‘Cloudmoney’: How will our lives change after the marriage of Big Finance and Big Tech?

The war on cash is hiding in plain sight. Let’s for a moment, though, imagine that it were a “conspiracy”. Who would be the “conspirators” and what would they stand to gain?

Conspirator 1: The banking sector

Eliminating cash would lock people into full dependence on the banking sector for all payments, which means the banking industry – in general – has much to gain. Dip into the insider world of banking – read industry magazines or attend banking conferences – and you will find widespread disavowal of cash. For example, in June 2019 the Bank of America CEO Brian Moynihan declared that “we want a cashless society”, noting that his firm has “more to gain than anybody” from a move to digital transactions.

While banks do get into industry associations to advance a common front, their more immediate concern is how to increase their individual profits. This typically entails a combination of cutting costs and boosting revenues. In terms of the former, banks see their cash and ATM operations as a cost, an irritatingly unprofitable thing they have to run in order to allow people to “take their money out of the bank”.

It would be convenient if customers slowly forgot that they should expect this right to exit, or found themselves slowly nudged out of that option. Banks try all manner of tactics to discourage cash usage, and feel increasingly entitled to penalise people for it.

On the other hand, banks have an incentive to encourage digital payment. Two major revenue sources for high-street banks are interest and fees. Credit cards give them both, and debit cards give them fee income. Their digital payments divisions are profit centres creating positive revenue.

Their annual reports confirm these views, touting how they are boosting their digital payments division while cutting their heavier or costlier physical branch and ATM networks. Not only can they make greater profit by shifting people to digital channels, where they can be dealt with remotely using algorithms and customer service bots, but digital payments also create data about customer behaviour. Banks can use this to build customer profiles that will help them predict the behaviour of account holders and cross-sell products to them.

Conspirator 2: The payments companies

For companies like Visa and Mastercard the issue is straightforward. They make fees from facilitating money transfers between bank accounts, and see cash as competition to be eliminated. Excited by the untapped potential of cash-heavy poorer economies, they parade around the “financial inclusion” scene proclaiming humanitarian ideals.

Unlike banks, who are in general more diplomatic in their anti-cash stance, Visa’s annual report is full of unabashed declarations of war against it. With zeal they talk about “freeing” people from cash, like self-righteous crusaders freeing heathens.

They have two primary fronts in this crusade, and two primary tactics. The front they control is Internet e-commerce, which, as mentioned, is a natural home for digital payments. Payments companies ally themselves with online firms in their push to get people off the high street.

The second, and far more difficult, front is street-level commerce. Cash is strongest in situations of physical proximity, so payments companies use a plethora of apps, cards and “point-of-sale” (POS) devices to battle cash directly on its home turf.

The first battle tactic is to extol the virtues of digital payment, and to sign people up to promote it on their behalf. In India, for example, Visa has run the “cashless man of India” campaign, and another under the banner that “Kindness is Cashless”.

The second tactic is to demonise cash. For example, in 2016 Visa UK launched its “Cashfree and Proud” advertising campaign, with the company noting in the background that the “campaign is the latest step of Visa UK’s long-term strategy to make cash ‘peculiar’ by 2020”. In many ways, it has succeeded.

The campaign was rolled out across London billboards, radio stations and TV, and by 2019 the psychological balance in the city looked to have shifted towards digital payments. A rash of bougie hipster shops that refused to accept cash sprung up like a physical meme, helped along by incentives Visa offers (in the US this has included, for example, the company’s Cashless Challenge competition, in which it handed out $10,000 prizes to small trendy businesses that “go cashless”).

In 2020 this demonisation was further accelerated when big retailers took a lead from payments companies to erroneously associate cash with Covid. For example, the major sports retailer Decathlon placed large signs at the entrance to its London mega-store, reading, “For your protection we are only accepting card payments.” This despite the fact that the Bank of England released a scientific report noting that card machines, trolley handles, goods on open shelves and the screens of self-checkout counters – all of which Decathlon has – pose a far greater risk of spreading the virus than cash does.

By the time this book is released cash may indeed seem very peculiar in London, but fifty years ago cash was seen as entirely legitimate. Fifty years ago, however, Visa was only a young company (with a different name). Over the years it, and others, have managed to install a level of moral panic about cash.

The industry has consistently cast card payments as being safer, cleaner and higher status than cash, thereby slowly associating the latter with crime, disease and low status. Payments companies even spread ideas about cash as environmentally unsustainable, as if digital payment-fuelled Internet commerce has not led to massive increases in energy-intensive logistics and consumption.

Conspirator 3: The financial technology industry

The fintech industry specialises in automating broader financial services (such as automating the decision process for who gets loans), but almost all fintechs rely upon the underlying infrastructure provided by banks and payments companies. They have a natural alliance, because to automate finance in general you need to automate payment systems in particular.

Put simply, digital finance does not work with non-digital payments, and fintech developers see cash as a bug standing in the way of their financial automation. The last time I visited Level 39 – the big fintech hub in London – they refused to take cash at the bar. When I asked why, they looked shocked. Fintech depends on a move away from cash. Surely it was obvious they would not accept it here!

