The cashless society is upon us, scorching through Scandinavia and reaching just about every part of the developed world. But now there is pushback. We have just had this week a report warning that up to 8 million people in the UK could not cope with the disappearance of cash, while Philadelphia has just become the first city in the US to require retailers to accept cash instead of cards. There are a few exceptions, including services such as car rental, where the card guarantees the identity of the hirer.
Other US cities, including New York, Chicago and Washington DC are considering similar action.
This is one of those great tidal waves that sweeps across the world, as big in its way as the development of the iPhone. What should we make of it?
The arguments are well known. The case for cashless includes security, convenience, cost, personal preference, the avoidance of tax evasion, and so on. The case against is mostly social: that people who do not have a bank account (some 6 per cent in Los Angeles) are excluded from a large part of economic life. A cashless society discriminates against the low-paid, undocumented immigrants and older people.
In recent months the switch of retailing from high street to online has given a boost to cashless sales, but one further issue is quietly driving government support for the switch: the losses the authorities currently make from evasion. In the past year UK VAT payments are been particularly strong. Could that be because more sales are traceable?
There are however some practical issues that make the matter less clear cut. For example, the convenience argument could swing either way. Yes, in general, it is easier to use a card rather than cash, but there are times when it is easier to hand over a fiver than make a card payment. Pocket money for children is an example of that.
The debate is a bit like the one in the UK over the use of cheques. You can see the arguments in favour of doing away with them, and many European countries have pretty much done this already. But charities are terrified that if cheques were to go, they would lose a lot of their donations. They fear that older people, who are their main donors, will not faff about with setting up a bank transfer, whereas they will happily write out a cheque.
In Sweden, where the switch has gone furthest, retailers have put up prissy signs saying that all customers are welcome but cash is not. In practice they are discriminating against undocumented immigrants, but they are not saying so. Maybe that works in a coffee bar, but would a store really turn away a foreign visitor who did not have an acceptable credit card but offered folding notes?
Actually the answer, in Scandinavia at least, is probably yes.
What is happening in Sweden has parallels with what is happening in China and India.
In China, the big push is for social control. If people are seen to be hostile to current social and political norms they may find it hard to buy a rail ticket. China is a long way from going cashless, but face recognition technology is more advanced there than anywhere else in the world. There are some issues as to its accuracy, so there is a case for tracking people by their spending rather than their image.
In India, the push away from cash has been driven by a desire not so much to track people but to reduce corruption, hence the withdrawal of old-style large denomination notes. (I had some rupees left over from my last trip. I popped them into the little British Airways envelope and hope they ended up in their charity.)
So what is happening is a pincer movement. Liberal societies in the west are getting rid of cash for one set of reasons. Less liberal ones elsewhere are getting rid of it for a different set of reasons.
This is why the push-back is really interesting. There are several drivers. Central banks including the Bank of England are worried. Cities are worried – I expect more US ones to follow Philadelphia’s lead. Retailers should be worried. Anyone who cares about civil liberties should certainly be worried too. But it is going to take a huge effort by individuals to keep the cash economy running. It is a bit like the high street. Use it or lose it.
There is a potential downward spiral. If offering cash for a transaction comes to be seen as slightly sleazy then cash will rapidly go out of use. The rich won’t be troubled. Their gold cards will do nicely. It will be the less well-off who will suffer and that would be terrible for our societies. Well done, Philadelphia.
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