Is Cashless the Way to Go?

If you’re around my age (I was born in 1967, in case you’re wondering), you probably remember how we used to bank and to pay for … well, just about everything.

It wasn’t all that long ago that if you wanted to withdraw or deposit money you had to go into local branch of your bank. You’d fill out a rectangular paper slip, wait in line, then hand it — along with your passbook and, if you were making a deposit, cash or a cheque — to a teller.

Most of us used the cash we withdrew for everyday transactions — like buying a jug of milk to a picking up a new pair of jeans to getting the books we needed for the school year. Sure, we made larger purchases with cheques or credit cards. But until recently, cash definitely was king.

The debit card changed the personal financial game. With ATMs everywhere you didn’t have to worry about making it to the bank before it closed to withdraw cash for a night out or for the weekend. You could deposit and withdraw money at your leisure at a convenient (sometimes not-so-convenient) ATM. And as debit card machines at stores of all sizes became the norm, buying whatever you needed became a whole lot easier. A quick swipe, a few key presses, and Presto! You got what you needed.

Sure, we still use paper money and coins — mainly for smaller purchases which incur an additional fee is using plastic. Transactions using debit cards have quickly become the norm. That process, which began several decades back, heralded the genesis of the so-called cashless society

The idea of the cashless society picked up steam in the 1990s after being heavily prophesied decades before. It hasn’t become a reality yet, although Sweden seems to be on the verge of becoming the first cashless society.

But is a cashless society the way to go? I don’t think it is.

Don’t get me wrong: I don’t believe a cashless society is the next step in the government’s, any government’s, move to tighten its control of us. I don’t see it as an attempt at Big Finance to expand its hegemony. I definitely don’t see it as one of the signs of the End Times.

My reasons for being skeptical about the cashless society revolve around the issues of technology, security, and privacy.

I worked in the field of technology for over 20 years. In that time, I never encountered a technology that was foolproof or that didn’t fail. Software crashed. Hardware died. Glitches and bugs crept in, like vermin gnawing at the foundations. They caused no end of grief until those glitches and bugs were fixed or stamped out.

Our technology is only as good as the people who create it. I’ve worked with, and know, a number of really clever and top notch software developers. People who do know their stuff. But no matter how good or experienced or diligent they are, those coders made mistakes. Usually small but annoying mistakes. Sometimes, worse than that.

A cashless system is built on top of what’s potentially fragile technology. On that can, and will, fail. I can’t see a cashless system not being susceptible to human error.

How often have you waited in line at a store checkout, whether self service or not, and found the debit card machine (or a bank of them) wasn’t working? How often has the ATM system frozen or gone down? If we go completely cashless, I can see that happening more often.

In the developed world, we take a constant supply of electricity from granted. We tend to forget, however, that all of our technology relies on the electrical grid that can be fragile at the best of times. A grid that can collapse without warning. That was brought home to me during the Northeast blackout of 2003. The electrical grid in the northeast U.S. and in parts of central and eastern Canada overloaded, leaving millions of people without power. I couldn’t use my debit or credit cards for few days. The cash I had in my wallet, and stashed in an emergency fund at home, tided myself and my family over until everything went back to normal. Had the crisis gone on for much longer than it did, I (and I’m sure many others) would have been hard pressed to live our normal, daily lives.

We’re all told to keep our PINs and passcodes safe, though not all of us do that. No matter what safeguards we put in place we’re still going to be vulnerable to people who don’t have our best interests at heart. To people who see our stash of money, no matter how small, as a tempting target. To people who are as clever and devious as they are determined to separate us from our cash.

One Sunday morning in 2014, my friend Paul stopped by his local New World Supermarket in Wellington, New Zealand to pick up a few supplies. He swiped his KiwiBank EPFTPOS card (what we call a debit card down here) and keyed in his PIN. The transaction was denied. He tried again. Same result. Luckily, Paul had enough cash on him to pay for his purchases.

When he got home, Paul logged into online banking. He saw something that confused and shocked him: minutes before he tried paying for his items at New World, someone had made an $800 withdrawal from his account. From an ATM in Zagreb, Croatia. A place Paul had never been to. Ever. It seems that Paul’s card had been skimmed.

You can toss around all the security-related jargon you want — SSL, TLS, EMV, two-factor authentication — but no security measures are perfect. You can bet intelligent, tech-savvy, and determined criminals will find ways to defraud people like you and me. You might even have been a victim in the past.

You can’t trust financial institutions to ensure that your transactions are secure. There’s always a lot of high-minded talk about consumer security, but none of it really adds up to much. Take, for example, the much-touted contactless debit and credit cards. They’re supposed to offer more convenience and added security. You don’t need to swipe and key in a PIN number. All you have to do is wave or tap the card and, presto!, your purchase is made.

The dream doesn’t quite match the reality, as far as security goes. Researchers and consumer groups found that there are some major flaws with those cards that thieves can easily exploit.

Although I’ve been accused of being paranoid, I’m not. But I do take my personal and digital security seriously. Especially when it comes to my bank accounts and investments. You should be, too.

Every time you swipe or tap debit card, every time you use credit card, that action leaves a record. It leaves a digital trail of what you purchased. Most of time, those purchases are innocuous — books, razor blades, the week’s groceries. Sometimes, you buy items that you just don’t want other people to know about. Items like contraceptives or gifts that didn’t go to your significant other.

Yes, there is potentially a personal cost to all this data collection. You might remember the story of a teenaged girl in the U.S. who bought certain items at a local Target department store. Based on the pattern of her purchases, Target’s statisticians and algorithms predicted that she was pregnant. So, what did Target do? It sent coupons for various baby items to her family home. It turns out the teen was pregnant, but hadn’t told her parents.

What you buy is your business, and yours alone. Unfortunately, anyone with access to the data surrounding your purchases can mine it. Most of that mining is for marketing, but who’s to say an algorithm developed by a three- or four-letter government agency isn’t going over that data? Admittedly, most of our purchases are benign. But even the most innocuous purchase could raise a red flag depending on the level of paranoia programmed into the algorithm.

Going cashless is all about choice. Your choice to either use cash, not to use cash, or to use it in combination with debit cards (or whatever replaces them). Admittedly, it’s cumbersome and potentially dangerous to carry large wads of bills on your person. But you should have that option. No government or private institution should take that option away from you.

by: Scott Nesbitt

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