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Hang on to your cash. This dash to digitise payments is dangerous

The Guardian logo The Guardian 9/13/2017 Brett Scott
Contactless payments: ‘our every economic interaction ends up logged in databases for analysis.’ © Bloomberg via Getty Images Contactless payments: ‘our every economic interaction ends up logged in databases for analysis.’

Sweden leads the world in cashlessness. In doing so it also leads the world in opening its citizens up to fine-grained financial surveillance. “Cashless society” is a euphemism for a “bank payments society”, in which every transaction must be passed through a complex of banks, card companies, phone providers and payments apps.

In granting financial corporations complete control over the money system, our every economic interaction ends up logged in their databases for analysis. Sweden may end up being the first society in which every private economic action is recorded.

Cashlessness is often presented as natural “progress”. Indeed, a recent BBC article about Sweden’s digital payments fetish asks: “So how did the Nordic nation get so far ahead of the rest of us?”.As if cashlessness is a state we are all willingly racing towards.

Commentators often suggest the phenomenon is driven by “consumer demand”. It’s partially true. Ask a room of people to raise their hands if they wish to be able to use digital payment, and most will do so. But if you reframe the question as “Do you want to not have the option to use cash?” people are more hesitant. We like new options, but we don’t like having options removed.

Automobile evangelists in the early 1900s pitched cars as the transport of the future, superior to other forms, such as horse-drawn carriages. The bicycle, though, has remained stubbornly persistent, despite the car’s greater speed, distance and carrying capacity. That’s because the bicycle is more efficient in certain contexts, and requires lower maintenance. Cars have come to cause congestion, pollution, accidents and urban sprawl, and nowadays we see the simple bicycle as one solution to the problems caused by the “superior” car.

So it is with cash. The digital payments industry tries to cast cash as the horse-drawn carriage of payments; but cash is the bicycle, more flexible, resilient and convenient in certain settings, especially informal ones.

People don’t “want” cashlessness any more than they “want” a society where you’re allowed to use cars only. And once people glimpse the dark side of bank digital payments – with surveillance, massive increase in financial cybercrime, and exclusion of people who cannot access the formal banking system – they will probably want cash to remain.

There are, however, certain institutions – banks, payments companies, and governments – that really do want the death of cash. They are waging a war on cash, publicly smearing it as an outdated social evil while contrasting it against a romanticised vision of digital payments. Most ordinary people do not see cash as a “social evil”. They see it as a normal public utility. Private companies, though, see public utilities as competition. The only reason Visa ran its “cashfree and proud” campaign is because Visa loses revenue when you use cash.

Engineering public consent for cashlessness is a subtle process. People may indeed enjoy a new payments app or contactless card, but financial institutions then use that to justify the gradual removal of the cash infrastructure – such as ATMS – in order to deliberately make cash harder to use. This feeds back, making digital seem relatively more convenient, “inspiring” more people to choose it.

A similar self-fulfilling feedback loop can be seen in the European commission’s recent inquiry into implementing cash thresholds that would set limits on the size of cash transactions. Thresholds seemingly strike a compromise, hindering criminal groups, which may use large cash transactions, while having minimal impact on legitimate businesses, which use small cash transactions. Nevertheless, if you wanted to slowly create a cashless society, thresholds would be the ideal way to incrementally implement it. By gradually lowering the threshold over time, authorities slowly wean people off cash by making it increasingly harder for them to use it. It acts as a ratchet mechanism, pushing them into the arms of the digital payments industry.

Maybe I’m wrong. Maybe ordinary people in Sweden do passionately desire cashlessness, and have driven it themselves. Maybe they are not aware of the downside of digital payment, or don’t care because they have relatively high levels of trust in their government and financial institutions. But this issue goes beyond Sweden. The Indian government recently tried to force-feed cashless society to its citizens through its botched demonetisation programme, which hit the poorest Indians hardest.

And then there is the rapid digitisation of China’s money system. Two services, WeChat and Alipay, have gained massive ground in mobile payments. There are enormous surveillance implications to having hundreds of millions of transactions being routed through two companies that the Chinese government has access to. Payments are one of the last data frontiers. Your Facebook profile presents your public persona, but in your private payments you “put your money where your mouth is”.

States having access to your payments data opens up potential for economic censorship. Want to disrupt a major protest in a country where everyone uses two major payments providers via phone apps that give location data? Order the companies to not process payments from any phone within the protest area.

Corporations too are drooling over the potential to monitor customer payment data. They can pass it through their machine-learning systems to understand your traits and manipulate you with ever-increasing levels of subtlety.

This is the world we celebrate when we congratulate Sweden for locking itself into a cage of digital payment. Maybe we should be more circumspect.

• Brett Scott is

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