Even at the very heart of the EU’s political establishment, a majority of people believe that a cashless society would not be beneficial for the general public or the economy.
Few organizations have tried as hard to curtail the public’s use of cash as the European Commission. A few years ago it was considering imposing EU-wide cash payment restrictions but ended up shelving the plan in 2018 after a public backlash. A year earlier, 95% of respondents to a public consultation run by the Commission, many from cash-loving Germany and Austria, had said they were opposed to the idea. Even more emphatic was the answer to the following question:
“How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?”
In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.” In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits. In the end, the Commission concluded that “limiting cash would not prevent the financing of terrorism and would be considered a violation of the personal freedom of Europeans.”
But it did not end its war on cash. While the Commission may have pressed the pause button on its campaign against physical money within the EU, it was rapidly escalating its actions at the EU’s borders. As I reported for WOLF STREET at the time, the Commission had proposed a raft of measures to tighten cash controls on people entering or leaving the EU, most of which were eventually ratified by EU Member States and the EU parliament.
Since then many national governments have taken up the baton. Spain and France have imposed some of the lowest cash payment limits in the EU, each of just €1000, though in the case of France the rule does not apply to everyone: well-heeled non-residents can spend as much as €15,000 in cash transactions. In Belgium, there has been a limit of €3,000 since 2014, while in Greece the cash ceiling is €1,500. More recently, the Commission took umbrage at the Meloni government’s proposals to lift Italy’s cash payment limit from $2,000 to €5,000 and repeal punitive measures for retailers who refuse to take card payments, arguing that they will weaken Italy’s ability to fight tax evasion.
Little Love for Physical Money
In other words, the European Commission has little love for physical money. Which is why it came as somewhat of a surprise to see that it had included an Oxford-style debate on the pros and cons of a cashless economy at its annual economic event, the Brussels Economic Forum, held last Thursday at the Brussels Convention Centre. The motion under debate was:
“This forum believes that a cashless society would be beneficial for people and the economy.”
Speaking in favour of the motion was Cecilia Skingsley, head of the Innovation Hub at the Bank for International Settlements, the central bank of central banks, and former deputy governor of Riksbank, Sweden’s central bank. Speaking against was Brett Scott, a financial journalist and author of the book Cloud Money: Cash, Cards, Crypto and the War for Our Wallets.
Things got pretty interesting from the get-go. Before the speakers spoke, the event’s attendees were invited to vote on the resolution. A slim majority (52%) voted against the motion while 48% voted in favour. In other words, even at the heart of the EU’s political establishment, at the EU executive’s flagship economic conference, most people believe that a cashless society would not be beneficial for the general public or the economy.
Then the debate began. First to speak was Skingsley, who gave a rather weak defence of the motion, describing cash as “no longer fit for purpose given the technical changes we observe around us.” For a start, she said, cash does not promote access to financial services beyond people’s “most basic needs.” In other words, people who only use cash are cut off from “the services being offered by the financial system: they don’t have access to credit, to safe savings products or insurance, and they can only use the most basic credit services.”
This was the essential thrust of Skingsley’s argument: people who only use cash because they have no other options are condemned to eke out a finance-free existence where they have to pay more for credit and other financial services. It doesn’t seem to occur to her that the main cause of this problem is accessibility (or the lack thereof) to financial services for certain segments of the population rather than the ubiquity of cash. Indeed, if it weren’t for the widespread availability of cash the so-called “unbanked” would have no means of payment at all.
Anonymity a “Two-Edged Sword”
She also described anonymity as a “two-edged” sword:
It has a major shortcoming. It means that others don’t know who you are and they can’t figure: are you a good payer, can you handle a saving (sic), can you carry a loan?
Presumably by “a saving,” Skinsgley means “a savings account”. By “others”, she appears to be referring once again to banks and other financial services companies, which are currently in the dark about the creditworthiness of unbanked citizens. Again, most of the emphasis is on the potential benefits of a cashless economy for financial services providers as opposed to their actual users. In fact, Skingsley rarely mentions the benefits of a cashless society for everyday citizens, presumably because those benefits barely extend beyond a few minor gains in time and convenience as well as the ability to access financial products, with all the benefits and risks that entails.
Ultimately, most of the benefits of a cashless economy will accrue to the financial and tech companies for whom cash is a major competitor. These companies talk all the time about the social benefits of “financial inclusion” but as a recent article by the Committee for the Abolition of Illegitimate Debt (CADTM) notes, their ultimate goal in expanding digital financial services to the world’s unbanked while undermining cash is to “recruit as many new clients as possible, the better to be able to quietly extract a never-ending stream of value from intermediating their trillions of dollars’ worth of tiny financial transactions.”