They are not the only tech companies who depend on this, though – in 2018, Amazon lobbied against legislation requiring shops to accept cash in cities like Philadelphia. Cash does not gel with automation, which means Amazon – which is pioneering a human-free automated system the likes of which the world has never seen – does not gel with cash. This is a major theme we shall return to later.

Conspirator 4: States and central banks

In anti-state libertarian circles, the drive against cash is presented as being orchestrated by a Big Brother state that wishes to watch transactions to gain more control. Every digital bank payment is recorded in a database, leaving a clear data trail. State bodies that may desire such data include the tax authorities – to watch for tax evasion – and the security authorities, to watch for money launderers, terrorist financiers or, alternatively, political dissidents (pro-democracy campaigners, minority rights groups, environmental activists and so on). Then there is the central bank, which may wish for greater general surveil- lance over a country’s economic activity and greater monetary policy control.

Libertarians are not wrong to have these suspicions, because there is plenty of evidence of overt state action against cash. Twelve EU member states have implemented “cash thresholds” to prevent the use of cash over a certain amount (for example, €1,000 in Portugal) under the justification of preventing terrorist financing and money laundering.

Others with thresholds include Uruguay, Mexico and Jamaica, and India and Russia have proposed them too. These thresholds are designed to ratchet down over time, with the cap slowly being reduced to wean people off cash purchases. For example, Greece started with a cash threshold of €1,500 and then moved it down to €500, and recently proposed to ratchet it down further to €300.

Germany, notably, has vigorously resisted cash thresholds. This is interesting, because anti-cash pundits present the demand for cash as being driven by underworld crime and corruption, and yet Germany ranks ninth out of 180 countries on the 2020 Corruption Perceptions Index, meaning it is perceived as highly trustworthy. The paternalistic message in places like Italy and Greece is that people who want cash are dodgy tax evaders, while Germans who want the same thing are presented as privacy-aware or prudently keeping their savings under a mattress.

No state has been bold enough to pass a law banning cash, but many have created national strategies to transition away from it. France has a national “cashless payments strategy”, and the Greek state (under huge pressure from creditors to repay onerous debt incurred through the opportunistic lending of German and French banks) has taken to a hostile anti-cash rhetoric to eliminate petty tax evasion. Other openly anti-cash governments include Nigeria and Hungary.

To complement the anti-cash rhetoric, these states praise the digital payments industry and encourage adoption of digital banking. Their support takes different forms, from state-funded digital innovation hubs through to paying welfare recipients via digital payments platforms, and it is often coupled with a refusal to accept state cash for state services.

Countries like Sweden have also made use of “demonetisations” – invalidating older notes to force people to change them – an action that creates inconvenience and uncertainty around cash. The most dramatic use of “demonetisation”, though, was that undertaken by India in 2016, when the Modi government sent a severe shock into the cash system by illegalising certain notes overnight and forcing people to turn them in within a very short period.

This action caused profound disruption in the lives of poorer people who depend on cash, while sending a powerful negative message about it – officially presenting it as the “black money” of corruption. The Modi government used the patriotic press to push anti-cash sentiment, before spinning the story into a tale of aspirational digital modernity: it preached about a bright, efficient and convenient cashless future that people would arrive at whether they wanted to or not.

Not surprisingly, this gave the Indian digital payments industry a massive boost, and the industry reciprocated with sycophantic front-page adverts in praise of Prime Minister Modi. The Indian digital payments giant Paytm put a full-page advertisement on the front of The Times of India and The Hindustan Times saying: “Paytm congratulates Honourable Prime Minister Sh Narendra Modi on taking the boldest decision in the financial history of Independent India! Join the revolution!”

It was not only Indian corporations sidling up to Modi. In its 2017 annual report, Visa noted that “During the year, we worked closely with the Indian government to support its demonetisation efforts,” a process that led to the doubling of merchant acceptance of Visa in the country.

The Indian government has also been vigorously pushing through the world’s largest biometrics programme – Aadhar – which is justified in terms of financial modernisation: digital payment accounts require people to verify their identity, and fingerprints and iris scans are a way for illiterate people to do just that. It was initially pitched as a voluntary complement to other ID systems, but over time Aadhar has increasingly become a requirement to access basic government services, and also prompted the largest supreme court privacy dispute in modern Indian history.

The Indian state has legitimate reasons to push economic development programmes, but there is no denying that these programmes simultaneously promote the commercial interests of the digital financial sector. The country is not alone. These alliances of states and financial institutions are found the world over and are enmeshed with major international development institutions like the Bill & Melinda Gates Foundation.

The latter also funds the Better Than Cash Alliance, alongside USAID, the US government development agency. Once we begin to look for them, the anti-cash stances of the various ‘conspirators’ outlined in the sections above are easy to spot. Their top-down initiatives, from anti-cash advertising campaigns to pro-digital policy recommendations, should immediately cast doubt over the extent to which a move away from cash is truly a bottom-up phenomenon.

Excerpted with permission from Cloudmoney: Cash, Cards, Crypto and the War for our Wallets, Brett Scott, The Bodley Head.