most food banks in Canada require personal ID for individuals to access their services</a>. While it is difficult to know exactly how many Canadians are without ID, <a href="https://this.org/2017/03/31/what-it-means-to-be-a-canadian-living-without-id/">reputable sources conservatively estimate the number to be in the thousands.</a> </p>
<p>Our preliminary research suggests the numbers may be much higher in the territories and northern areas of provinces, where there is limited access to health-care resources and social services. Many people simply do not have access to those documents and information, cannot afford the added cost of a personal ID application or lack a fixed address to receive the documents, all of which means that it is nearly impossible to obtain personal identification now that they need it most. A lack of ID and the systemic barriers that make it difficult to acquire identification operate within a <a href="https://doi.org/10.3390/ijerph17124227">structure of existing social and economic inequalities in our society</a>.</p>
<p>Policies should not be implemented if they render people <a href="https://www.cbc.ca/news/canada/british-columbia/indigenous-man-stranded-dtes-1.5504544">bureaucratic hostages</a> and make it almost impossible for those who most need assistance to get help. </p>
<h2>Modest interventions can make a big difference</h2>
<p>Relatively straightforward bureaucratic fixes can have a meaningful impact. Governments should <a href="https://www.ontario.ca/page/get-or-replace-ontario-birth-certificate">reduce or eliminate fees associated with birth certificate applications</a>. <a href="https://doi.org/10.3390/ijerph17124227">Our research finds</a> that even birth certificate applications fees as low as $25 still present a major barrier for many low-income individuals.</p>
<p>Why not waive fees altogether? Providing people with birth certificates should not be a fee-driven service as this unintentionally imposes yet another obstacle to possessing ID for many people, particularly low-income people.</p>
<p>Governments should also reduce bureaucratic requirements for obtaining a birth certificate especially during crisis periods. Some requirements for birth certificate applicants — like mother’s maiden name at time of birth or physical signatures — also present major barriers, particularly for people with deceased or estranged parents. </p>
<p>In light of COVID-19, agencies like the Canada Revenue Agency are enacting <a href="https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-electronic-signatures.html">alternatives to physical signatures</a> in order to accommodate Canadians during this challenging time. The same must be done to help people attain vital documents at a time when having access to personal identification is more important than ever.</p><img src="https://counter.theconversation.com/content/140899/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kristin Burnett receives funding from SSHRC</span></em></p><p class="fine-print"><em><span>Chris Sanders receives funding from Social Sciences and Humanities Research Council (SSHRC).</span></em></p>The outbreak of the COVID-19 pandemic has exposed gaps in the health-care system that leave those without identification documents vulnerable.Kristin Burnett, Profesor in the Department of Indigneous Studies, Lakehead UniversityChris Sanders, Associate Professor of Sociology, Lakehead UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1461872020-09-29T06:50:19Z2020-09-29T06:50:19ZGoing cashless isn’t straightforward. Ask Sweden, or Zimbabwe<figure><img src="https://images.theconversation.com/files/360451/original/file-20200929-22-1f4tl7k.jpg?ixlib=rb-1.1.0&rect=0%2C22%2C3840%2C2132&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>“No Cash Accepted” signs are increasingly common in Australian shops, thanks to COVID-19. Even before the the pandemic struck, though, we were well along the cashless path, with demand for coins <a href="https://www.theguardian.com/business/2020/jun/24/virtually-no-demand-for-coins-in-covid-19-era-as-australias-shift-from-cash-to-digital-hastens">halving between 2013 and 2019</a>.</p>
<p>For the most part Australians have taken cashless payments in their stride. A fully cashless society is often envisaged as inevitable. </p>
<p>But the experiences of Sweden and Zimbabwe, two very different countries that have gone much farther down the path to a cashless society, highlight the pitfalls of such thinking. Sweden shows the need to safeguard access to cash. Zimbabwe shows the importance of the transition not being forced.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/cashless-payment-is-booming-thanks-to-coronavirus-so-is-financial-surveillance-145179">Cashless payment is booming, thanks to coronavirus. So is financial surveillance</a>
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<h2>Sweden’s cashless experience</h2>
<p>Sweden was quick to move toward a cashless society. In the decade to 2018, its central bank, <a href="https://www.riksbank.se/en-gb/payments--cash/payments-in-sweden/payments-in-sweden-2019/the-payment-market-is-being-digitalised/card-payments-still-dominate/">the Riksbank</a>, says the proportion of purchases in shops using cash dropped from about 40% to 13%. Now even panhandlers and <a href="https://www.npr.org/2019/02/11/691334123/swedens-cashless-experiment-is-it-too-much-too-fast">public toilets</a> take cards or a mobile payment system called Swish.</p>
<figure class="align-center ">
<img alt="Sweden's Swish app on smart phone." src="https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=451&fit=crop&dpr=1 600w, https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=451&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=451&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/360423/original/file-20200929-14-1jzpez3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Sweden’s Swish payment system is widely used.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<p>But the bloom started coming off Sweden’s cashless rose relatively quickly. </p>
<p>Over the past few years Swedes have been increasingly concerned about the elderly, those living in rural areas and people from migrant backgrounds being left behind by businesses switching to Swish no longer accepting cash.</p>
<p>Last year all but one of Sweden’s political parties supported new laws requiring Sweden’s major banks to continue to offer cash services across the country. </p>
<p>Britain’s government has also promised to guarantee access to cash, with the UK Treasury drafting legislation <a href="https://www.thetimes.co.uk/edition/news/banks-may-be-forced-to-keep-cash-for-the-elderly-lfp50hq20?utm_medium=Social">based on the Swedish laws</a>. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-a-cashless-society-would-hurt-the-poor-a-lesson-from-india-79735">Why a 'cashless' society would hurt the poor: A lesson from India</a>
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<p>In Australia, research by the Reserve Bank of Australia (from 2019) suggests <a href="https://www.rba.gov.au/publications/bulletin/2020/jun/cash-use-in-australia-results-from-the-2019-consumer-payments-survey.html">about a quarter</a> of the population remain “high cash users”, for whom no longer being able to use cash would be “a major inconvenience or genuine hardship”:</p>
<blockquote>
<p>These high cash users are more likely to be older, have lower household income, live in regional areas, and/or have limited internet access. </p>
</blockquote>
<p>With the vast majority of Australians still wanting <a href="https://www.theadvocate.com.au/story/6850914/cashless-society-moving-closer-but-most-of-us-dont-want-it/">the choice of cash</a>, the moral from Sweden is maintaining access to cash is likely to require regulation.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/depending-on-who-you-are-the-benefits-of-a-cashless-society-are-overrated-113268">Depending on who you are, the benefits of a cashless society are overrated</a>
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<h2>Zimbabwe’s cashless experience</h2>
<p>The lesson from Zimbabwe’s experience with cashless transactions is rather different. It’s about the importance of the move to cashless being voluntary, and occurring organically. </p>
<p>While the conditions shaping Zimbabwe’s experience are unlikely to be replicated in Australia, it is nonetheless worth understanding for the broader moral. </p>
<p>In Sweden the transition to cashless payments was overwhelmingly welcomed. In Zimbabwe, the change was mixed up with bigger economic travails. It was neither wanted nor particularly welcomed.</p>
<p>Zimbabwe’s chequered history of economic crises include hyperinflation hitting <a href="http://news.bbc.co.uk/2/hi/africa/7660569.stm">231,000,000% in October 2008</a>. To deal with that problem, in 2009 the government suspended the Zimbabwean dollar and instead allowed Zimbabweans to use foreign currencies as legal tender. US dollars fast became the cash of choice. </p>
<p>This de facto “dollarisation” stabilised the economy, but it also resulted in a scarcity of cash. Supply could not be topped up by the government printing money. The supply of US dollars was also reduced by their use to buy imports as well as being stashed away as savings. </p>
<p>Government attempts to address this cash shortage, such the introduction of a “surrogate currency” in 2014, failed due to the lack of popular trust. Zimbabweans instead turned to electronic payment platforms such as Ecocash, a phone-based money-transfer service. By 2017, 96% of all transactions were <a href="https://itweb.africa/content/JBwErvnBaYjv6Db2">electronic</a>.</p>
<h2>Use shapes understanding</h2>
<p>In Sweden, the transition to cashless payments has not fundamentally affected people’s concepts of money and value.</p>
<p>In Zimbabwe, however, the move toward cashlessness has been experienced as a disruption of pre-existing forms of economic life, rather than their seamless extension. </p>
<p>It is tainted by distrust in government institutions and the value of all money. “Bad cash is better than good plastic!” as one street trader in Bulawayo (Zimbabwe’s second-largest city) told me. </p>
<p>This crisis of trust in the very understanding of money is worth noting at a time when the COVID-19 pandemic accelerates our move to cashless transactions. Changes in everyday economic life brought about by the shift to cashless transactions have the potential to reshape how we understand money in unpredictable ways.</p><img src="https://counter.theconversation.com/content/146187/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Vasantkumar does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A fully cashless society has often been presented as natural or inevitable. The experiences of Sweden and Zimbabwe highlight some pitfalls.Chris Vasantkumar, Lecturer in Anthropology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1387742020-07-07T13:41:17Z2020-07-07T13:41:17ZCash and the coronavirus: COVID-19 is changing our relationship with money<figure><img src="https://images.theconversation.com/files/343574/original/file-20200623-188891-erstsw.jpg?ixlib=rb-1.1.0&rect=0%2C100%2C5184%2C3344&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The coronavirus pandemic may provide another incentive for some countries to move to e-currencies.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>The coronavirus pandemic has prompted retailers to ask customers to wear masks, maintain physical distancing and avoid the use of cash when possible. Despite scientific evidence indicating that <a href="https://globalnews.ca/news/6712120/coronavirus-cash-precautions/">currency doesn’t transmit COVID-19</a>, there continues to be an unprecedented weariness around the use of cash altogether. </p>
<p>At the peak of the global pandemic, banks in China and South Korea began <a href="https://www.theguardian.com/world/2020/feb/15/chinese-banks-disinfect-banknotes-to-stop-spread-of-coronavirus">disinfecting and quarantining bank notes</a> to slow the spread of the novel coronavirus. Other central banks have refused to adopt such measures, communicating that risks posed by handling cash are low compared to other objects that are frequently touched, such as PIN pads.</p>
<p>The Bank of Canada, for example, encouraged retailers to <a href="https://www.theglobeandmail.com/business/article-bank-of-canada-asks-retailers-to-stop-refusing-cash-payments-over/">stop refusing cash</a> because it could disproportionately affect those who are dependent on cash as a form of payment. </p>
<p>Despite such assurances, fear of transmitting the virus could accelerate the trend of digital payment apps and reduce the use of cash in society.</p>
<p>Although digital payment systems such as Apple Pay, Venmo and Google Pay have become much more <a href="https://www.payments.ca/sites/default/files/12-Dec-18/paymentscanada_trendsreport2018_13.pdf">widespread in recent years</a>, these payment apps were not meant to replace existing currency. These apps also haven’t substantially reduced the amount of cash in circulation. </p>
<h2>Cashless in a crisis</h2>
<p>The Bank for International Settlements, which advises central banks around the world, <a href="https://www.bis.org/publ/bisbull03.pdf">released a bulletin</a> in April that said the pandemic could speed up the shift toward digital payments around the world, including central bank digital currencies. That’s not a surprise. A global crisis can often act as a catalyst for <a href="https://doi.org/10.1080/13501760802453221">structural change</a>. </p>
<p>For instance, the <a href="https://www.theguardian.com/world/2009/sep/23/swedish-cash-depot-helicopter-raid">2009 Västberga heist</a> led to a cashless society in Sweden. As a string of robberies occurred in shops, banks and even buses, Sweden moved to reduce cash circulation as a way to protect workers. Cash use in Sweden has since been <a href="https://www.riksbank.se/globalassets/media/rapporter/sa-betalar-svenskarna/2019/engelska/payments-in-sweden-2019.pdf">on the decline</a>, from 39 per cent in 2010 to 13 per cent in 2018. Currently about 20 per cent of retailers in the country no longer accept cash. </p>
<p>Sweden’s central bank, the Riksbank, announced in 2017 that it would initiate a pilot program exploring the viability of a national digital currency called the <a href="https://www.riksbank.se/en-gb/payments--cash/e-krona/">e-krona</a>. The Riksbank <a href="https://www.riksbank.se/en-gb/press-and-published/notices-and-press-releases/notices/2020/the-riksbank-to-test-technical-solution-for-the-e-krona/">recently launched</a> a joint project with Accenture to determine the technical aspects of the e-krona. The only details released so far indicate the digital currency will use blockchain technology. However, <a href="https://www.riksbank.se/globalassets/media/rapporter/e-krona/2017/rapport_ekrona_uppdaterad_170920_eng.pdf">previous reports from the pilot</a> concluded the e-krona would be centrally managed, ensuring the central bank would have firm control over money supply.</p>
<h2>China’s digital currency trials</h2>
<p>China recently <a href="https://www.theguardian.com/world/2020/apr/28/china-starts-major-trial-of-state-run-digital-currency">launched a pilot program of its digital yuan</a> in four major cities, but details of the national digital currency are scarce.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343859/original/file-20200624-133002-xnnj69.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Chinese national flag flutters in front of the People’s Bank of China in Beijing.</span>
