July 28, 2016
Thanks to the internet, smartphone apps and other technological advances, we seem to be headed in the direction of a cashless society in which physical currency is replaced completely by an internet connection and a bank account. For instance, I can pay my portion of a bar tab with my phone using the payment-splitting app Venmo. I can send friends money through PayPal’s website. I can even buy Cheez-Its at work sans cash, because there’s a credit card reader attached to the vending machine. Using near-field communication, the tech-savvy among us can breeze through the retail checkout process by waving an Apple Smartwatch or Visa payWave credit card over a contactless terminal.
All these innovations have happened in the past few decades. At this rate, could cash become completely obsolete in the near future? And is that a good thing?
To answer the first question: Certain cultures are certainly heading in that direction. A 2013 article on Swedish news site The Local was headlined, “Swedes set for cashless future.” The article stated that only 27 percent of retail purchases involve cash (not including those made online), and some public buses in the country refuse paper money and coins altogether. Sweden’s central bank, the Riksbank, told The Local, “Neither retailers nor banks have any obligation to accept cash.”
Convenience-wise, a cashless society certainly sounds appealing (imagine a future with no dirty, wrinkled dollar bills or coins buried in the couch). Privacy-wise, it’s harder to say. Especially when you consider the existence of an electronic record of your most sensitive purchases, including items such as drugs.
One example: marijuana
On Oct. 1, 2015, recreational marijuana sales became legal in Oregon. Hundreds of dispensaries sprouted up; they quickly outnumbered Oregon’s Starbucks and McDonald’s locations. It was a boon for small businesses—except most banks don’t allow dispensaries to open accounts. Banks fear losing their Federal Deposit Insurance Corporation insurance, as marijuana is still illegal at the federal level. That means roughly 85 percent of Oregon’s dispensaries are cash-only. Many have ATMs inside, but that’s not the point. The point is someone at the federal level gets to decide marijuana is questionable even though the majority of Americans disagree.
Immediately, troublesome implications come to mind about the potential difficulties for dispensary owners. What if dispensary owners want to apply for a loan or rent retail space, but have no way to prove their creditworthiness? Paper records only go so far. And it’s inconvenient for any business to have to deal solely in cash: Tracking transactions, managing payroll and doing taxes are difficult. As Oregon Sen. Ron Wyden said last year, “It is ridiculous to make any business owner carry duffel bags of cash just to pay their taxes.” Finally, there’s theft. As Jeffrey Stinson wrote for the Pew Charitable Trusts, “The abundance of cash makes … dispensaries tantalizing targets for criminals.”
These arguments for a cashless society may be compelling, but swapping cash for plastic presents privacy concerns for consumers. Currently, cash-only marijuana purchases mean that my bank–and anyone who hacks into my bank account or subpoenas my banking activity–doesn’t know if or when I buy marijuana. If society goes cashless, if I apply for a loan through a national bank, loan officers might not view those purchases favorably when considering how responsible, upstanding and financially prudent I am–even though purchasing marijuana is legal in my state. (Some lenders, such as Earnest, don’t merely use your credit score to determine your creditworthiness; they also examine your purchase history.) So yes, marijuana dispensaries should not have to rely solely on cash, but consumers shouldn’t have to rely solely on debit and credit cards.
To put it plainly, most people probably don’t want their banks to know whenever they buy drugs. The minute Americans can purchase marijuana with credit or debit cards, other people will start making assumptions and judgments will start being used against them.
Your bank account tells all
In an imaginary future cashless society, it’s one thing for your bank to know your complete spending history. Unless you shun banks and get paid only in cash, your bank knows almost everything you buy already. But what happens when (as previously mentioned) someone subpoenas a record of your financial transactions to determine whether you deserve custody of your child? Or whether you’re a “suspicious character” and had motive to commit a crime? In a cashless society, activities such as gambling, going to a strip club and purchasing a counterfeit handbag lose their anonymity. Not only do banks gain knowledge of your every purchase, but they open the door for others to police your morality.
Sometimes this is a good thing, like with illegal activity. “A student at Columbia University was arrested and charged with five drug-related offenses, including possession with the intent to sell,” wrote Sarah Jeong for The Atlantic. “Supposedly, his fellow students and customers had paid him through the PayPal-owned smartphone app Venmo.” No matter how unmonitored they seem, most digital apps and payment systems aren’t anonymous. That’s good news for law enforcement and cases that are black and white, but what about the gray areas?
Who decides what’s unethical?
What if the morality of a situation is not as cut-and-dried? Who gets to decide that a legal purchase such as like purchasing marijuana in Oregon or tipping a stripper is unethical? What you and I may think is acceptable may be put in the same category as activities that are illegal and far less ethically ambiguous. For example, a recent initiative by the Department of Justice inadvertently grouped Ponzi schemes and adult entertainment together in the same category of suspicious, high-risk activity, despite their fundamental differences in legality.
Here’s the full story, according to Sarah Jeong in The Atlantic: In 2013, the Department of Justice launched an initiative called Operation Choke Point to crack down on high-interest payday loans. The DOJ asked banks to flag “high-risk activity.” In addition to guns, get-rich-quick schemes and pyramid schemes, other high-risk activities according to the FDIC included “tobacco sales, telemarketing, pornography, escort services, dating services, online gambling, coin dealers, cable-box descramblers, and ‘racist materials,’” wrote Jeong. As a result, banks stopped working with businesses that were actually legitimate, concluded an investigation by the U.S. House Committee on Oversight and Government Reform. As Jeong commented in her piece, “It’s strange to see a list of a handful of actually-illegal activities … alongside legal vices.” Indeed. While the goal of Operation Choke Point was to target exploitative payday lenders, not to serve as the morality police, the operation ended up revealing how easy it was to do the latter. In a cashless society, we lose the option to keep legal yet morally questionable purchases private, leaving others to label them as they will.
From hacking to hurricanes
Aside from concerns about privacy and morality, a cashless society is worrisome in light of threats such as fraud and natural disasters (two cases in which cash comes out on top).
Today, it’s arguably easier to open a fraudulent credit card in someone’s name than to snatch someone’s physical wallet; compare 326,000 reported robberies in the United States in 2014 to 333,000 reported cases of identity theft. And having your identity stolen is not merely annoying. “Identity theft is often committed to facilitate other crimes such as credit card fraud, document fraud, or employment fraud, which in turn can affect not only the nation’s economy but its security,” noted the Congressional Research Service. In contrast, cash is relatively secure, even if you don’t wear a wallet chain.
Plus, its liquidity makes it good for emergencies. Apps and online banking require not only power but also internet access. Should a large-scale natural disaster strike, no one will be taking Uber to the grocery store to buy flares with their debit card. Need a five-gallon jug of water? Don’t count on Amazon Prime.
Obviously, I’m not advocating draining your bank account and stashing all your money under your mattress. But as we slowly transition away from physical money, it’s worth first examining the sacrifices to our privacy, anonymity and security. Jeong warns, “[T]he cashless society offers the government entirely new forms of coercion, surveillance, and censorship.” Whether you care more about your freedom or your right to privacy, a cashless society should give us pause.
Holly Richmond is a Portland-based writer. You can learn more about Holly through her website.