Conclusion: the war against digital payment does not reach its target

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 yes. But Brett Scott disagrees. In “Cloudmoney: Cash, Cards, Crypto and the War for our Wallets,” the pro-cash campaigner argues that digital payments are a “predestined fate” chosen for us by tech companies and big banks. Promoting the use of outmoded cash is therefore a way to limit corporate power. The book raises provocative questions, but Scott’s arguments are unlikely to be compelling enough to halt the movement towards a cashless society.

Paying electronically rather than with notes and coins brings new risks. Power outages and technology failures – such as the 10-hour outage of European Visa (VN) card network systems in 2018 – have left card-dependent people scrambling to get cash. Cyberattacks routinely expose online accounts. But Scott embraces a more radical critique.

It begins by attacking banks and corporations as for-profit entities that do not have the interests of customers at heart. Financial institutions find it costly to serve the poorest people. That’s when digitalization becomes useful, allowing banks to replace human branches with standardized smartphone apps. Payment networks, technology companies and banks all benefit by charging fees 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 is true that this push leaves behind people who depend on the cash economy. But Scott underestimates how much the convenience of digital payments has changed consumer behavior. Less than a quarter of those polled by KPMG UK last year had visited a bank branch in the previous six months. According to a Payments Europe survey, around 70% of merchants would like to be allowed to refuse cash, in part because handling notes and coins is less convenient. These factors – along with the global pandemic – have contributed to the decline of cash, which accounted for just 26% of total transactions worldwide in 2021, down from 40% a decade ago, according to research by JPMorgan.

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

But this transparency can also have advantages. Data sharing can help governments track suspicious payments and fight tax evasion. The sweeping sanctions that followed Russia’s invasion of Ukraine showed that 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 UK are taking steps to preserve access to cash.

Some argue that cryptocurrencies and decentralized transactions using blockchain technology provide an escape from the oversight and control of banking giants. Scott dismisses this as a fantasy. Many crypto tokens remain pegged to the traditional monetary system. The recent collapse of TerraUSD, which was mistakenly called a stablecoin, is a reminder of the vulnerability of these digital infrastructures.

For Scott, protecting physical cash payments is therefore a way to preserve our freedom. Indeed, he argues that the use of banknotes and coins is akin to “a meditative practice” in a frenetically polarized world. Meanwhile, however, consumers are voting with their digital wallets. Cash defense looks like a losing battle.

To 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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