<span class="attribution"><span class="source">(AP Photo/Andy Wong)</span></span>
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<p>The digital yuan is backed by China’s central bank, the People’s Bank of China, and pegged to the national currency. This sovereign digital currency is unlikely to resemble traditional cryptocurrencies such as Bitcoin, which support decentralization and are not issued or managed by a central authority. The Chinese digital currency allegedly uses <a href="https://www.usna.edu/Users/cs/wcbrown/courses/si110AY13S/lec/l26/lec.html">asymmetric cryptography</a> (public/private keys) and smart contracts, which allows for <a href="https://in.reuters.com/article/china-markets-digital-currency/chinas-digital-currency-not-seeking-full-control-of-individuals-details-central-bank-official-idINKBN1XM0JA">controllable anonymity</a> and the prevention of counterfeiting.</p>
<p>The centralized design of the digital yuan would provide the Chinese government with unmatched oversight over money flows and transactions. Moreover, the People’s Bank of China has <a href="https://www.reuters.com/article/us-china-markets-digital-currency/chinas-proposed-digital-currency-more-about-policing-than-progress-idUSKBN1XB3QP">filed over 50 patents</a> related to the digital yuan and plans to distribute the digital currency through commercial banks. The bank is also exploring a tracking system that would trace the digital currency’s movement.</p>
<p>The timing of the digital yuan launching comes when the rest of the world is <a href="https://business.financialpost.com/news/economy/cp-newsalert-bank-of-canada-cutting-overnight-rate-target-to-0-75-per-cent">cutting interest rates</a> and dealing with the global pandemic, providing China with an unusual opportunity. The objective of the digital yuan is to increase its circulation, with the end goal of becoming a global currency much like the U.S. dollar.</p>
<p>China also aims to beat private competitors, such as <a href="https://libra.org/en-US/">Facebook’s Libra</a>, by maintaining control over the country’s financial security. China believes digital currencies that are not issued by governments or central banks are a threat to sovereignty.</p>
<h2>Digital currency coming to Canada?</h2>
<p>The Bank of Canada appears to have a strong interest in rethinking the nature of cash and reinventing the role of central banking. A recent <a href="https://careers.bankofcanada.ca/job/Ottawa-%28Downtown%29-Project-Manager%2C-CBDC-ON/540226217/">job posting</a> at the central bank indicated it would be “embarking on a program of major social significance” by designing and presumably deploying its own central bank digital currency system. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343860/original/file-20200624-132996-1patx6z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Like other central banks around the world, the Bank of Canada may be considering the creation of a digital currency system.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Adrian Wyld</span></span>
</figcaption>
</figure>
<p>The proposed digital currency would protect user privacy, but it would not provide the same anonymity as cash transactions. It’s intended to be accessible, indicating the digital currency could be used by all Canadians, even those who don’t have a bank account or a mobile phone. </p>
<p>Many countries have been experimenting with digital currencies since the growing interest in blockchain and cryptocurrency emerged. As central banks attempt to enter the race of developing digital currencies, governments must first examine whether such a move will actually help the economy. Citizens must also think critically before jumping on board because national digital currencies have serious <a href="https://theconversation.com/a-national-digital-currency-has-serious-privacy-implications-130520">privacy implications</a>. </p>
<p>There seems to be some leeway with introducing change during a crisis, as the experiments in China and Sweden display. But the introduction of a digital currency during a crisis could provide governments with frightening new powers. The role of the state could drastically change as nations shift towards a cashless society, which encourages central banks to adapt in order to maintain firm control over money supply.</p><img src="https://counter.theconversation.com/content/138774/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anwar Sheluchin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There’s no indication that handling cash increases your chance of catching COVID-19. But that hasn’t stopped countries around the world from looking at digital currencies.Anwar Sheluchin, PhD Student, Political Science, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1132682019-03-20T18:52:56Z2019-03-20T18:52:56ZDepending on who you are, the benefits of a cashless society are overrated<figure><img src="https://images.theconversation.com/files/264772/original/file-20190320-60953-1qxyr6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cashless payment systems are not socially neutral. They discriminate against the 'unbanked'.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>After recreational cannabis use became legal in Canada last October, research shows the number of <a href="https://blogs.lse.ac.uk/businessreview/2019/02/26/legalising-cannabis-reduced-the-use-of-cash-in-canada/">bank notes in circulation</a> fell sharply. Before, marijuana buyers used cash to keep their transactions anonymous. After, there was a massive switch to the convenience of cashless payments. </p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/264780/original/file-20190320-60990-3lofhl.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The fall in October was particularly large and contrasts with average monthly gains of 0.4 per cent over the previous five years.</span>
<span class="attribution"><a class="source" href="https://blogs.lse.ac.uk/businessreview/2019/02/26/legalising-cannabis-reduced-the-use-of-cash-in-canada/">Bank of Canada</a></span>
</figcaption>
</figure>
<hr>
<p>It’s a prime example of what makes a cashless society so attractive to law makers and enforcers wanting to put the squeeze on the “black economy” that can’t be tracked or taxed.</p>
<p>But not everyone clinging to cash has illicit motivations. </p>
<p>This month Philadelphia became the first major US city requiring all merchants to accept cash. This week the state of New Jersey followed suit. Other US cities and states are considering the same.</p>
<p>The chief concern is that cashless payment systems discriminate <a href="https://www.wsj.com/articles/philadelphia-is-first-u-s-city-to-ban-cashless-stores-11551967201?mod=hp_lead_pos5">against the
“unbanked”</a> – those without a bank account – making life harder for those already on the margins. “It’s really a fairness issue,” said the <a href="https://www.phillyvoice.com/philadelphia-ban-cashless-stores-first-us-city/">councillor who sponsored the ban</a>. “Equal access is what we’re trying to get.”</p>
<p>So as nations make plans to become cashless societies, and automated teller machines start to go the way of telephone booths, it’s timely to consider the pros and cons of cashless payments. We need ensure our enthusiastic <a href="https://theconversation.com/australia-may-be-closer-to-being-a-cashless-society-but-it-wont-happen-by-2020-75258">march to the future</a> does not trample over people or leave them behind. </p>
<h2>Counting the unbanked</h2>
<p>A <a href="https://economicinclusion.gov/">national survey</a> by the US Federal Deposit Insurance Corporation shows about 8.4 million US households – or 6.5% of all households – were unbanked in 2017. Philadelphia’s new law is primarily to protect such people. </p>
<p>Taking effect on July 1, the law requires most stores to accept cash, and forbids them charging a surcharge for paying with cash. New York, Washington and Chicago are among the cities investigating similar measures.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-cash-remains-sacred-in-american-churches-79167">Why cash remains sacred in American churches</a>
</strong>
</em>
</p>
<hr>
<p>In Britain a <a href="https://www.accesstocash.org.uk/media/1087/final-report-final-web.pdf">review of cash accessibility</a> headed by former chief financial ombudsman Natalie Ceeney has urged financial regulators to stop the country “<a href="https://www.finextra.com/newsarticle/33482/access-to-cash-system-on-verge-of-collapse-warns-report?utm_medium=newsflash&utm_source=2019-3-6&member=103992">sleepwalking</a>” into a cashless society. Its report, published this month, recommends a national guarantee that consumers will be able to access and use cash for as long as they need it.</p>
<p>About 17% of the British population – over 8 million adults – would struggle to cope in a cashless society, the report says: “While most of society recognises the benefits of digital payments, our research shows the technology doesn’t yet work for everyone.” </p>
<p>The tip of the iceberg is the decline in bank branches and ATMs. Two-thirds of bank branches have closed <a href="https://www.ft.com/content/1947ac8e-e8d2-11e8-a34c-663b3f553b35">in the past three decades</a>, and the rate of closure in accelerating. Cashpoints are disappearing at <a href="https://www.finextra.com/newsarticle/33386/the-numbers-dont-add-up-universal-provision-of-access-to-cash-called-into-question?utm_medium=dailynewsletter&utm_source=2019-2-15&member=6040">a rate of nearly 500 a month</a>. </p>
<h2>Learning from Sweden</h2>
<p>But this is simply the most obvious symptom, according to the Ceeney report, with evidence from other countries demonstrating the issue of merchants accepting cash is more important.</p>
<p>“Sweden, the most cashless society in the world, outlines the dangers of sleepwalking into a cashless society: millions of people could potentially be left out of the economy,” it says, “and face increased risks of isolation, exploitation, debt and rising costs.”</p>
<p>About 85% of transactions in Sweden are now digital. Half the nation’s retailers expect to stop accepting cash before 2025. </p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/264792/original/file-20190320-60953-1bfehan.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Percentage of Swedes that used cash for their most recent purchase.</span>
<span class="attribution"><a class="source" href="https://www.riksbank.se/en-gb/statistics/payments-notes-and-coins/payment-patterns/">The Riksbank</a></span>
</figcaption>
</figure>
<hr>
<p>The nation is now counting the societal costs.</p>
<p>The Riksbank, Sweden’s Central Bank, is asking all banks to keep providing and accepting cash while government works out how best to protect those <a href="https://www.riksbank.se/en-gb/statistics/payments-notes-and-coins/payment-patterns/">who most rely on cash</a> – such as those aged 65 or more, those living in rural areas, those with disabilities and recent immigrants. </p>
<p>An estimated 1 million Swedes are not comfortable with using a computer or smart phone to do their banking. Immigrants often do not have a bank account or credit history to get a payment card.</p>
<h2>Considering consequences</h2>
<p>“If cash disappears that would be a big change, with major implications for society and the economy,” Mats Dillen, the head of the Swedish Parliament Committee studying the issue, <a href="https://www.nytimes.com/2018/11/21/business/sweden-cashless-society.html">has said</a>. “We need to pause and think about whether this is good or bad and not just sit back and let it happen.” </p>
<p>The New York City Council member pushing the bill to ban cashless-only stores, Ritchie Torres, agrees. He is particularly concerned about the issues of class and ethnic discrimination. </p>
<p>“I started coming across coffee shops and cafés that were exclusively cashless and I thought: but what if I was a low-income New Yorker who has no access to a card?” <a href="http://www.grubstreet.com/amp/2018/11/new-bill-would-make-cash-free-businesses-restaurants-illegal.html">Ritchie Torres has explained</a>. “I thought about it more and realised that even if a policy seems neutral in theory it can be racially exclusionary in practice.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-a-cashless-society-would-hurt-the-poor-a-lesson-from-india-79735">Why a 'cashless' society would hurt the poor: A lesson from India</a>
</strong>
</em>
</p>
<hr>
<p>"In some ways making a payment card a requirement for consumption is analogous to making identification a requirement for voting. The effect is the same: it disempowers communities of colour.” </p>
<p>These are timely reminders that we should never assume that technological change is value-free, or necessarily an improvement. All revolutions have their hidden costs. We need to ensure those costs are shared equitably, and that no one is accidentally disadvantaged by them.</p><img src="https://counter.theconversation.com/content/113268/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As cashless societies become a reality, we’re starting to see this technological revolution has a dark side.Steve Worthington, Adjunct Professor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/995582018-07-17T11:55:44Z2018-07-17T11:55:44ZUnused £321m trapped on dormant Oyster cards – and time may be running out to get it back<figure><img src="https://images.theconversation.com/files/227036/original/file-20180710-70072-h9lbms.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Topping up.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-april-17-2018-passengers-1071469106?src=yI5vOnSrqkdMzpS0q5QOZQ-1-13">shutterstock</a></span></figcaption></figure><p>It is 15 years since Transport for London (TfL) launched the Oyster card on London’s buses and tube trains, but Oyster hasn’t had a very happy birthday.</p>
<p>Instead of cake, candles and raised glasses, news broke that money trapped on dormant Oyster cards amounts to £321m, a princely sum that has effectively been loaned, interest-free from the public to TfL. This <a href="https://news.sky.com/story/dormant-oyster-card-cash-mountain-totals-321m-11421714">“mountain of cash”</a> exists as credit on cards that haven’t been used for at least a year – either lost, damaged, abandoned, or stashed away.</p>
<p>To followers of Oyster-nomics, this is just one more episode in a marked decline affecting Oyster and similar top-up based systems. More and more cards have been slipping into disuse, while the percentage of journeys using Oyster has plummeted. Where did these troubles come from, and might the so-called cash mountain be the final straw?</p>
<h2>Oyster vs Octopus</h2>
<p>To understand Oyster’s problems, we need to take a look at its history.</p>
<p>London was not the first world city to introduce labour-saving methods on its public transport, and there have been many attempts to use technology to ease the passage of commuters cramming into buses and trains. In the 1960s, the Japanese launched a cardboard ticket with a <a href="https://www.omron.com/about/history/founder/04/">magnetic stripe</a> on the back. The system is still used today, including on some British railway lines and the Mexico City metro.</p>
