Cashless society would give banks way too much power

Banks, rejoice. Perhaps we are finally on our way to becoming a cashless society. Soon nobody will have any of the damned stuff left, if the price of everything keeps soaring.

For more than 25 years, banks have relentlessly pushed to create a society unburdened by cash, and where digital and card payments reign. They do this for their own benefit. Consultants at McKinsey estimate that cash operations account for between 5 and 10 per cent of total bank operating costs. No cash means no expensive ATM network, no salaried tellers and no cash vans ripe for robbing.

But while institutions are becoming increasingly successful at herding customers towards digital alternatives to cash, a sizeable and stubborn proportion of people and even some businesses, if they are given the option, still prefer to use notes and coins in many situations.

Banks have long cultivated a narrative that says a cashless society is inevitable. But European Central Bank research proves the majority of Irish people believe it is still important to have the option to pay for many things in cash, even as digital and card payments take over in popularity. Several of the ECB’s Space (Study of Payment Attitudes of Consumers in the Euro zone) findings don’t sit well alongside the tone of some of the anti-cash propaganda that can flow from bank public relations departments.

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Several unrelated incidents in recent weeks suggest that banks and digital payment companies may not get it all their own way, even as they try very hard to make cash as inconvenient as possible, thus ensuring that digital alternatives to cash become relatively more attractive.

The first and most obvious was the red-hot furore almost six weeks ago when AIB botched an attempt to turn 70 of its branches into cashless operations, regardless of the impact on elderly or lower-income customers who are much more reliant on cash than younger or wealthier cohorts. Had the bank achieved what it wanted with the 70, the rest of its branches would presumably have followed.

AIB humiliation

Instead, AIB was forced into a humiliating climbdown after spending days relearning a lesson to which it has been repeatedly treated over the past 20 years – it is no good for your brand to be at the centre of national controversy. AIB didn’t consult anyone over its cashless move. It simply believed it could push the decision through while people were distracted by their holidays.

The groundswell of blistering opposition that the bank ran into may have been embellished by the fact that it was right in the middle of a hot summer, and journalists had little else of interest to write about apart from the weather and gelato. But there was substance to it, too. Using their wits, the public correctly deciphered it as a bank acting in naked self-interest, while dressing it up as a progressive move for customers. People usually are well able to spot that kind of manoeuvre, and rarely like it.

Another incident occurred at Aviva Stadium last week to flag that a cashless society would have certain risks attached, chief among them the potential for catastrophic technology failure. Such a risk can never be fully mitigated and hangs over the bankers’ vision of a cashless utopia like the Sword of Damocles. Technology always fails at some point. If it does and nobody can pay for anything, what then?

The technology for reading card and digital payments failed tor two hours at the Aviva last Saturday during a US college football event with 43,000 people in the stands. It threw the catering operation into chaos. American Football games go on for longer than Ulysses – people had to eat and drink.

The stadium went fully cashless last November and so the caterer had no fallback. It chose to give away 75 per cent of its stock for free until the problem was fixed. What else could it do? The Compass-owned caterer blamed Sumup, the firm whose technology runs the card machines. The loss is estimated at up to €500,000, so let them duke it out over who pays. Note: it won’t be banks that pay, even though they re-engineered the financial system to make a football stadium going cashless a viable option.

Half the world freaks out every time there is a widespread Twitter, WhatsApp or Facebook outage, which can happen on occasion. Just imagine the societal chaos that would ensue if something similar to what happened in the Aviva someday afflicted an entire city, country or region, and there was no cash alternative. This is not beyond the bounds of imagination or even possibility. It is barely 16 months since a cadre of Russian hackers brought down the system for Ireland’s health service and held it to ransom.

Loss of control

The third incident that caught my eye was when Sophie Corcoran, a 20-year old conservative British political commentator, tweeted a picture of a sign on the counter of a Starbucks outlet somewhere in Britain. It said: “We are going cashless.”

“And so it begins,” wrote Corcoran. She is of that breed of new conservatives who revel in needling the libs. The prospect of a cashless society as a dystopian conspiracy perpetrated by elites to control people’s lives is catnip for the sort of anti-establishment types who hang on her every word. Her post went viral, with floods of people commenting that they planned to boycott the coffee chain.

Starbucks was later forced to clarify that it has no plans to make all of UK outlets cashless, suggesting that this was a decision taken by a sole franchisee.

The holders of the Twitter accounts that made up the anti-cashless crowd in the Starbucks debate tend not to be the sort of people who value logic over emotion. They are firmly entrenched in a culture war. But beneath their tinfoil-hat freak-out lies a kernel of truth. A 100 per cent cashless society would, in fact, hand over a frightening level of control over our everyday lives to banks and other huge corporate entities, especially tech companies.

It’s free to tap your card now. But what if there is no cash alternative. Will banks start charging for us to buy a loaf of bread? What do banks and digital payments firms do with the unprecedented metadata they collect on our spending habits, which are recorded in every digital transaction. If unscrupulous political research firms got a hold of that data, what would be the ramifications of that for democracy? Just look at Facebook’s Cambridge Analytica controversy.

Banks have relentlessly tried to checkmate society over many years into completely giving up notes and coins. I do not know if they will ever fully succeed. But I hope they don’t.