Review: War on digital payment fails to hit target

4 minute read

A contactless payment system is pictured in Aschheim, Germany, September 6, 2018. REUTERS/Michael Dalder

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LONDON, May 20 (Reuters Breakingviews) - Do we choose to pay for our coffee with cards rather than cash? Most consumers would say they do. But Brett Scott disagrees. In “Cloudmoney: Cash, Cards, Crypto and the War for our Wallets”, the pro-cash campaigner argues digital payments are a “pre-destined inevitability” chosen for us by tech companies and big banks. Promoting the use of unfashionable cash is therefore a way to limit corporate power. The book raises provocative questions, but Scott’s arguments are unlikely to be persuasive enough to pause the move towards a cashless society.

Paying electronically rather than with notes and coins brings new risks. Power cuts and technological failures – like the 10-hour outage in card network Visa’s (V.N) European systems in 2018 – left people who depend on card payment scrambling to get hold of cash. Cyberattacks regularly expose online accounts. But Scott embraces a more sweeping critique.

He begins by attacking banks and corporations as profit-seeking entities that do not have customers’ interests at heart. Financial institutions find it expensive to serve poorer people. That’s when digitalisation comes in handy, allowing banks to replace branches staffed by humans with standardised smartphone apps. Payment networks, tech firms and banks all benefit by charging a fee on digital transactions. Scott accuses them of waging a “war on cash” to make customers more dependent on these systems.

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It’s true that this push leaves behind people who rely on the cash economy. But Scott underestimates how the convenience of digital payments has changed consumer behaviour. Less than a quarter of the people surveyed by KPMG UK last year had visited a bank branch within the previous six months. About 70% of merchants would like to be allowed to refuse cash, according to a survey from Payments Europe, in part because handling notes and coins is less convenient. These factors – as well as the global pandemic - have contributed to the decline of cash, which accounted for only 26% of total transactions globally in 2021, down from 40% a decade ago, according to a JPMorgan study.

Scott is on stronger ground when he warns of the risks of payment surveillance. The ability of governments and companies to track people’s financial activities has never been greater. Regulations prevent financial institutions from exposing sensitive data to third parties. But payments companies like PayPal (PYPL.O) can share information with 600 organisations, including card networks, credit reference companies, fraud agencies, marketing firms and commercial partners like eBay (EBAY.O), Scott says, citing data from Wolfie Christl of the Austrian research house Cracked Labs. Big firms can also take seemingly political decisions. For example, Visa and PayPal refused to process donations to the website WikiLeaks.

This transparency can also have benefits, though. Data sharing can help governments track suspicious payments and crack down on tax avoidance. Sweeping sanctions following Russia’s invasion of Ukraine have shown electronic payment networks can be a powerful weapon. Meanwhile, customers are happy to share their data if it helps them get better terms on mortgages and credit cards. At the same time, countries like the United Kingdom are taking steps to preserve access to cash.

Some argue that cryptocurrencies and decentralised transactions using blockchain technology offer an escape from surveillance and control by banking giants. Scott dismisses this as a fantasy. Many crypto tokens remain pegged to the mainstream monetary system. The recent collapse of TerraUSD, which misleadingly called itself a stablecoin, is a reminder of the vulnerability of these digital infrastructures.

For Scott, then, protecting physical cash payments is a way to preserve our freedom. Indeed, he argues that using notes and coins is “akin to a meditative practice” in a frenetic polarised world. Meanwhile, however, consumers are voting with their digital wallets. The defence of cash looks like a losing battle.

Follow @karenkkwok on Twitter


- “Cloudmoney: Cash, Cards, Crypto and the War for our Wallets” by Brett Scott was published by Bodley Head on May 19.

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Editing by Peter Thal Larsen and Streisand Neto

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