<p>In Hong Kong during the 1990s a diverse group of companies collaborated to develop Octopus – a payment card with a chip that dramatically reduced the city’s use of cash. Initially, the card solely served the city’s vast transport network – a direct forerunner of Oyster – but slowly expanded to include convenience stores, fast food restaurants and more.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227039/original/file-20180710-70045-xfwvap.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">They look better too.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hong-kong-china-may-5-2018-1088258894?src=BRNxz7Sc_WC-gGgrLYEiaw-1-19">shutterstock</a></span>
</figcaption>
</figure>
<p>By <a href="http://www.mtr.com.hk/archive/corporate/en/investor/annual2017/EMTRAR2017F.pdf">December 2017</a>, more than 10,000 Hong Kong shops and service providers were accepting Octopus payments from 34m cards – accounting for 15m transactions a day. These corresponded to a daily spend of around HK$194m (£18.7m).</p>
<p>The Oyster card seems brittle by comparison. While Octopus morphed into a contactless, stored value smart card capable of online and offline transactions, Oyster remains a glorified travel card. TfL oversees <a href="http://content.tfl.gov.uk/tfl-draft-annual-report-2017-2018.pdf">3.99 billion journeys</a> every year, so have easily had the influence and financial muscle to help develop Oyster if they had wanted. Predominantly, they have chosen not to.</p>
<p>At one stage there were ambitions to expand the Oyster network to Britain’s ATMs, so that customers would be able to top-up at any hole-in-the-wall. But in the course of <a href="https://global.oup.com/academic/product/cash-and-dash-9780198782810?cc=gb&lang=en&">our ATM research</a>, interviewees in the banking sector suggested it was political infighting in LINK – the sole ATM network in the UK – that kept the plans on the shelf, rather than any technological or commercial concern. A clear missed opportunity for Oyster to develop, Octopus-esque, and establish similar schemes across the country.</p>
<p>As it is, while some global counterparts have evolved to keep up with the new applications of contactless technology, Oyster has been touching in and out the same way since 2003.</p>
<h2>Going for gold</h2>
<p>Perhaps unexpectedly, the 2012 London Olympics dealt the Oyster card a body blow. Preparations for the games included plans to make Olympic sites <a href="https://www.dailystar.co.uk/news/latest-news/95825/Plastic-Games-at-London-Olympics">“cash-free zones”</a> in a bid to cut queues and stop criminals targeting visitors.</p>
<p>After much lobbying, this led to TfL starting to accept EMV payments. “EMV” – “Europay, Mastercard, Visa” – refers to technical specifications which, within specific guidelines, make chips in payment cards and point-of-sale terminals compatible. This allowed contactless bank cards to be used instead of Oyster, initially on London’s <a href="https://www.theatlantic.com/technology/archive/2013/01/londons-tube-is-getting-contactless-payments-could-they-work-in-the-us/267300/">8,500-strong fleet of red buses</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227037/original/file-20180710-70063-nm2z9h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The London Olympics delivered an unexpected blow to the Oyster monopoly.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-aug-6-2012-tower-bridge-460761517?src=1lWJqwxo2mDAC_5q-CC19g-1-5">shutterstock</a></span>
</figcaption>
</figure>
<p>By the end of 2013, London’s entire network of buses, tube trains, trams, metropolitan rail lines, and TfL-operated river boats was open to EMV payments, and in 2014 TfL doubled down by banning cash payment for bus fares. At the time, fewer than 40% of the 96m debit cards and 58m credit cards in the UK were contactless, but by the end of 2017, 70% of all payment cards had contactless capabilities. Similar trends were expected in the wallets of many of London’s 15m or so annual <a href="https://www.bbc.co.uk/news/uk-england-london-32812460">overseas visitors</a>. </p>
<p>Since the London Olympics in 2012, Oyster travel has dropped by 20%, while EMV journeys grew from <a href="https://tfl.gov.uk/corporate/publications-and-reports/contactless-payment">79,421 in 2014 to 723,098 in 2017</a> – a factor of more than nine. The number of unused Oyster cards doubled between 2013 and 2017 from 27m to 53m. As for the cash mountain, that’s been growing by an average of 25% per year since 2014, from £123m to the whopping £321m now quoted in the press.</p>
<h2>An Oyster with no pearl</h2>
<p>In effect, punters have loaned TfL this money, interest-free, and there’s no guarantee it will be fully returned. When breaking the news, Liberal Democrat London Assembly member Caroline Pidgeon stated that it was “time TfL devoted far more time and energy telling the public how they can get their own money back.” </p>
<p>But as with energy companies, TfL has no financial incentive to persuade the public to withdraw their balances. Gas bills at least are usually large enough to jerk the claimant into action, whereas Oyster balances are spread across 76m units (73% of which have lain dormant for a year or more), each containing an average of <a href="https://tfl.gov.uk/corporate/publications-and-reports/oyster-card">£2.86</a>. One solution would be to imitate airlines and air miles – TfL could set a deadline by which to withdraw dormant money, or lose anything that goes unclaimed.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=415&fit=crop&dpr=1 600w, https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=415&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=415&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=521&fit=crop&dpr=1 754w, https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=521&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/227042/original/file-20180710-70066-54gr27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=521&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Punters can now pay for their morning torture in more ways than ever before.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/underground-151196600?src=hMB0p500T2jTrzpZa5XNAw-1-6">shutterstock</a></span>
</figcaption>
</figure>
<p>This dormant money has set off alarm bells across the pre-paid industry, and shows how non-financial organisations can heavily affect the way payment methods develop. In this case the bargaining power clearly lies with the transport operator (TfL) and not the user as, regardless of people’s preferences, they have to conform to the operator’s choice of payment method. Whether Oyster stays or goes will depend on TfL’s strategy, not on benefits to users.</p>
<p>Nevertheless, this is just one narrative in a much wider story: cash transactions are digitising, payment methods proliferating, and top-up systems like Oyster must evolve quickly or face extinction. Advances barely on the horizon a few years ago are now setting the industry standard, and the Oyster card has spent 15 years in stasis. One day soon it may be touching out for good.</p><img src="https://counter.theconversation.com/content/99558/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bernardo Bátiz-Lazo has received funding to research ATM and payments history from the British Academy, Fundación de Estudios Financieros (Fundef-ITAM), Charles Babbage Institute and the Hagley Museum and Archives. He is also active in the ATM Industry Association, consults with KAL ATM Software and is a regular contributor to <a href="http://www.atmmarketplace.com">www.atmmarketplace.com</a>.</span></em></p><p class="fine-print"><em><span>Prachandra Shakya does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A dormant ‘cash mountain’ marks a nadir for London’s contactless travel card, but trouble has been brewing for some time.Bernardo Batiz-Lazo, Professor of Business History and Bank Management, Bangor UniversityPrachandra Shakya, PhD Candidate, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/858802017-10-20T01:15:36Z2017-10-20T01:15:36ZIn defense of cash: why we should bring back the $500 note and other big bills<figure><img src="https://images.theconversation.com/files/191112/original/file-20171019-1048-1mv1fkj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 'war on cash' is slowly eliminating paper currency. </span> <span class="attribution"><span class="source">Thanatos Media/Shutterstock.com</span></span></figcaption></figure><p>A <a href="https://www.washingtonpost.com/the-pros-and-cons-of-ditching-cash-for-electronic-currency/2012/03/05/gIQAhCTC4R_story.html?utm_term=.6c1540bcf83a">world without cash</a> seems wonderful at first glance since it is <a href="http://nypost.com/2017/07/14/what-living-in-a-cashless-society-will-look-like/">convenient and fast</a>. You don’t need to withdraw dollars or euros ahead of time. You don’t have to worry about money being lost or stolen. Paying for things with your phone is a breeze.</p>
<p>Many countries around the world are steadily shifting away from cash. <a href="http://www.telegraph.co.uk/money/future-of-money/10-cashless-countries-world-does-uk-rank/">Canada</a>, the United Kingdom and <a href="https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-europe">Sweden</a> have already largely embraced a cashless society. The U.S. is also <a href="https://www.bostonfed.org/publications/research-data-report/2016/2014-survey-of-consumer-payment-choice-summary-results.aspx">steadily making the move</a>, with people holding smaller amounts of cash.</p>
<p>However, the recent string of natural disasters and security breaches at major financial entities exposes a huge flaw in this trend: When the power goes out, telephone lines shut down or account information is stolen, it is impossible to use ATMs, credit or debit cards or mobile payments – no matter how rich you are. </p>
<p>In other words, giving up cash increases the chance of the kind of economic catastrophe that results when people can no longer easily trade for the goods they need and want. The solution to this national security issue is simple: bring back the currently maligned large denomination bills like the $500, which <a href="http://www.investopedia.com/slide-show/past-us-currency-denominations/">was discontinued</a> in 1969.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=520&fit=crop&dpr=1 600w, https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=520&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=520&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=654&fit=crop&dpr=1 754w, https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=654&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/191114/original/file-20171019-1062-oyw6fp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=654&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">President William McKinley was the last face to adorn the $500 note before it was discontinued in 1969.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:US-$500-GC-1928-Fr-2407.jpg">National Numismatic Collection, National Museum of American History</a></span>
</figcaption>
</figure>
<h2>Countries going cashless</h2>
<p>Recently, some prominent economists have suggested countries should move to a cashless society, with actions like eliminating the $100 bill. </p>
<p>Kenneth Rogoff, a Harvard professor who was also chief economist of the International Monetary Fund, wrote in the <a href="https://www.wsj.com/articles/should-we-move-to-a-mostly-cashless-society-1506305220">Wall Street Journal</a> that <a href="http://www.journals.uchicago.edu/doi/abs/10.1086/680657">going cashless</a> reduces crime by ensuring tax cheats, drug lords, gangs and terrorists cannot easily fund their activities. </p>
<p>If only small bills are allowed, then people making illegal payments need briefcases <a href="https://www.reference.com/science/much-one-million-dollars-weigh-7ab82498c203efdb">stacked with huge numbers</a> of small denomination bills like $5 and $10s. This is much more difficult than discreetly using a small envelope filled with a few very high value notes.</p>
<p>Some countries have eliminated high value notes to reduce corruption. <a href="https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3270">India</a> in <a href="https://www.nytimes.com/2016/11/09/business/india-bans-largest-currency-bills-for-now-n-bid-to-cut-corruption.html">2016 eliminated the 500-rupee</a> (about $7.69) and 1,000-rupee notes for this reason before bringing in <a href="https://economictimes.indiatimes.com/news/economy/policy/rbi-to-issue-rs-200-note-tomorrow-here-is-how-it-looks/articleshow/60205741.cms">new denominations</a>. </p>
<p>Larry Summers, an economist who was also president of Harvard and a Treasury secretary, <a href="https://www.washingtonpost.com/news/wonk/wp/2016/02/16/its-time-to-kill-the-100-bill/?tid=a_inl&utm_term=.9a6f50b61a1b">also argued for eliminating both the $100 bill</a> and €500 note (about $592) from circulation. A few months after his recommendation, the European Central Bank decided to stop <a href="https://www.ecb.europa.eu/press/pr/date/2016/html/pr160504.en.html">issuing the large bills</a> by the end of 2018 in an attempt to <a href="https://www.nytimes.com/2016/05/05/business/international/ecb-to-remove-500-bill-the-bin-laden-bank-note-criminals.html">reduce corruption and terrorism</a>. The <a href="https://www.wsj.com/articles/end-the-100-bill-uncle-sam-says-no-1466155982">Wall Street Journal reports</a>, however, that there is no move yet to kill off Ben Franklin and his $100 note.</p>
<h2>Risks of a cashless society</h2>
<p>While eliminating high value notes does make illegal transactions harder, it also introduces new risks. A cashless society that solely uses credit cards, debit cards and electronic transfers is dependent on a <a href="https://www.authorize.net/resources/echeckdiagram/">complex network</a> to replace physical money. This network requires three things to work all the time.</p>
<p>First, there always has to be electricity to power the computers and network storage. Second, communication between all parts of the network needs to be available. Finally, the network has to be secure, so only authorized money transactions occur.</p>
<p>All three of these fundamental requirements for a cashless society have broken down recently in dramatic fashion.</p>
<p><a href="http://www.cnn.com/2017/10/14/us/puerto-rico-recovery/index.html">Hurricanes Irma and Maria devastated</a> Puerto Rico in September. Many weeks later, <a href="https://www.nbcnews.com/storyline/puerto-rico-crisis/puerto-rico-takes-steps-boost-electric-power-next-week-n811561">less than 20 percent of the electricity has been restored</a>, and no one really knows when the rest of the island will regain power. Because the electricity has been cut off to almost all cities and towns, the entire <a href="https://www.nytimes.com/2017/09/29/us/puerto-rico-shortages-cash.html">island has reverted to a economy based on cash</a>, which is in very short supply. Credit and debit cards can’t be used because there is no way to process transactions and no power to run credit card terminals and readers.</p>
<p>Wildfires are currently <a href="https://www.cnbc.com/2017/10/15/california-wildfires-death-toll-reaches-40-fires-now-100-miles-wide.html">ravaging Northern California</a>. One of the problems caused by the fires is that the flames have <a href="http://www.mercurynews.com/2017/10/10/danger-road-closures-hamper-efforts-to-restore-phone-and-internet-service-in-fire-areas/">destroyed numerous cell towers</a>. When the phone network goes down, it is impossible both to reach loved ones and for credit and debit card readers to connect to the network. Without a connection, those without cash can’t buy fuel to flee, pay hotels for temporary shelter or purchase food.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/191117/original/file-20171019-1072-23jr3e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The devastation in Puerto Rico wrought by recent hurricanes shows what can happen when a society is too reliant on electronic money and cash is in short supply.</span>
