No Cash = No Privacy?

Sweden is about to become the first cashless society. It is estimated that this year 85 to 90% of all transactions will be made via cards, apps, wire transfers and other means of electronic transfer. Cashless payments are so common that 5 of 6 main banks have entirely switched to digital operations, and have removed 900 ATMs across the country. Stockholm’s Royal Institute of Technology (KTH) forecasts that by 2030 every Swedish transaction could be digital.

The shift towards the cashless economy is a worldwide trend: many banks have introduced fees on cash withdrawal from ATMs. According to The Nilson Report, Nov/2012, there were 13.45 billion cards in circulation in 2011, up 51% since 2006. It forecast that the number of cards would increase by 36% in the next 5 years. The 8th Annual World Payments Report 2012 estimated the annual growth rate of electronic and mobile payments during the period 2009–2013 at 20%. It also predicted that m-payments could even grow at a faster rate: by 53% per year.   

Cashless payments drive consumerism: we tend to spend more if we pay with cards or apps. This happens because of the psychological illusion that they do not have the same value as cash. As a result, we lose track of our finances more easily, and end up with purchases with a privacy tax included: every non-cash transaction we make leaves a digital record of our personal data. There is growing concern that the cashless payment system will be further developed at the expense of our privacy.

On Business Insider, Don Quijones observes that banks and other financial mediators could take advantage of every single transaction we make. They will have access to the biggest datasets on consumer behaviour, which could easily be sold to advertisers, marketers, financial institutions, insurance companies, governments or other third parties.

In The Guardian, Brett Scott draws attention to the issue of surveillance. Commercial banks record ‘a transaction-by-transaction history of your entire commercial life’, which can be used not only for internal surveillance needs but also at the macroeconomic level. If companies like Mastercard and Visa could secure access to transaction records, they could develop a ‘big data economic macro-surveillance system’. Access to such datasets would provide accurate up-to-date information on economic activity, which would be of great importance to governments. On the other hand, it would limit consumer privacy even more.

Domagoj Sajter points out that if cashless payments overtake the market, society will be exposed to constant state monitoring, which can deepen mutual mistrust. He also notices intensive lobbying efforts of some large financial institutions to promote the use of digital money. Gemma Hunt further continues his argument. She mentions that last year contactless technology processed about £2 billion of transactions in the UK. In her opinion, if banks and retailers establish cashless payments as a norm or even as the only option, consumer privacy will be gone. Every purchase will leave a record of a client’s identity and purchase history, making it much easier to create datasets of spending patterns and other commercially valuable information.    

References: [1] Mark Hay, GOOD / [2] The Nilson Report (2012) via Domagoj Sajter (2013), / [3] Capgemini, RBS and EFMA, The 8th Annual World Payments Report 2012 via Domagoj Sajter (2013), / [4] Lindsay Konsko, NerdWallet / [5] Don Quijones, Business Insider / [6] Brett Scott, The Guardian / [7] Gemma Hunt, The Libertarian Alliance Blog