Why a Cashless Society Should Scare You
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 Venmo. I can send friends money through PayPal鈥檚 website. I can even buy Cheez-Its at work sans cash, because there鈥檚 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 or 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 , 鈥淪wedes set for cashless future.鈥� 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鈥檚 central bank, the Riksbank, told The Local, 鈥淣either retailers nor banks have any obligation to accept cash.鈥�
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鈥檚 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 . Hundreds of dispensaries sprouted up; they quickly Oregon鈥檚 Starbucks and McDonald鈥檚 locations. It was a boon for small businesses鈥攅xcept don鈥檛 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 percent of Oregon鈥檚 dispensaries are cash-only. Many have ATMs inside, but that鈥檚 not the point. The point is someone at the federal level gets to decide marijuana is questionable even though .
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鈥檚 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 last year, 鈥淚t is ridiculous to make any business owner carry duffel bags of cash just to pay their taxes.鈥� Finally, there鈥檚 theft. As Jeffrey Stinson for the Pew Charitable Trusts, 鈥淭he abundance of cash makes 鈥� dispensaries tantalizing targets for criminals.鈥�
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鈥揳nd anyone who hacks into my bank account or subpoenas my banking activity鈥揹oesn鈥檛 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鈥揺ven though purchasing marijuana is legal in my state. (Some lenders, , don鈥檛 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鈥檛 have to rely solely on debit and credit cards.
To put it plainly, most people probably don鈥檛 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鈥檚 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鈥檙e a 鈥渟uspicious character鈥� 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. 鈥淎 student at Columbia University was arrested and charged with five drug-related offenses, including possession with the intent to sell,鈥� Sarah Jeong for The Atlantic. 鈥淪upposedly, his fellow students and customers had paid him through the PayPal-owned smartphone app Venmo.鈥� No matter how unmonitored they seem, most digital apps and payment systems aren鈥檛 anonymous. That鈥檚 good news for law enforcement and cases that are black and white, but what about the gray areas?
Who decides what鈥檚 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鈥檚 the full story, in The Atlantic: , 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 鈥渉igh-risk activity.鈥� In addition to guns, get-rich-quick schemes and pyramid schemes, other high-risk activities according to the FDIC included 鈥渢obacco sales, telemarketing, pornography, escort services, dating services, online gambling, coin dealers, cable-box descramblers, and 鈥榬acist materials,鈥欌�� Jeong. As a result, banks stopped working with businesses that were actually legitimate, by the U.S. House Committee on Oversight and Government Reform. As Jeong commented in her piece, 鈥淚t鈥檚 strange to see a list of a handful of actually-illegal activities 鈥� alongside legal vices.鈥� 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鈥檚 arguably easier to open a fraudulent credit card in someone鈥檚 name than to snatch someone鈥檚 physical wallet; compare in the United States in 2014 to of identity theft. And having your identity stolen is not merely annoying. 鈥淚dentity 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鈥檚 economy but its security,鈥� the Congressional Research Service. In contrast, cash is relatively secure, even if you don鈥檛 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鈥檛 count on Amazon Prime.
Obviously, I鈥檓 not advocating draining your bank account and stashing all your money under your mattress. But as we slowly transition away from physical money, it鈥檚 worth first examining the sacrifices to our privacy, anonymity and security. Jeong warns, 鈥淸T]he cashless society offers the government entirely new forms of coercion, surveillance, and censorship.鈥� Whether you care more about your freedom or your right to privacy, a cashless society should give us pause.
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 Venmo. I can send friends money through PayPal鈥檚 website. I can even buy Cheez-Its at work sans cash, because there鈥檚 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 or 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 , 鈥淪wedes set for cashless future.鈥� 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鈥檚 central bank, the Riksbank, told The Local, 鈥淣either retailers nor banks have any obligation to accept cash.鈥�
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鈥檚 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 . Hundreds of dispensaries sprouted up; they quickly Oregon鈥檚 Starbucks and McDonald鈥檚 locations. It was a boon for small businesses鈥攅xcept don鈥檛 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 percent of Oregon鈥檚 dispensaries are cash-only. Many have ATMs inside, but that鈥檚 not the point. The point is someone at the federal level gets to decide marijuana is questionable even though .
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鈥檚 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 last year, 鈥淚t is ridiculous to make any business owner carry duffel bags of cash just to pay their taxes.鈥� Finally, there鈥檚 theft. As Jeffrey Stinson for the Pew Charitable Trusts, 鈥淭he abundance of cash makes 鈥� dispensaries tantalizing targets for criminals.鈥�
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鈥揳nd anyone who hacks into my bank account or subpoenas my banking activity鈥揹oesn鈥檛 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鈥揺ven though purchasing marijuana is legal in my state. (Some lenders, , don鈥檛 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鈥檛 have to rely solely on debit and credit cards.
To put it plainly, most people probably don鈥檛 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鈥檚 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鈥檙e a 鈥渟uspicious character鈥� 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. 鈥淎 student at Columbia University was arrested and charged with five drug-related offenses, including possession with the intent to sell,鈥� Sarah Jeong for The Atlantic. 鈥淪upposedly, his fellow students and customers had paid him through the PayPal-owned smartphone app Venmo.鈥� No matter how unmonitored they seem, most digital apps and payment systems aren鈥檛 anonymous. That鈥檚 good news for law enforcement and cases that are black and white, but what about the gray areas?
Who decides what鈥檚 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鈥檚 the full story, in The Atlantic: , 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 鈥渉igh-risk activity.鈥� In addition to guns, get-rich-quick schemes and pyramid schemes, other high-risk activities according to the FDIC included 鈥渢obacco sales, telemarketing, pornography, escort services, dating services, online gambling, coin dealers, cable-box descramblers, and 鈥榬acist materials,鈥欌�� Jeong. As a result, banks stopped working with businesses that were actually legitimate, by the U.S. House Committee on Oversight and Government Reform. As Jeong commented in her piece, 鈥淚t鈥檚 strange to see a list of a handful of actually-illegal activities 鈥� alongside legal vices.鈥� 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鈥檚 arguably easier to open a fraudulent credit card in someone鈥檚 name than to snatch someone鈥檚 physical wallet; compare in the United States in 2014 to of identity theft. And having your identity stolen is not merely annoying. 鈥淚dentity 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鈥檚 economy but its security,鈥� the Congressional Research Service. In contrast, cash is relatively secure, even if you don鈥檛 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鈥檛 count on Amazon Prime.
Obviously, I鈥檓 not advocating draining your bank account and stashing all your money under your mattress. But as we slowly transition away from physical money, it鈥檚 worth first examining the sacrifices to our privacy, anonymity and security. Jeong warns, 鈥淸T]he cashless society offers the government entirely new forms of coercion, surveillance, and censorship.鈥� Whether you care more about your freedom or your right to privacy, a cashless society should give us pause.