<span class="attribution"><span class="source">AP Photo/Carlos Giusti</span></span>
</figcaption>
</figure>
<p>Finally, we’ve recently learned how unsecure the network that processes transactions and protects our financial data has become. As most people do not possess piles of coins or bills anymore, our money consists of entries in bank and brokerage databases. If those entries change or disappear, people’s wealth vanishes, too.</p>
<p>The <a href="https://www.wsj.com/articles/pentagon-turns-to-high-speed-traders-to-fortify-markets-against-cyberattack-1508065202">Pentagon is trying to ensure</a> that cyberattacks cannot disrupt the financial system. Nevertheless, the <a href="https://www.nytimes.com/2017/10/15/world/asia/north-korea-hacking-cyber-sony.html">capabilities of rogue actors</a>, like North Korea, are increasing. It has even been <a href="https://www.wsj.com/articles/north-korea-link-suspected-in-taiwan-bank-cyberheist-1508246101">implicated in stealing millions</a> from a Taiwanese bank.</p>
<p>The recent breach of <a href="https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do">Equifax’s database</a> and <a href="http://thehill.com/policy/cybersecurity/279255-fdic-reports-five-major-data-breach-incidents">hacks</a> at <a href="https://www.bloomberg.com/news/articles/2017-07-26/unicredit-says-400-000-clients-affected-by-security-breach">numerous other</a> financial <a href="https://www.scmagazine.com/scottrade-bank-data-breach-exposes-20000-customers-personal-information/article/649030/">institutions</a> show security is a major problem.</p>
<p>These events show just how precarious the three pillars of a cashless society are and how quickly they can falter. When this network breaks down, people who do not have <a href="https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/">cash are forced to barter</a>. Bartering is devastating for an economy, in part because it needs a “<a href="https://www.thoughtco.com/the-double-coincidence-of-wants-defintion-1147998">double coincidence of wants</a>.”</p>
<p>A double coincidence means your desire to trade something has to happen or coincide at the exact same moment someone else wants what you are offering – and has something you want as well. Moreover, few people in a <a href="http://businessmacroeconomics.com/">modern economy</a> own many goods or can provide services that are useful for bartering. When a natural disaster or war strikes, no one wants to barter for collections of antique dolls, baseball cards or china.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/191118/original/file-20171019-1062-qk1ee4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A woman trades fish for ginger near Gauhati, India.</span>
<span class="attribution"><span class="source">AP Photo/Anupam Nath</span></span>
</figcaption>
</figure>
<h2>A solution</h2>
<p>When it works, a cashless society is wonderful. I enjoy not having to carry or worry about cash when I travel. The networks, when they work, are amazing. I have checked my bank balance on the edge of a desert in Botswana using an ATM and paid my taxes from a cell phone in Tokyo.</p>
<p>However, a cashless society means a country’s economy is vulnerable to anything that causes a long-term disruption in power, communications or security. And those threats are rising. The number of <a href="https://theconversation.com/are-catastrophic-disasters-striking-more-often-83599">natural disasters striking the U.S. is increasing</a>, and wars are <a href="https://www.nytimes.com/2017/10/15/world/asia/north-korea-hacking-cyber-sony.html">no longer being fought</a> using just conventional weapons. Today the <a href="https://www.wsj.com/articles/u-s-army-outlines-new-approach-to-shifting-battlefields-1507521602">computers that control a country</a> are playing a much bigger role.</p>
<p>Shifting to a cashless economy makes a country more vulnerable to both disasters and wars. National defense is not only about boots, guns and bullets. It is about keeping the economy running at all times. Cash can ensure the economy won’t collapse in an emergency, since people with cash are still able to buy and sell.</p>
<p>The solution is simple. Governments need to bring back higher value <a href="http://www.bankrate.com/financing/banking/pictures-of-big-bills-500-1000-5000-10000/">notes like $500 bills</a>. There clearly are negatives to bringing back large bills, which make it easier for crime and corruption to flourish. I believe, however, that the positives outweigh the negatives, particularly the usefulness of cash during disasters.</p>
<p>Whether governments bring back larger bills or not, store some cash at home in case of emergency. When disaster is about to strike and it is time to flee, having cash in your wallet or purse can make the difference. Cash gives you purchasing power when everything else fails.</p><img src="https://counter.theconversation.com/content/85880/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A cashless society depends on three things, all of which have failed in recent weeks as a result of natural disasters and security breaches.Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/797352017-06-26T21:20:10Z2017-06-26T21:20:10ZWhy a ‘cashless’ society would hurt the poor: A lesson from India<figure><img src="https://images.theconversation.com/files/175498/original/file-20170625-13450-p7gx9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A bank official counts discontinued rupee notes. </span> <span class="attribution"><span class="source">AP Photo/ Anupam Nath</span></span></figcaption></figure><p>India <a href="http://indianexpress.com/article/india/india-news-india/narendra-modi-prime-minister-address-to-the-nation4364609/">recently tried</a> to reduce the use of cash in its economy by eliminating, overnight, two of its most widely used bills in what was called demonetization.</p>
<p>While the effort – initially explained as an attempt to curb “black money” – <a href="https://www.nytimes.com/2017/01/24/world/asia/in-its-third-month-indias-cash-shortage-begins-to-bite.html?_r=0">has been a failure in many respects</a>, it was part of an ongoing and <a href="http://theconversation.com/cash-is-falling-out-of-fashion-will-it-disappear-forever-79316">global push toward cashlessness</a>. </p>
<p>What India and other governments have failed to contend with, however, is the adverse effect such severe policies have on the poor, who seldom use banks.</p>
<p>India’s working poor rely almost exclusively on cash, with <a href="http://documents.worldbank.org/curated/en/765851467037506667/pdf/106633-WP-PUBLIC-Innovative-Solutions-Accelerate-Adoption-Electronic-Payments-Merchants-report-2016.pdf">about 97 percent of all transactions</a> involving an exchange of rupees. With 93 percent 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. </p>
<p>My own research on the persistence of Delhi’s informal recycling economy shows just how important cash is to low-income laborers. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=296&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=296&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=296&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=372&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=372&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175495/original/file-20170625-13435-1bq94lt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=372&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Indians stand in a queue outside a bank to withdraw cash in Ahmadabad, India, in December.</span>
<span class="attribution"><span class="source">AP Photo/Ajit Solanki</span></span>
</figcaption>
</figure>
<h2>How Delhi’s informal recycling economy works</h2>
<p>For the past few years, my work has focused on informal garbage collectors in a northwest Delhi neighborhood who collect garbage for middle-class residents across the city. </p>
<p>Beyond collecting trash, <a href="http://www.worldcat.org/title/of-poverty-and-plastic-scavenging-and-scrap-trading-entrepreneurs-in-indias-urban-informal-economy/oclc/958715213?referer=di&ht=edition">these workers also constitute</a> the city’s only recycling service by separating out and selling plastics, papers, metal and other valuable scrap – including human hair sold for wigs and stale bread used for cow feed. The money they earn from selling these materials is how they support their families. </p>
<p>While my research focus was to understand how an informal economy like this one persists when confronted with formal government-backed services, I also learned how the exchange of cash between buyers and collectors of scrap helped structure community life by creating durable social bonds that functioned like contracts.</p>
<p>Over 20 months from 2013 to 2015, I interviewed more than 100 garbage collectors, scrap buyers and policymakers and worked alongside collectors on their garbage collection routes, at their homes where they sort and sell the scrap, and at recycling factories.</p>
<p>At the site where I did the bulk of my research, around 100 scrap collectors and their families live in homes constructed from bamboo and plastic sheeting on privately owned land. These structures offer not only shelter, but also space for sorting scrap into about 10 different categories, which their families typically assist with until the scrap can be sold.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175499/original/file-20170625-13438-xstmut.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Indian woman sorts reusable and recyclable materials from collected garbage in northeast Delhi.</span>
<span class="attribution"><span class="source">Dana Kornberg</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Once it’s sorted into sacks, collectors hoist them onto scales, while buyers jot down the weights and multiply them by the going rate to arrive at the price tag. But, collectors usually aren’t paid the total amounts on the spot. Instead, small payments are made for daily expenses, and the rest is noted down as a deposit against the regular advances given to collectors. </p>
<p>In other words, buyers act almost as patrons who are responsible for the basic needs of their dependent laborers. The collectors, in turn, rely on their buyers for cash to meet their daily needs, as well as for larger sums to pay for weddings, medical expenses and, in some cases, to build better houses and purchase farmland back in the village. </p>
<p>This <a href="http://journals.sagepub.com/doi/abs/10.1177/0002764298041010003">infuses the cash with extra meaning</a> and also requires durable relationships and negotiations to function. Physical currency’s flexibility <a href="https://www.jstor.org/stable/2780903">makes it amenable to negotiation</a> in both timing and amount – a feature that requires more personalized relationships. </p>
<p>Furthermore, scrap buyers themselves get credit to run their businesses in the same way, <a href="http://pages.ucsd.edu/%7Earonatas/conference/Banking_on_each_other.pdf">through informal channels</a> that depend on personal relationships, rather than banks. </p>
<p>A 2015 report noted that just 15 percent of adults worldwide <a href="http://documents.worldbank.org/curated/en/187761468179367706/pdf/WPS7255.pdf">used a bank account to make or receive payments</a> over a 12-month period.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175500/original/file-20170625-16913-1hb2zjn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A scrap collector shows his account book detailing the stuff he sells and his daily expenses.</span>
<span class="attribution"><span class="source">Dana Kornberg</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>When cash disappears</h2>
<p>So what happens when 86 percent of a nation’s currency suddenly disappears?</p>
<p>When I returned in December 2016, a month after <a href="https://www.wsj.com/articles/india-to-phase-out-current-500-and-1000-rupee-bank-notes-1478619693">Indian Prime Minister Narendra Modi announced</a> that all 500 and 1,000 rupee bills would cease to be legal tender, a scrap collector I knew relayed his experience. Just three hours before Modi’s Nov. 8 announcement, Pintu had boarded a train for a 24-hour journey to his village near Calcutta. With him were 11 1,000 rupee notes that his buyer gave him as an advance just before he left. Just as he got on the train, the notes were declared worthless, and he barely managed to buy a single meal for his family along the way. </p>
<p>More importantly, it was very difficult for people like Pintu and even the scrap buyers to get the new 500 and 2,000 rupee bills issued to replace the eliminated notes. The chain had been damaged: With cash in short supply everywhere, scrap buyers couldn’t pay the collectors, who in turn had more trouble supporting their families. Seeing how people were struggling, a buyer rhetorically asked: “Why didn’t the government do more to make sure that poor people would have money?”</p>
<p>While middle-class Indians were able to exchange their currency in banks, the unbanked poor often had to rely on informal lenders who would only exchange the old bills for new ones at predatory rates. Without savings, and with high rates of illiteracy, these laborers have little chance of joining <a href="https://www.bloomberg.com/news/articles/2017-03-09/modi-s-goal-of-a-cashless-india-may-be-thwarted-as-digital-drops">Modi’s dream of a cashless, digital economy</a>.</p>
<h2>Take it easy</h2>
<p><a href="http://fortune.com/2017/01/16/cashless-rogoff-india-scandinavia/">Some have argued</a> that a cashless society would help the poor by, for example, reducing crime and making labor practices more transparent. </p>
<p>The United Nations is leading an <a href="https://www.betterthancash.org/about">effort by more than 50 financial companies, foundations and governments</a>, including India, to accelerate the transition from cash to digital payments specifically to “reduce poverty and drive inclusive growth.”</p>
<p>There’s some truth to this, and while cash exchanges can facilitate mutual care and responsibility, the downside to the patron relationship I described above is that cash can facilitate exploitative or predatory practices because of how much control moneylenders and bosses have over laborers. So it may be wise to gradually move some forms of exchange to digital transactions. </p>
<p>But, if such a future exists, it is still a long way off, at least in India. According to a 2014 study, just 10 percent of Indians over 15 <a href="http://fletcher.tufts.edu/%7E/media/Fletcher/Microsites/Cost%20of%20Cash/COC-India-lowres.pdf">had ever made a digital payment</a>. And in countries where a large share of transactions are already done digitally, there’s evidence that this <a href="http://www.newyorker.com/currency-tag/the-high-cost-for-the-poor-of-using-a-bank">does not serve the poor well</a>.</p>
<p>With cashlessness becoming a new economic frontier, the effects of such state-led policies on cash-dependent economies must be considered seriously before they are indiscriminately introduced. 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.</p><img src="https://counter.theconversation.com/content/79735/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research was supported with funding from the National Science Foundation and the University of Michigan's Center for the Education of Women and Department of Sociology.