Skingsgley also dedicated a large part of her talk to trying (and largely failing) to assuage fears about the potential dangers of a cashless society. These, she said, include the public’s fears around big tech and financial companies erecting a “big brother” society. Her answer to that problem is to give more powers to government (as in, EU) entities to use their legislative, regulatory and supervisory powers to ensure they can’t.
The problem here is that many government agencies are already captured by the financial and tech companies, although the EU has probably done more than most governments to push back against the power of big tech. Also, there are justifiable public concerns about governments and central banks, with the help of big tech and financial companies, ushering in their own “big brother” society through the introduction of digital identity and central bank digital currencies — a topic that was almost entirely — and conspicuously — absent from this debate.
Arguably the biggest weakness in Skingsley’s argument was her insistence that a cashless economy is necessary to achieve genuine digital inclusion. As her debate opponent Brett Scott pointed out, one option should not come at the exclusion of the other:
Promoting digital inclusion does not mean you’re getting rid of the other system; it means you’re providing a balanced system of multiple options. That’s what digital inclusion is all about. You entirely can have a cash economy alongside a digital economy.
The Three Insults Against Cash
Yet in today’s discussions around technology and money, digital automation is invariably presented as not only desirable but also inevitable, while cash is broadly painted as having negative impacts on society, said Scott:
The three major categories of insults that are thrown against it are that it is old and outdated; that it is somehow inefficient and inconvenient; and that it is dangerous and creates social ills. These are the things that anti-cash proponents throw at us.
To try to help break this narrative and recalibrate the way the event’s attendees thought of cash, Scott offered two metaphors.
Metaphor #1: The Banking System as a Casino
“Like a casino, banks give us digital chips in exchange for our cash. Our confidence in that digital money is predicated upon access to cash. Ironically, if you undermine the cash system you simultaneously undermine public confidence in the digital system. Even if you don’t like cash, even if you perceives it to be inefficient you’ve got to realise that it actually underpins the digital system itself.”
“Imagine if a casino was going to prevent you from going back with your chips to redeem them for cash? That’s basically what banks do when they shut down ATMs: they’re saying we’re going to stop you from exiting our systems. You’ll have to use our digital chips. That’s why the cashless system is a euphemism for a type of enclosure by the banking sector and big tech.”
Metaphor #2: Cash as a Bicycle
Even in a world of rapid technological and behavioural change, cash still has a vital role, says Scott. “If I’m in a skyscraper, I’ll probably want to use the lift but that doesn’t mean I want the stairs taken away.”
In much of the talk around money today cash is often portrayed as a bygone product, much like the horse and cart following the advent of the motor vehicle. But according to Scott, cash is more like the “bicycle, or even the mountain bike, of payment systems,” while digital payments are like Uber. If Uber was the only transport system available in today’s towns and cities, we would have an unnatural monopoly with all of the associated problems that would bring. The same would happen if cash was replaced by an exclusively digital payments system, says Scott:
“If you get rid of the cash system, all the worst excesses of the [digital payments] system would come out.”
There would also be serious resilience issues. Digital payments systems go down whenever the electricity and/or mobile network go(es) down, a cyber attack takes place or there’s a bug in the system. Scott also highlighted the potential dangers of excessive data harvesting, exclusion problems, over-centralisation of the money system as well as the “risk of authoritarian states using people’s dependence on the digital money system to control behaviour.”
Just as today many city councils are encouraging people to use the car less and the bicycle more, governments should also be doing everything they can to preserve cash’s role in the economy. Ultimately, as Scott notes, keeping cash alive means maintaining a balance of power between different payment systems:
It is important not only to protect cash but to promote it as superior in many situations, as the bicycle is often better than Uber in certain situations.
Scott also notes quite rightly that there are many people who actually continue to enjoy engaging in human-scale local transactions, which are best facilitated by cash. This is true across vast swathes of Europe’s economy. Even after three years of the COVID-19 pandemic, during which time cash was demonised globally for spreading the SARS CoV-2 virus, cash remains the most frequently used means of payment in stores, accounting for 59% of point-of-sale transactions in 2022, according to the European Central Bank’s latest payments study.
Even in the heart of Brussels, at the European Commission’s flagship annual economics conference, most people do not believe that a cashless society would be beneficial for the people and the economy. In fact, after the debate the number of people who disagreed with the motion surged from 52% to 72%. Which perhaps goes to show that if there is an open, frank debate about the potential risks and benefits of a fully cashless society, most people — including many close to the levers of power — will end up rejecting it.