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Towards A Cashless Society: Lobbies Setting Up Smoke And Mirrors

|Includes: Citigroup Inc. (C)

Due to slow but tangible economic trends, the share of cash has slowly dwindled in recent decades. Several lobbies thus started fantasizing on a world without cash, either to increase their margins, or up their market control. But cash is deeply rooted in our societies, so lobbies are pulling out the big guns.

Who are these anti-cash lobbies? As always, they are informal, but they regroup certain outstanding sectors. Banks are generally hostile to cash for two main reasons. It generates little profit while creating expenses, on the one hand, and it exposes them to low capital availability during credit crunches (as clients no longer have any interest in keeping their money at the bank, and withdraw it in cash). Government agencies are also often annoyed with cash. Law enforcement systematically finds large stashes of it in each major operation, and fiscal services find hard currency highly suspicious, as it easily evades their control systems. Finally, financial software companies see in the cash segment a market share they would gladly take over.

Banks are pushing the strongest. Citi's, an Australian bank, has just recently decided to render its agencies cashless, quoting customer lack of interest for cash and the bank's orientation towards the future of banking. Head of retail banking Janine Copelin stated: "This move to cashless branches reflects Citi's commitment to digital banking and we are investing in the channels our customers prefer to use". As proof of it claims, it quotes the decline in low-value payments in cash, which dropped from 95% in 2007 to 78% in 2013. But this is a bit of a stretch. 78% is close to four fifth of payments, so cash isn't exactly disappearing, even if online and phone payments are indeed on the rise.

In addition, even the Swedes, who are known to be one of the nations the least bent on cash, made their position quite clear in a 2014 survey on cash, that they considered cash payments to be an inalienable right. Indeed, a cashless society would lock citizens into the system, with no way out, something a prominent democratic people like Swedes find unpalatable. Blogger Frank John says (1) "Cashless is fast and convenient and hip. That's the big selling point. BUT card payments are electronic and monitor who you are, where you are, what you've bought and how much you have spent".

Government agencies can be divided into two parts: fiscal and law enforcement. Fiscal services around the world dislike cash for one simple reason: it is hard to track down. This is one of the many reasons why the European financial powers that be are welcoming the slow but steady rise in plastic payments in Greece. The shadow and cash-friendly Greek economy has constantly evaded fiscal payments, which was one of the main factors of the Greek economic crisis.

Svetoslav Danchev, who heads the microeconomics analysis and policy department for the Foundation for Economic and Industrial Research (ΙΟΒΕ) in Athens, says "You get the wheels in motion towards a situation where you have much more use of digital payments and much more transparency [...] And that's how you lower the shadow economy." With the powerful digital trail created by electronic payments, fiscal services could levy substantial additional taxes. But, just as with banks, the cost of this extra fiscal income is democratically unacceptable. It will mean that the State will have absolute control of its citizen's economic life, as would an Orwellian State. And on the mere tax aspect of it, it would lead to citizens being fiscally gutted by their administration. Olivia Townsend warns: "Having an entire nation's accounts in a single, central institution would provide authorities with total control over the public's economic behaviour", pointing out such moves should be met with great skepticism.

As for law enforcement agencies, cash makes problems both upstream and downstream from investigations. Lack of digital trails makes it more difficult for police to shape out criminal networks, and linking suspects one to another. And once they have brought their investigation to term, through financial inquiries or other, they have no other evidence to produce to the judge than depositions from shady individuals. No official documents are produced by cash transactions. In almost all major cases, large amounts of cash are involved, be it for embezzlement, narcotics or terrorism.

In a recent surprise crackdown, the Indian government decided to outcast small bills from its economy, with Finance minister explaining : "To break the grip of corruption and black money, we have decided that the five hundred rupee and thousand rupee currency notes presently in use will no longer be legal tender from midnight tonight, that is 8th November 2016". But again, this is judging a system by its misuse and restraining the liberties of the innocent majority for the misdealings of a few black sheep. Less than three weeks after the rash Indian move, Zeeshan Aleem points out "Unsurprisingly, Modi's demonetization initiative has caused chaos across the country. People want new banknotes, but the current supply of them isn't close to meeting demand."

The most prominent argument of pro-cash lobbies, be they private companies or government agencies, is not an argument. They attempt to rally public support by appealing to the collective imagination: in some citizen's minds, cash is associated to crime, mafiosi, and all sorts of shady dealings. Anyone who wants to kill their dog first says it has rabies, so anti-cash lobbies are encouraging this association of ideas, in the hope that people will resist less the disappearance of cash they so fondly wish for. They may give in to the songs of the lobbies, but if they do, odds are they will soon be sorry they did.