</span></em></p>India’s recent move toward a cash-free society helped reveal just how important physical currency is to the informal economies that the poorest families depend upon.Dana Kornberg, Ph.D. Candidate in Sociology, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/746502017-03-23T12:44:11Z2017-03-23T12:44:11ZIndia’s drive for a cashless economy puts millions at risk of cybercrime<p>When the Indian government recently banned two high-value currency notes, it led to <a href="https://theconversation.com/indias-demonetisation-drive-has-boosted-banks-and-start-ups-but-its-still-a-failure-71704">all sorts</a> of <a href="https://theconversation.com/modis-bank-note-ban-has-inflicted-pointless-suffering-on-indias-poorest-69157">chaos</a>. It led to huge queues to exchange money at banks and ATMs. And this in a country where more than half of its citizens <a href="http://www.bbc.co.uk/news/world-asia-india-37983834">do not have a bank account</a>.</p>
<p>But as the dust continues to settle, a tangible long-term benefit of the process appears to be emerging: moving <a href="https://theconversation.com/india-taking-a-step-on-the-road-to-cashless-economy-70309">India towards a digital economy</a> in which electronic transactions play a major role in the financial system. The rush to do this, however, is likely to cause a spike in cybercrime. </p>
<p>The Indian government’s push to get ordinary citizens using plastic and digital money is evident in the launch of various schemes like the <a href="http://indianexpress.com/article/explained/bhim-app-payments-cashless-online-transaction-narendra-modi-how-it-works-shortcomings-4456264/">BHIM app</a> to incentivise digital payments by the poor, rural and illiterate who have hitherto been unrepresented in the country’s modern banking systems. </p>
<p>Encouraging cashless transactions has the potential to curb tax evasion, corruption and the use of hard cash in crime. And to that extent it is a worthy goal to follow for any government. But adequate measures have not been taken to ensure that the hard-earned money of ordinary Indians is secure from the <a href="http://journals.sagepub.com/doi/abs/10.1177/0022427810365903">cybercrime that will inevitably follow</a>. </p>
<p>The repeated assertion made by Indian banks and online portals is that they use the latest security protocols and hence they are as secure as any other similar business in the developed world. Even though there is a degree of truth in this argument, it is dangerous to accept it as evidence of sufficient protection for Indian consumers from digital fraud.</p>
<h2>Human error</h2>
<p>The transition to a digital economy will create several new opportunities for financial crime against citizens who will have their first experience of <a href="http://www.digitalindia.gov.in/">digital India</a>. That will leave them vulnerable to losing their precious assets to new kinds of criminals. Most will be completely unaware of how cybercrime works – and therefore in no position to guard against it.</p>
<p>Research into the field of IT security <a href="http://www.sciencedirect.com/science/article/pii/S0167404809000467">consistently shows</a> that the Achilles’ heel of systems lies at the consumer’s end. And this is an area where neither the Indian government nor the banks or online portals seem to have any plan of action in place. </p>
<p>Humans are the <a href="http://search.proquest.com/docview/206792454?pq-origsite=gscholar">weakest link</a> in IT security. Decades of <a href="http://discovery.ucl.ac.uk/1424472/">research</a> has shown that there is an inverse relationship between the effort required to follow an IT security protocol and its compliance by ordinary consumers. In other words, the banks can put hi-tech security measures in place, but if they are too complicated to follow for a poor farmer in rural India then ironically the same measures may make him even more vulnerable to cybercrime.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/162170/original/image-20170323-3517-1fw48wu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The weakest link.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>The point is best illustrated through a well-known anecdote that gets told in the field of IT security. The security team of a sensitive corporation kept coming up with rules that required the employees to generate more and more complicated passwords to log into the system. They believed that it would make the company virtually unhackable to criminals. However, all their effort came to nought when the employees – fed up with remembering long combinations of words and symbols – simply started writing their passwords on pieces of paper and sticking them to their computer screens.</p>
<h2>Conscious effort required</h2>
<p>It is for this reason, that over the last few decades a <a href="https://www.degruyter.com/view/j/semi.ahead-of-print/sem-2014-0035/sem-2014-0035.xml">conscious effort</a> has been made to educate people and provide usable security protocols when using debit cards and the internet for financial transactions. </p>
<p>Psychologists, systems engineers, software designers and financial experts have all been involved in the process to identify the capacity of ordinary people to follow security measures and <a href="http://www.morganclaypool.com/doi/abs/10.2200/S00594ED1V01Y201408SPT011">design practical solutions</a> for them. It is an area of security research that is growing outside the digital realm as well. In domains such as <a href="http://www.tandfonline.com/doi/abs/10.1080/21650020.2014.908739">infrastructure security</a>, for example, it has been found that even specialists like <a href="https://link.springer.com/article/10.1007/s40864-017-0050-8">train drivers</a> fail to follow complicated security procedures. </p>
<p>Many of the new digital clients in India will not be tech-savvy or well-educated and may be vulnerable to cybercrime for reasons such as age, income or social status. They will have a unique set of constraints that will have an impact on their ability to conduct safe electronic transactions. </p>
<p>Unlike the latest technical IT security expertise that Indian banks and online portals have adapted from the West, the methods for designing usable security are not directly transferable. This requires a long-term <a href="https://link.springer.com/article/10.1023/A:1011902718709">effort to study consumer behaviour</a> and the specific challenges of users in the Indian context. </p>
<p>Left to themselves, ordinary people in India are experienced at protecting their valuables from criminals. Any traveller on Indian public transport will vouch for that, from the surfeit of chained luggage in trains and buses to prevent thieves from running away with it. </p>
<p>It is now the responsibility of the Indian government, financial institutions and business to ensure that the common citizen is equally well prepared to protect their money from cyber-criminals, through access to usable security. Efforts must start immediately, if it has not already been left too late.</p><img src="https://counter.theconversation.com/content/74650/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kartikeya Tripathi has received funding from Engineering and Physical Sciences Research Council (EPSRC) and University College London (UCL) in the UK.. </span></em></p>India’s transition to a digital economy creates several new opportunities for financial criminals.Kartikeya Tripathi, Teaching Fellow, Security and Crime Science, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/688722016-12-21T10:32:42Z2016-12-21T10:32:42ZThree radical political experiments for a new age of extremes<p>Historian Eric Hobsbawm famously called the 20th century an “<a href="http://www.history.ac.uk/reviews/review/28">age of extremes</a>”, one characterised by polarising ideological battles fought in the name of nationalism. Whether fascism, communism, or Western capitalism, Hobsbawm related how these ideologies transformed the political consensus, sparked global wars, and incurred an astonishing death toll.</p>
<p>When the Berlin Wall came down and the Soviet Union disbanded, American policy wonk <a href="https://www.foreignaffairs.com/reviews/capsule-review/1995-07-01/age-extremes-history-world-1914-1991">Francis Fukuyama</a> declared Hobsbawm’s “age of extremes” all but over. The end of Soviet communism, Fukuyama believed, signalled the triumph of liberal democratic capitalism as the only viable form of national government, although he admitted the potential existed for extreme nationalist ideologies to reemerge in periods of strife. Unfortunately, they have. </p>
<p>Theological fundamentalism has thrived in the Middle East and Africa, inspiring the rise of <a href="https://theconversation.com/what-does-islamic-state-actually-want-50865">Islamic State</a> and <a href="https://theconversation.com/why-boko-haram-is-the-worlds-deadliest-terror-group-54216">Boko Haram</a> (and many more besides), sparking deadly civil wars. China has mastered a combination of <a href="https://theconversation.com/chinas-soft-power-strategy-cant-keep-up-with-its-fearsome-reputation-68870">one-party authoritarianism and market capitalism</a>. In the Americas, the “neo-Bolivarianism” of leaders such as <a href="https://theconversation.com/how-todays-crisis-in-venezuela-was-created-by-hugo-chavezs-revolutionary-plan-61474">Hugo Chávez</a> and the <a href="https://theconversation.com/all-change-in-argentina-as-sun-sets-on-the-kirchner-era-45666">Kirchners</a> broke stride with free-market globalisation and helped destabilise their countries. </p>
<p>Europe’s nationalist vanguard includes neo-fascist parties such as <a href="https://theconversation.com/how-greece-crisis-sparked-a-new-era-of-extremist-politics-44193">Golden Dawn</a> in Greece, the xenophobic anti-immigration rhetoric of <a href="https://theconversation.com/mood-around-immigration-has-made-britain-a-nastier-place-61234">UKIP</a>, France’s <a href="https://theconversation.com/how-marine-le-pen-could-become-the-next-french-president-68765">Marine Le Pen</a>, the Netherlands’ <a href="https://theconversation.com/geert-wilders-maverick-who-could-ride-anti-islam-wave-to-the-top-of-dutch-politics-64992">Geert Wilders</a>, and <a href="https://theconversation.com/how-did-the-far-right-gain-so-much-ground-in-germany-56314">Alternative for Germany</a>. In some ways, the US is late to the party, but Donald Trump and his sympathisers on the the so-called <a href="http://www.vox.com/world/2016/11/28/13716038/alt-right-policy-platform-trump">alt-right</a> embrace many of the same messages.</p>
<p>But there are two things worth remembering about this sort of populist nationalism. </p>
<p>First is that extremism begets extremism. The apogee of nationalism in the early 20th century was no accident; it was an international phenomenon sparked by international discord. Debates about national identity and progress that developed in one place often found platforms and adherents elsewhere. Moreover, the rise of far-leaning politics often led to a counter-current of political activism.</p>
<p>Second, as the 20th century wore on, the extremes of left and right proved to be remarkably similar; fascists and communists, for instance, were equally proficient in the ways and their means of authoritarianism. We might think political ideologies cover a linear spectrum ranging from left to right, but a more suitable symbol is the horseshoe – the far-left and far-right ideologies residing at the tips, rather closer together than they might care to admit.</p>
<p>Why is this history lesson worth remembering today? Although the media report endlessly on Trump and the alt-right, they often neglect those on the far left. The far left shows similar signs of authoritarianism as the far right, and offers a radical plan to restructure society and international relations. If history offers any prediction for the future (which could be up for debate), we should pay attention to these ideas on the left, because they are likely to play some role in our politics.</p>
<p>Here are three big ideas from that area of the political spectrum – some of which might leave political centrists a bit rattled.</p>
<h2>Universal Basic Income</h2>
<p><a href="https://theconversation.com/basic-income-is-a-radical-idea-bound-for-the-political-mainstream-heres-why-69695">Universal Basic Income</a> (UBI) is a social welfare policy that, in principle, would provide every citizen with a living wage. The living wage is calculated on basic subsistence costs, namely the costs of food, clothes and shelter. The idea can be traced to eighteenth and nineteenth century thinkers like Thomas Paine and John Stuart Mill, although it became a serious consideration in the twentieth century among intellectual circles in Europe and North America.</p>
<p>The logic of UBI is that it sets a standard for social welfare, and ensures that no member of a community falls into abject poverty. But this is only part of what UBI adherents promise. They say it will increase social mobility, allow citizens to gain further education, and provide a renewed sense of personal freedom. </p>
<p>Some fiscal conservatives like UBI, too. Unlike the various welfare programmes that exist today, UBI would override all such programmes, and because it would be available to all citizens, administration would be straightforward. Proponents even say it would be cost saving.</p>
<p>But some important questions remain unanswered. Would people still work? Would inflation soar? Would it lead to mass immigration? Swiss voters rejected the proposal for this very reason. And how do we calculate a living wage? Urban living is more expensive than rural. </p>
<h2>Epistocracy</h2>
<p>The divisive politics of nationalist populism has raised new concerns over the functionality of democracy. In the UK, the Brexit campaign was chastised for using fake statistics, and in the US the fake news circulating on social media has led many to criticise gullible voters. </p>
<p>Parodies of the electorate abound, from Jay Leno’s Tonight Show skits that put Americans through a citizenship test (spoiler alert: they always fail), to Jordan Klepper’s Daily Show segment that “fingers the pulse” of today’s most irrational voters.</p>
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<p>In his new book, <a href="http://press.princeton.edu/titles/10843.html">Against Democracy</a>, Jason Brennan argues for an “epistocracy”, a system under which only the informed can vote. It’s an appealing idea, especially if you watch one of Klepper’s skits, but it’s controversial because it dispenses with universal suffrage to make the case that public welfare trumps equality. </p>
<p>It also presumes we can accurately test knowledge and exclude a portion of the polity without causing mass resentment. </p>
<h2>The end of cash</h2>
<p><a href="https://theconversation.com/india-taking-a-step-on-the-road-to-cashless-economy-70309">Why do we need cash</a> in a world where electronic transactions are faster and more efficient? Cash is a vehicle for criminal activities. Without it, the government could use transaction records to more closely audit businesses, indict organised lawbreakers, and check the flow of illegal immigrants who rely on cash for work. Bank robberies would be pointless.</p>
<p>More than that, cashlessness could make a big macroeconomic difference. When recession hit and deflation threatened an economy, a cashless world would allow central bankers to impose negative interest rates, which would in turn force banks to loan money because not doing so would actually cost them.</p>
<p>So what’s to worry about? Plenty. Black markets will surely survive, and new ones crop up; as we’ve seen with the likes of <a href="https://www.bloomberg.com/view/articles/2013-11-18/are-bitcoins-the-criminal-s-best-friend-">Bitcoin</a>, electronic currencies can in fact cater nicely to illegal activities. We also inevitably lose a degree of privacy when we start leaving our financial footprints electronically, meaning hackers or a technology failure could reveal our financial records – or worse still, wipe them out. Above all, a system without cash would need to cater to everyone, including those who find it difficult to learn digital systems. </p>
<p>Radical and complicated though they are, these are captivating ideas for strange times. The way things are going, expect them to start cropping up in political campaigns sooner rather than later.</p><img src="https://counter.theconversation.com/content/68872/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Patrick Cullinane does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The far left and the far right are closer than they’d like to admit. So can some of their better proposals gain ground in 2017?Michael Patrick Cullinane, Reader in US History, Northumbria University, NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/703092016-12-20T10:48:06Z2016-12-20T10:48:06ZIndia taking a step on the road to cashless economy<p>It was a move that could have brought India’s economy to a shuddering halt. Indeed, the <a href="https://www.theguardian.com/world/2016/nov/28/india-bank-lines-controversy-cash-for-queuing">seemingly endless queues</a> outside banks, and the difficulty of spending cash at shops and stalls may have seemed like it did. But the decision to <a href="https://theconversation.com/indias-crackdown-on-cash-corruption-is-really-all-about-politics-68701">demonetise the 500 and 1,000 rupee notes</a> was just one in a series of moves that will push India towards a digital economy.</p>
<p>The demonetisation was implemented <a href="http://economictimes.indiatimes.com/news/economy/policy/what-is-demonetisation-and-why-was-it-done/articleshow/55326862.cms">with the aim</a> of eliminating societal corruption and counterfeit currency. But the move was sudden, happening overnight. The two notes accounted for <a href="http://www.business-standard.com/article/economy-policy/86-of-currency-by-value-in-india-are-of-rs-500-rs-1-000-denominations-116110801416_1.html">86% of the bank notes in circulation</a> in India, and retailers and consumers were forced to look immediately for options. Many turned to digital paying systems.</p>
<p>The digital money strategy has been laid out <a href="http://www.independent.co.uk/news/world/asia/india-cashless-society-banknotes-narendra-modi-ban-currency-a7442316.html">by Prime Minister Modi’s government</a> from its early days in power, via a string of major decisions. The <a href="http://www.thehindu.com/news/national/jan-dhan-scheme-to-help-poor-open-back-accounts-pm/article6320842.ece">Jan Dhan scheme</a>, for example, saw more 220m new bank accounts being opened for the poorest in society. The Reserve Bank of India also <a href="http://indianexpress.com/article/india/india-others/rbi-to-withdraw-all-currency-notes-issued-before-2005-after-march/">decommissioned all currency notes issued before 2005</a>.</p>
<p>Until recently, cash was used for <a href="http://www.business-standard.com/article/economy-policy/infographic-68-of-transactions-in-india-are-cash-based-116111400495_1.html">more than two-thirds of transactions</a> in India. However, just over a month into the demonetisation and the country had already started to see the benefits of digital transactions. Government figures show a <a href="http://www.forbes.com/sites/wadeshepard/2016/12/12/one-month-in-whats-the-impact-of-indias-demonetization-fiasco/2/#526811d95d69">268% increase in year-on-year tax collection</a> from 47 Indian cities for November 2016.</p>
<p>But can India become a truly cashless society? These moves are pushing the economy in the right direction, but is it digitally savvy enough for such a system to survive?</p>
<h2>Digital money</h2>
<p>Since the removal of the notes, the government has been working hard to promote digital payment systems to consumers, proactively offering <a href="http://timesofindia.indiatimes.com/governments-digital-push-top-11-incentives-for-cashless-transactions/listshow/55876568.cms">different incentives</a> and rewards. So far, it seems to be working: the government has reported a <a href="http://timesofindia.indiatimes.com/business/india-business/400-1000-increase-in-digital-transactions-after-demonetisation-says-government/articleshow/55897291.cms">400-1,000% increase in digital transactions</a> since the demonetisation.</p>
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<p>The changes have created perfect market conditions for alternative digital payment systems, in addition to <a href="http://www.financialexpress.com/industry/technology/emergence-of-e-wallets-in-india-here-is-how-the-payments-industry-is-growing-rapidly/451008/">existing e-wallets</a> and debit/credit cards. These are not just the basic banking apps or websites either. The <a href="http://www.npci.org.in/home.aspx">National Payments Corporation of India</a>, together with the RBI, has launched UPI (“united payment interface”), which powers multiple accounts from participating banks, and offers several banking services all in a single mobile application. </p>
<p>A step in the right direction certainly, but not one without its problems. Although India has around <a href="http://www.thehindu.com/news/cities/mumbai/business/with-220mn-users-india-is-now-worlds-secondbiggest-smartphone-market/article8186543.ece">220m smartphone users as of February 2016</a>, there is still a long way to go until 100% of the population has mobile internet access. </p>
<p>Nevertheless, the banks have made sure that smartphone ownership is not a barrier to accessing mobile payments, providing a <a href="http://www.npci.org.in/Product-Overview-NUUP.aspx">USSD option</a> on older, “non-smart” phones which users call up for. In addition, the “<a href="http://www.dnaindia.com/money/report-here-s-what-you-need-to-know-about-the-digital-india-initiative-2129525">Digital India Initiative</a>” has been set up to provide internet access and comprehensive mobile phone coverage across India, helping over a billion people to get online and utilise digital payment techniques.</p>
<p>Furthermore, the RBI has been promoting a biometric authentication system for banking. The <a href="http://indianexpress.com/article/business/banking-and-finance/government-wants-aadhaar-enabled-payment-to-replace-cards-4406261/">Aadhar Enabled Payment System</a> (AEPS) can be used to open a bank account, withdraw or deposit cash, and transfer funds using just an identification number and fingerprint. </p>
<p>AEPS was created to serve remote towns and villages where cash machines cannot be provided. It has the potential to be the cornerstone of the government’s vision of a cashless digital society – if it can penetrate deeply enough into rural India.</p>
<h2>India’s adoption</h2>
<p>The people of India are the biggest hurdle in the implementation of the cashless strategy. By and large, they have <a href="http://www.thefrustratedindian.com/2016/12/india-has-largely-welcomed-demonetisation-jaitley-second-lead/">welcomed the beginnings</a> of a cashless society, albeit with some opposition to the <a href="https://theconversation.com/how-getting-rid-of-black-money-has-driven-a-digital-treasure-hunt-in-india-69013">demonetisation implementation</a>. Many can already see the benefits of going cash-free – such as the ability to tender exact change at small retailers, and keep track of expenditures – and are ready to adopt.</p>
<p>The opportunity is there, and the Indian authorities are certainly keen to take it. The interdepartmental approach by the government, working on finance, internet penetration and public relations strategies all at once is essential to making the cashless plan work. Overseen by the government’s Niti Ayog (planning commission), the plan is to implement these systems in the shortest amount of time possible. </p>
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<p>But citizens have to feel confident about the move, especially those who doubt online security. Furthermore, the cashless initiative needs comprehensive pan-India awareness, especially in more rural areas. Participation by rural and cooperative banks, post offices and other financial institutions to create awareness and education programmes will ultimately pave the way for a cashless economy. </p>
<p>Training will be a necessity in urban parts of the country, too. Awareness is all well and good, but some will still need help to understand how to install and use digital payment systems.</p>
<p>Although it would be impossible for India to become a cashless economy in the short amount of time since demonetisation, it is definitely something the country can look forward to. Making India cashless is like treating multiple chronic societal diseases using just one cure. Demonetisation was just the first step and now much more needs to be done – but the country can get there.</p><img src="https://counter.theconversation.com/content/70309/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yogesh K Dwivedi has developed and co-authored this article with Dr G.P. Sahu, Mukunda Murthi Rao and Ankita Chandra from Motilal Nehru National Institute of Technology Allahabad, UP, India.</span></em></p>India is going digital.Yogesh K Dwivedi, Personal Chair and Director of Research, Swansea UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/635162016-08-04T23:48:45Z2016-08-04T23:48:45ZIf cash is king, how can stores refuse to take your dollars?<figure><img src="https://images.theconversation.com/files/133154/original/image-20160804-501-yzvf27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Legal tender no more?</span> <span class="attribution"><span class="source">Legal tender via www.shutterstock.com</span></span></figcaption></figure><p>We’ve been <a href="http://www.emeraldinsight.com/doi/abs/10.1108/09590559510095260">talking about society’s transition to a cashless society</a> for a long time, but it begs an important question: Can stores and other retail establishments refuse to take your dollars and cents? </p>
<p>As odd as it sounds, this is not hypothetical anymore as a small number of stores and industries have stopped accepting cash and allow payment only by credit card, debit card or via a smartphone app.</p>
<p><a href="http://www.sweetgreen.com/menu/?region=new-york">Sweetgreen</a>, a high-end salad restaurant, <a href="http://www.nytimes.com/2016/07/31/business/where-a-suitcase-full-of-cash-wont-buy-you-lunch.html">stopped accepting cash</a> in its New York City stores in <a href="http://www.businessinsider.com/salad-chain-sweetgreen-weighs-cashless-offerings-2016-8">January</a>. A Boston <a href="http://www.falafelshop.com/locations/99-locations-kenmore">restaurant</a> near Fenway Park <a href="http://www.nytimes.com/2016/07/31/business/where-a-suitcase-full-of-cash-wont-buy-you-lunch.html">went cashless</a> this past December. Most <a href="http://articles.latimes.com/2010/jan/24/business/la-fi-lazarus24-2010jan24">airlines stopped taking cash</a> for in-flight purchases of food and beverages around 2010.</p>
<p>While the trend of smaller stores refusing to accept credit cards because of the high fees is more well-established, the opposite trend of refusing to take cash hasn’t been as well-explored. <a href="https://www.youtube.com/watch?v=2vSYg17HD94">Let’s examine why</a> they do it and if they can get away with it.</p>
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<h2>Legal tender?</h2>
<p><a href="http://www.dualtron.ie/cashless-catering/benefits-of-cashless-payment-systems-to-your-company/">Businesses claim that not accepting cash</a> reduces the chance of <a href="http://www.mobilepaymentstoday.com/articles/how-the-uk-can-benefit-from-a-cashless-society/">stores being robbed</a>, eliminates the temptation for employees to <a href="http://www.stepstowardthemark.com/id41.html">steal money</a>, <a href="http://www.rfidjournal.com/articles/view?12137">eliminates the time</a> needed for workers to travel to and from the bank and even reduces expenses by dispensing with the need for bulky cash registers.</p>
<p>Yet eliminating cash is a huge problem for the roughly 10 million U.S. households that <a href="https://www.fdic.gov/householdsurvey/">have no banking accounts</a>. These “unbanked” families have no direct access to financial services like credit and debit cards. For them, it is a hardship not to use cash.</p>
<p>Furthermore, some customers are quite confused by the policy since the front of every piece of U.S. currency states: “This note is legal tender for all debts public and private.” </p>
<p>Moreover, that statement has been enshrined <a href="http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section5103&num=0&edition=prelim#miscellaneous-note">in federal law</a> in various forms since the <a href="http://uscode.house.gov/statviewer.htm?volume=rs&page=708">late 1800s</a>.</p>
<p>So the question is, why don’t the statements on each piece of currency and the various federal laws backing that up mean that a restaurant, shop or airline has to accept paper money?</p>
<h2>When does a Coke become a debt?</h2>
<p>The answer might surprise you. </p>
<p>Stores don’t have to accept paper money. Despite the greenback’s apparent claim, the right for a store to refuse cash is supported both by the <a href="https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx">U.S. Treasury</a> and the <a href="https://www.federalreserve.gov/faqs/currency_12772.htm">Federal Reserve</a>.</p>
<p>There are <a href="http://businessmacroeconomics.com/">two reasons</a> that a business can reject cash even if it is “legal tender for all debts public and private.” </p>
<p>First, this statement means that the only circumstance when someone must accept the bill is <a href="http://www.azlawhelp.org/viewquestions.cfm?mc=4&qid=231&sc=34">when a person owes the business a debt</a>. If no debt has been incurred, a person or business is not legally required to take U.S. currency.</p>
<p>Let us say it is very late at night and you need gasoline for your car. Many gas stations in the U.S. do not take large bills late at night to prevent robberies and theft. If the gas station requires customers to pay for gas before pumping it into their car, they have the legal right to refuse US$50 and $100 bills. They do not have to accept large bills because until the customer has put gas into the car, the customer does not owe the station owner anything. However, if the customer is allowed to pump gasoline into the car first and then pay, the owner must accept all types of U.S. bills because the customer has a debt to pay.</p>
<p>The same issue <a href="https://consumerist.com/2013/02/25/court-rules-airline-doesnt-need-to-accept-cash-for-in-flight-purchases/">arises on an airplane</a>. If you want to buy a drink for $5, the airline doesn’t have to accept your cash as long as it requires you to pay for the drink first. Until you have drunk your beverage, you owe no debt to the airline.</p>
<h2>There oughta be a law</h2>
<p>The second reason is that while the statement on each piece of currency is enshrined in federal law, there’s no actual federal statute that requires companies to accept it. </p>
<p>As the <a href="https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx">U.S. Treasury points out</a>:</p>
<blockquote>
<p>“There is, however, no federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.”</p>
</blockquote>
<p>Massachusetts is one state that actually does have a <a href="https://malegislature.gov/Laws/GeneralLaws/PartIII/TitleIV/Chapter255D/Section10A">law on the books</a> that requires all retail establishments to accept cash payments. However, at the present moment this law appears <a href="http://www.bostonglobe.com/business/2016/08/03/paying-cash-some-stores-say-thanks-greenbacks-credit-only/a4EvjwgTpI7r4lD3xVOENO/story.html">relatively unknown</a>, the exact definition of a retail establishment is unclear, but most importantly the law specifies no penalties for breaking the law.</p>
<p>Airlines taking off from Boston’s airport clearly are not retail establishments, but do <a href="http://en.parkopedia.com/parking/lot/37_ashburton_pl/02108/boston/">parking garages in Boston that take only credit cards</a> fall into the retail category?</p>
<p>The <a href="https://www.bostonfed.org/payment-studies-and-strategies/payments-in-perspective/measuring-how-consumers-pay.aspx">Survey of Consumer Payment Choice</a>, an annual survey by the Boston Federal Reserve, shows that paying bills by cash is still very popular. In 2013, the <a href="https://www.bostonfed.org/publications/research-data-report/2015/the-2013-survey-of-consumer-payment-choice-summary-results.aspx">latest year of data</a>, roughly one-quarter of all payments made by individuals were still done by cash. However, the larger the payment, the lower the chance cash was involved.</p>
<p>What does all this mean? Cash might not be king anymore, especially for large debts. </p>
<p>However, cash is not dead or dying, even if some <a href="https://www.youtube.com/channel/UCcMxc7kEkx_0HCkI_Dxo7ow">businesses</a> wish that paper money would disappear.</p><img src="https://counter.theconversation.com/content/63516/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="border">Disclosure</h4><p class="fine-print"><em><span>Jay L. Zagorsky is an unpaid advisor to the Federal Reserve's Survey of Consumer Payment Choice.</span></em></p>The notes in your pocket say they’re legal tender for all debts public and private. Are they lying?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/630992016-08-03T04:17:37Z2016-08-03T04:17:37ZMobile payments and tap and go might not mean the end for tellers<p>Consumers are drawing out less cash and using other methods to pay for things such as contactless payments, but this doesn’t necessarily signal the end of bank tellers or their automated counterparts. </p>
<p>There is conflicting evidence on whether or not banks are moving away from providing customers with a human face or an ATM.</p>
<p>Looking internationally, in 2016, Lloyds Banking Group in the United Kingdom announced that it was <a href="http://www.finextra.com/newsarticle/29232/lloyds-to-cut-further-3000-jobs-and-close-200-branches-in-wake-of-brexit-vote?utm_medium=dailynewsletter&utm_source=2016-7-29">closing 200 branches and planning to cut 3,000 jobs</a>, as a result of changing customer behaviour. The number of transactions carried out in branches has continued to drop and Lloyds has continued to invest heavily in digital banking instead.</p>
<p>In contrast to this, Metro Bank, a new UK bank, has made the branch <a href="https://www.metrobankonline.co.uk/about-us/press-releases/news/metro-bank-continues-to-see-significant-growth-in-deposits-and-loans/">the core of its business model</a>, with long opening hours every day of the week and staffed stores. In 2015 Metro claim to have gained over 200,000 new customers, through its 42 stores and created 2,000 new jobs.</p>
<p>Domestically, the <a href="http://www.bankers.asn.au/Banks-in-Australia/Facts-and-Figures">latest Australian Bankers Association (ABA) statistics</a> reveal that in the year ending June 2015, the number of bank branches in Australia fell by 16, to 5,480 in total. The ABA data also shows that since 2001, Australian banks have increased their bank networks by 691 branches. </p>
<p>While this could partly be a result of some building societies and credit unions rebranding themselves as banks, it is also a reflection of the creation of sub-brands within the major banks. One example would be the Bank of Melbourne, which was acquired by Westpac in 1997 and relaunched in 2011. By April 2016 Bank of Melbourne had 106 branches spread around the state of Victoria, its ‘local’ brand helping to differentiate it from its competitors.</p>
<p>So there is still some emphasis on the human face of banking but what about the automated teller machine (ATM)?</p>
<p>According to the <a href="http://www.apca.com.au/payment-statistics/transaction-statistics/atm-and-eftpos">Australian Payments Clearing Association (APCA)</a>, there were 31,661 ATMs in Australia in December 2015, over 1,300 per million inhabitants, relatively high by international standards, the leader being Portugal with 1,540 per million inhabitants. ATMs in Australia have increased in numbers by around 20% since 2008 according <a href="http://www.rba.gov.au/publications/bulletin/2016/mar/4.html">to the Reserve Bank of Australia (RBA)</a>. However by contrast ATM transaction numbers have declined in recent years. </p>
<p>The total value of ATM cash withdrawals in Australia <a href="http://www.rba.gov.au/payments-and-infrastructure/resources/statistics/payments-data.html">in May 2016 were A$10,942 million.</a> ATM cash withdrawals peaked at $14,874 million in December 2008 and it has been suggested that consumers now require less cash, as they increasingly use <a href="https://www.finextra.com/newsarticle/29215/most-americans-foresee-death-of-cash-in-their-lifetimes?utm_medium=dailynewsletter&utm_source=2016-7-26">contactless payments cards at the point of sale</a>.</p>
<p>In Australia the contactless payment threshold is high at $100 and the speed and wide availability of this type of payment does free up consumers from having to carry cash. </p>
<p>Internationally digital payment apps are proliferating and as disrupters such as Google, Apple, Samsung and Facebook enter the financial services market. The ATM might be considered to be going the same way as the public telephone kiosk. </p>
<p>However ATM manufacturers such as Diebold see technology as giving the ATM a new lease of life to ATM’s. Some of the innovations in ATM technology are eye scanners and fingerprint authentication instead of PIN numbers for security and ATM response to smartphone commands within close proximity. All of these are aimed at making the ATM experience both easier and safer, as well as negating the need for plastic cards.</p>
<p>The original bank branch teller is still the main customer facing employee of financial institutions and as such a key determinate of how customers judge the attractiveness of their chosen or potential provider of financial services. A recent <a href="http://www.smh.com.au/business/banking-and-finance/digital-banking-not-killing-off-the-branch-says-cba-20160531-gp894x.html">briefing by the Commonwealth Bank of Australia</a> revealed that four out of five of CBA’s most profitable customers still use branches and that proximity to a branch remained important to them, because there were staff there who could help them with their more complex financial needs.</p>
<p>As customers we want it all; access to banking services anytime, anywhere and anyhow and that includes personal contact with a human being where necessary or desired. So bank tellers have a future if the financial services provider sees the value of human interactions at the point of service.</p>
<p>It seems the ATM also has a future. While we might not get <a href="https://theconversation.com/digital-payment-providers-yet-to-win-war-on-cash-53286">to the cashless society</a>, we are already moving to a less cash society. </p>
<p>This means that whilst we need less access to cash than before, we still need access to cash for a variety of economic and psychological reasons, such as cash being anonymous and reliable in a time of crisis. </p>
<p>ATMs will remain the customer’s main access point for cash and indeed may evolve into multi-functional machines which provide customers with an even wider range of services and easier access than at present.</p><img src="https://counter.theconversation.com/content/63099/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite a rise in cashless payments and a drop in customers drawing out cash, bank tellers might still have a future.Steve Worthington, Adjunct Professor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/555272016-03-01T15:40:12Z2016-03-01T15:40:12ZWhy scrapping the €500 note may not help counter terrorism<figure><img src="https://images.theconversation.com/files/113402/original/image-20160301-31030-x4ohw2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>The president of the European Central Bank has said that the bank is considering <a href="http://www.reuters.com/article/us-ecb-banknote-idUSKCN0VO1UM">scrapping the €500 note</a> as the big bill is being increasingly seen as “as an instrument for illegal activities”, according to ECB president, Mario Draghi. But there is little proof that scrapping the €500 note will improve chances of clamping down on nefarious transactions.</p>
<p>There are only two denomination notes in the world that have a higher value than the euro, namely the 10,000 Singapore dollar (about US$7,000) and the 1,000 Swiss franc (about US$1,000). The highest denomination banknotes in other parts of the world are generally worth around US$100. The €500 is therefore particularly attractive both for conducting cash business transactions and as a store of value. Its popularity can also be attributed to its relatively stable exchange rate, the fact that it is accepted everywhere and the large number of central banks that can police counterfeits. </p>
<p>The <a href="http://www.telegraph.co.uk/business/2016/02/12/euro-will-slide-if-500-notes-are-abolished-says-bank-of-america/">circulation figures</a> show that demand for the €500 note has grown since the financial crisis. In Greece, there is <a href="http://www.ekathimerini.com/205913/article/ekathimerini/business/greeces-500-euro-note-bank-run">evidence of hoarding</a> due to fears of a banking collapse. When just 20 notes equate to €10,000, it’s easy to transport and hide large sums.</p>
<p>The note is also popular in Germany, the country that led support for the €500 note when planning for the euro <a href="https://www.ecb.europa.eu/pub/pdf/other/the_first_euros_2015en.pdf">began in 1991</a>. Germany wanted a note that corresponded with its currency at the time – the deutschmark – as high value cash transactions <a href="http://qz.com/262595/why-germans-pay-cash-for-almost-everything/">remain popular</a> in Germany.</p>
<h2>Cash in hand</h2>
<p>But there are downsides to keeping the €500. Cash is relatively anonymous, whereas bank transfers are electronically tracked – so cash is attractive for crime and money laundering. As an illustration, the equivalent of £1m would weigh just over 2kg and could neatly fit in a brief case if it comprised solely of €500 notes. If this was made up of £50 notes (the UK’s highest note denomination) it would weigh in at <a href="http://1000000-euro.de/how-much-does-a-million-pounds-weigh/">a hefty 24kg</a>. </p>
<p>For obvious reasons, there is no reliable data on the use of cash in illegal activities, but a <a href="http://www.hks.harvard.edu/centers/mrcbg/publications/awp/awp52">recent study by Peter Sands</a> and his colleagues from Harvard’s Kennedy School of Government estimated that cash finances 55% to 60% of total proceeds from illegal cross-border trade in drugs, counterfeit goods, human trafficking, oil, wildlife, timber and fish. Of these, trade in illicit substances represents the lion’s share in terms of estimated annual volume (US$320 billion a year) and the share financed by cash (as much as 80%).</p>
<p>The €500 note’s popularity with criminals means it has been dubbed “the Bin Laden”. Thus, although this note accounts for 28% <a href="https://www.ecb.europa.eu/stats/money/euro/circulation/html/index.en.html">of the total value of euro notes in circulation</a>, many merchants in Europe <a href="http://www.ft.com/cms/s/0/4bb9e48c-c901-11e5-be0b-b7ece4e953a0.html#axzz414xBapf6">refuse to accept the €500 note</a>.</p>
<h2>Unforeseen consequences</h2>
<p>The European Commission is probing the links between €500 and criminality while the European Anti-Fraud Office has also expressed concerns over the €500 note used in fraudulent activities. Following the terrorist attacks that took place in Paris in November 2015, the European Union is clamping down on all means of payment <a href="http://europa.eu/rapid/press-release_IP-16-202_en.htm">that may be used to finance terrorist activities</a>. The UK government, which sits outside the eurozone, already decided in 2010 to prohibit exchange offices from selling the €500 , mainly as a result of the <a href="http://news.bbc.co.uk/1/hi/uk/8678886.stm">findings of the Serious Organised Crime Agency</a> which indicated that 90% of the notes were found to be used in criminal activity.</p>
<p>Removing the €500 will affect criminals mostly by increasing their transaction costs. It will also improve the traceability for law enforcement officials by making it more difficult to physically conceal the cash and by increasing the number of notes required to complete a transaction. But getting rid of the €500 note without global cooperation to remove large denomination in other currencies may result in criminals merely substituting the €500 with another high denomination note.</p>
<p>Criminals will not be the only ones affected. Those with a high preference for cash for its anonymity and for being outside of the financial system are likely to oppose the move, <a href="https://www.thetrumpet.com/article/13567.2.0.0/why-is-germany-eliminating-paper-money">citing liberty, right to privacy and freedom of choice</a>. It is a fine balancing act to weigh the need for government surveillance with the right to privacy – and clamping down on criminals will affect law-abiding citizens too. There is also the risk that focusing on its ability to reduce crime fails to consider the underlying causes of this underground activity in the first place.</p>
<p>As a practical and easier to implement measure, the ECB could consider placing limits on the value of cash transactions across all eurozone countries. Currently, these <a href="http://qz.com/613105/germans-buy-everything-with-cash-and-the-government-thinks-thats-a-problem/">limits</a> are in place in France (€1,000), Spain (€2,500), and Italy (€2,999.99). The German Finance Ministry has recently announced plans to ban cash payments of more than €5,000. Farther afield, Mexico has had limits on cash transactions in pesos and dollars <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/08/26/AR2010082605355.html">since 2010</a>. This is designed to limit money laundering and tax evasion on large scales but there is scant evidence of the effectiveness of these cash-curtailing measures at fighting illegal transactions. </p>
<p>Whatever the ECB decides on the €500 note’s future, it will be an interesting reflection on how democracy within the eurozone operates – and the transparency with which these decisions take place will indicate the extent to which the ECB values the right to information and freedom of choice. It epitomises how money is also subject to the freedom versus security debate that is fast becoming one of the quintessential quandaries of the 21st century.</p><img src="https://counter.theconversation.com/content/55527/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bernardo Batiz-Lazo has received funding to research ATM and payments history from the British Academy, Fundación de Estudios Financieros (Fundef-ITAM), Charles Babbage Institute and the Hagley Museum and Archives. He is also active in the ATM Industry Association, consults with KAL ATM Software and is a regular contributor to <a href="http://www.atmmarketplace.com">www.atmmarketplace.com</a>.</span></em></p><p class="fine-print"><em><span>Marybeth Rouse does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The evidence that €500 notes are used by criminals are strong. But there is no guarantee that scrapping them will crack down on illegal activity.Bernardo Batiz-Lazo, Professor of Business History and Bank Management, Bangor UniversityMarybeth Rouse, PhD Candidate , Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/528822016-01-08T14:26:48Z2016-01-08T14:26:48ZAround the world in 80 payments – global moves to a cashless economy<figure><img src="https://images.theconversation.com/files/107639/original/image-20160108-3317-wc5xd0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">epSos.de</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Ever since computers were first introduced into the retail banking system in the late 1950s, there has been the vision of a future world <a href="http://www.bloombergview.com/articles/2012-03-29/visions-of-a-cashless-society-echoes">where cash is obsolete</a>. The near death of personal cheques, increase in debit and credit card use, and innovations such as PayPal, Square, Apple Pay and Bitcoin, have led us to believe the cashless society is well within our reach. </p>
<p>But <a href="https://www.linkedin.com/pulse/cashless-payments-growing-rapidly-cash-remains-felix-kronabetter?trk=prof-post">data from Retail Banking Research</a>, one of the most authoritative sources in the area, suggests that even though cashless payments are growing rapidly across the world, hard currency remains resilient. This trend was corroborated by a study commissioned by the ATM Industry Association of a panel of 30 countries. It suggested that global demand for cash <a href="https://www.atmia.com/news/atmia-publishes-new-global-cash-demand-study/2632/">grew 8.9% between 2009 and 2013</a> (when the latest figures were available).</p>
<p>So 50 years into the journey and we are still not there yet. However, a number of innovations have taken place around the world. Here’s how different continents stack up.</p>
<h2>Europe</h2>
<p>One in ten card payments were contactless <a href="http://www.fstech.co.uk/fst/UKCA_Contactless_Milestone_Oct_2015.php">for the first time in 2015</a> in the UK. By making small payments easier and quicker, contactless marks a major threat to cash. London is also fast becoming the world’s fintech capital, despite having substantially fewer resources <a href="http://paymentweek.com/2015-10-6-is-london-the-fintech-capital-of-the-world-8492/">available for investment than the US</a>. </p>
<p>Next summer Copenhagen will host Money 20/20, the world’s major annual event for emerging payment technology. It will be the first time the forum convenes <a href="https://www.money2020europe.com/">outside the US</a>, bearing witness to the increasing importance of Europe when it comes to innovation in payments and financial technology. In countries like the Netherlands there are cafes and even supermarkets <a href="http://letstalkpayments.com/which-countries-are-close-to-a-cashless-world/">that no longer accept cash</a>.</p>
<p>Many have pointed to the <a href="https://www.credit-suisse.com/uk/en/news-and-expertise/banking/articles/news-and-expertise/2015/03/en/sweden-we-dont-accept-cash.html">slow death of cash in Scandinavia</a>, but cash is unlikely to completely die out – few may develop a mobile app suited to the needs of refugee migrants there, for example.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/107631/original/image-20160108-3348-19u12na.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Contactless payments are on the up in Europe.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<h2>North America</h2>
<p>Despite playing host to the world’s top technology firms and research centres, the US lags behind when it comes to implementing some of this tech. Chip and pin payment cards were only launched in October 2015 and do not seem to have done well over the Christmas holiday season, with reports of large retailers bypassing card readers and <a href="http://www.forbes.com/sites/kateashford/2015/12/27/chip-cards-take-too-long/">going back to signatures</a>. This might seem backward but it’s important to remember that chip and pin cards are as much a protocol to determine who will <a href="https://theconversation.com/chip-enabled-cards-may-curb-fraud-but-consumers-will-be-picking-up-the-tab-48410">bear the cost of fraud</a> as a security feature. </p>
<p>And, while the US has been slow to introduce chip and pin, there have been developments in smartphone payments. The bank <a href="https://next.ft.com/content/ef690e8e-7c42-11e5-98fb-5a6d4728f74e">JP Morgan Chase</a> and retailer Walmart have both launched rivals to Apple Pay, which shows how retailers, banks and <a href="http://www.pymnts.com/news/faster-payments/2016/who-is-making-payments-faster-in-the-u-s/">regulators</a> are innovating to bring about faster payments and a potential cashless society.</p>
<h2>Africa and the Middle East</h2>
<p>The success of the mobile payments system, M-Pesa, in increasing financial inclusion in Kenya <a href="https://theconversation.com/bitcoin-fuels-africas-banking-revolution-16044">is well known</a>, with the majority of the population able to transfer money using their phones, despite not having a bank account. And there has been similar growth of mobile payments <a href="http://www.worldbank.org/en/programs/globalfindex">in Botswana and South Africa</a>. But Safaricom (the telecom company behind M-Pesa) has failed to replicate its model in neighbouring countries such as Tanzania. The jury is also out regarding the <a href="http://www.cenbank.org/cashless/">Cash-less Nigeria Project</a> by its central bank, which aims to reduce the the amount of physical cash circulating in the economy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/107630/original/image-20160108-3309-v3vjr9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">M-Pesa enables users to complete basic banking transactions through mobile phones.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/rosenfeldmedia/7171804334/in/photolist-bzhs6B-9WyJYw-bmnzwj-dmijzz-e7xSFA-9yvoQ2-9yypdS-9yvocV-9yyoyY-bCptw5-5JKYSx-jg3aYz-6jqorc-ppJ7Xq-dmfAJj-arwXQt-7MxK3Z-7MBJiW-7MxJDZ-7MBHVU-7MxJoV-6jqoPp-6juyGA-6juyzm-6jqoiX-6jqoaz-kuVG7a-9WyEuL-CHzZ8Z-bVKnyS-dUzm55-bnYk3T-95BG7d-5D7nvg-oec2FX">Rosenfeld Media</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Africa and the Middle East remain the areas with the lowest global numbers of adults with a bank account while MENA countries (as well as China and other Asia Pacific nations) have been and will continue to be the worlds’ growth markets <a href="http://www.rbrlondon.com/reports/global">for ATM manufacturers</a>. This suggests the high use of banknotes in the everyday life of people in these regions.</p>
<h2>Asia, Latin America and Oceania</h2>
<p>In China, the mobile app WeChat is one to watch. WeChat, part of digital behemoth Tencent, has grown from its original service as a messaging app in 2011 to include cab-hailing, food-ordering <a href="https://www.techinasia.com/wechat-allows-money-transfers-between-friends">and money transfers</a>. WeChat ranks as <a href="http://www.scmp.com/tech/apps-gaming/article/1896648/wechat-trends-expect-2016-virtual-reality-more-ads-global-expansion">China’s most popular app</a> with 650m users and is used to send <a href="http://www.pymnts.com/news/social-commerce/2015/wechat-rings-in-chinese-new-year-with-bitcoins/.VQo6cBDF_PE">both RMB and cryptocurrencies</a> like Bitcoin between users.</p>
<p>Technology as a promoter of financial inclusion is the name of the game in poor economies where the bottom third of the population hardly have any access to the financial sector and mobile money is seen as the potential solution. <a href="https://theconversation.com/cash-remains-king-in-chile-but-its-days-could-be-numbered-37952">Chile</a> is a notable example of successful government initiatives in this direction. But the one to watch is the Indian government’s drive to replace money with mobile payments on top of a growing <a href="http://www.thehindubusinessline.com/money-and-banking/apgvb-bagsaward-for-financial-inclusion/article7318539.ece">private network</a> made up of 140,000 private business and public sector bank correspondents. </p>
<p>The challenge for mobile money, however, is that it sits at the intersection of finance and telecommunication and so faces regulations from both. On top of that, India and other countries in Asia and Latin America have a significant number of transactions that take place outside the formal financial sector and typically, an over-regulated telecommunications sector. At the same time, those at the “bottom of the pyramid” are fearful of and distrust established financial institutions. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/107661/original/image-20160108-3323-bfewx3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">No cash needed.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>Australia offers a much brighter outlook. The introduction of contactless payment cards in 2010 has proven hugely successful and as a result plastic has significantly <a href="ww.smh.com.au/national/about-us/australians-are-using-less-cash-and-more-card-to-pay-and-play-every-day-20150124-12xi8b.html">eroded the use of cash and ATMs</a>. Indeed, a recent <a href="http://www.rba.gov.au/publications/annual-reports/psb/2014/trends-in-ret-pay.html">study by the Reserve Bank of Australia</a> found that the use of banknotes and coins fell from 69% in 2007 to just 47% in 2013. That decline took place across all age and income groups, with people in rural locations more likely to be using cash than those in major cities.</p>
<p>While some countries have embraced mostly electronic forms of payment, this does not mean that others still using banknotes and coins are less efficient or backward as some might seem to think. Differences between countries and between rich and poor within them remain partly due to custom, culture and regulation. But also because new technology has failed to make its case to users. </p>
<p>There is more innovative technology looking for a market than consumers looking for alternative ways to pay. And there is nothing wrong with existing forms of payment – they, and cash in particular, work well in most countries, for most consumers, 99% of the time. Of course, people change their habits and financial technology start-ups may one day disrupt the status quo.</p>
<p>**</p>
<p><em>An earlier version of this article referred to a study commissioned by the ATM Industry Association incorrectly, saying it used a panel of 13 countries, not 30, and suggested that global demand for cash grew 4.5% instead of 8.9% between 2009 and 2013.</em></p><img src="https://counter.theconversation.com/content/52882/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bernardo Batiz-Lazo has received funding to research ATM and payments history from the British Academy, Fundación de Estudios Financieros (Fundef-ITAM), Charles Babbage Institute and the Hagley Museum and Archives. He is also active in the ATM Industry Association, consults with KAL ATM
Software and is a regular contributor to <a href="http://www.atmmarketplace.com">www.atmmarketplace.com</a>.</span></em></p><p class="fine-print"><em><span>Leonidas Efthymiou received scholarships from the Cyprus Tourism Organisation; Louis Group and the University of Derby. </span></em></p><p class="fine-print"><em><span>Sophia Michael does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Do innovations like PayPal, Square, Apple Pay and Bitcoin spell the end of cash? How different countries are adopting new forms of financial tech.Bernardo Batiz-Lazo, Professor of Business History and Bank Management, Bangor UniversityLeonidas Efthymiou, Lecturer in Management and Strategy, Intercollege LarnacaSophia Michael, Languages Department Coordinator/Lecturer of English, Intercollege LarnacaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/431812015-06-17T20:19:36Z2015-06-17T20:19:36ZChocolate on top: how a cashless economy might be bad for your waistline<figure><img src="https://images.theconversation.com/files/84814/original/image-20150612-1453-1ypz50c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What's the link between chocolate cake and a cashless economy?</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>In early May, 2015, <a href="http://www.theguardian.com/world/2015/may/14/no-wallet-no-worries-denmark-considering-cash-free-shops">news services reported</a> that Denmark would allow retailers to only offer card payment and allow them to ban cash as a means of transaction. </p>
<p>For quite a while, Scandinavia has been all about a <a href="http://www.theguardian.com/world/2014/nov/11/welcome-sweden-electronic-money-not-so-funny">cashless society</a>. Sweden has taken it one step further with a <a href="http://www.sciencedaily.com/releases/2014/06/140612120426.htm">vein scanner</a>, where consumers can pay for their coffee by entering the last four digits of their mobile phone number into a sensor that scans their veins – presumably to see if they have Black, Platinum, Gold, Silver, or just boring old red blood.</p>
<p>But, will we ever see Australia go completely cashless?</p>
<p>I don’t think so. While Australians are also pretty good at adopting new technology, we are also pretty good at not giving up the old stuff. <a href="http://www.princeton.edu/%7Ekahneman/docs/Publications/prospect_theory.pdf">Prospect theory</a>, which tells us that we value losses more than we value gains, would suggest that we are unlikely to give up the perceived usefulness of cash, at least in the short-term. </p>
<p>That said, at an incremental level, we are using our cards more and more, particularly in relation to the swipe and go PayWave and PayPass technology. According to a <a href="http://www.westpac.com.au/about-westpac/media/media-releases/2014/7-april">Westpac forecast</a> made in 2014, there would be almost $3 billion in contactless transacations in Australia in 2015.</p>
<p>But, there are other reasons why we should be hesitant to give up cash totally, and these tend to be directly related to the hip-pocket nerve – well, kind of.</p>
<p>Research in psychology and neuroscience has suggested that there is a kind of emotional competition between the immediate pleasure of buying something, and an equally immediate pain of paying for that something. </p>
<p>A <a href="http://web.natur.cuni.cz/%7Ehoudek3/papers/economics_psychology/Knutson%20et%20al%202007.pdf">2007 study </a> published in the journal Neuron, found that the region of the brain associated with pain processing (the bilateral insula) activated when participants saw prices that were too high. </p>
<p>In the study, people were placed in an fMRI machine, given $20 cash and given the opportunity to buy something. What the researchers found was that the handing over of cash caused a sense of pain for them, or at least that’s what was observed happening in the brain.</p>
<p>We already know a lot of this from psychological experiments which show we have a tendency to “couple” or clump bits of information together in our minds. So, when we buy something with cash, we know straight away how much that thing is going to cost us. We also know that we no longer have that amount of money in our wallet or purse.</p>
<p>But when we use a plastic card, we are, ostensibly handing over something quite abstract. Whether it’s debit or credit, there is a <a href="http://www.researchgate.net/profile/Drazen_Prelec/publication/233496571_Always_Leave_Home_Without_It_A_Further_Investigation_of_the_Credit-Card_Effect_on_Willingness_to_Pay/links/0deec51bb0d84ce278000000.pdf">degree of psychological and temporal distance</a>. Most people don’t know exactly how much they have in their savings or credit account; they might have a general idea, but you can see that it is not the same as cash. It requires effort to check your credit or debit card balance, but looking in your wallet, as you are paying, requires next to no cognitive effort.</p>
<p>So, when you hand over your card, you don’t see the money disappear from your account (at least in any concrete way), and therefore, feel like you’ve lost anything. You’re also creating a kind of abstract distance between the payment of the bill, and the usage of the money that you have. And that is sometimes extended even more if you don’t actually get the bill for months after you have spent the money and consumed the product.</p>
<p>In addition, research tells us that people are more likely to buy unhealthy food, on average, when they pay using cards, as opposed to using cash. A study published in the <a href="http://www.jstor.org/stable/10.1086/657331">Journal of Consumer Research in 2010</a> analysed the shopping behaviour of 1,000 households over a period of six months and found that using debit and credit cards led to a small, but statistically significant, increase in impulsive purchases of unhealthy products. </p>
<p>In one of the experiments, participants spent 40% more on “vice” product (such as chocolate biscuits or frozen cheesecakes) when they were using credit cards, than cash. The mode of payment didn’t affect the amount spent on “virtue” products (such as rolled oats). </p>
<p>The researchers even classified different types of spenders as “tightwads” and “spendthrifts”, and found that “tightwads” were likely to spend 56% more on impulse products when they used credit, than when they used cash. They also found that participants also thought “less” about their product when they chose vice products.</p>
<p>But, there is nuance in these broad findings. A <a href="http://150.210.226.182/admin/Plone/faculty/profiles/block.html/papers/lauren/bagchi-block-jppm.pdf">different study</a> found that if people were buying indulgent food such as chocolate cake for immediate consumption, the pain of using cash was offset by the excitement and anticipation of eating the delicious, exciting food.</p>
<p>So, the greater the pain of payment, the more we were to choose foods that we wouldn’t normally consider as part of a healthy diet, but only if we plan to eat them straight-away. </p>
<p>In one of the experiments, the researchers created a cafe afternoon snack menu, and found that people who paid with cash consumed close to 80 more calories than those who used a card. People who paid with cash consumed products higher in total fat (3g, or 15% more), salt (130 mg, or 17%), carbs (8g, or 13%) and sugar (1.5g or 6%), than those who used a card to pay.</p>
<p>Which returns us to the earlier idea that paying for something causes a sense of “pain”, and paying with cash hurts more than paying with a card. People are offsetting that pain by treating themselves to make themselves feel good after the trauma of spending money.</p>
<p>So, the moral to all of these stories? Put a freeze on your cards (maybe literally – stick your cards in the freezer for month and see how much you spend), don’t go shopping when you are in an fMRI machine, and eat more chocolate biscuits (well, that’s my interpretation of the findings).</p><img src="https://counter.theconversation.com/content/43181/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Harrison does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How could a cashless economy make you gain weight? It’s all about the pain in your brain.Paul Harrison, Senior lecturer, Deakin Business School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.