Cloudmoney

Are we trading freedom and resilience for convenience as cash fades away in favor of digital transactions?

Insight 1: The Roots of the "War on Cash"

The "war on cash" began to take shape during the 2008 financial crisis, which eroded public trust in banks. At the same time, emerging financial technology (fintech) businesses promised to disrupt traditional banking by offering innovative payment methods. The narrative of a "cashless society" quickly gained popularity as fintech companies declared the end of cumbersome cash transactions.

However, this promise did not materialize as expected. Companies like PayPal became extensions of traditional banking rather than true disruptors. Far from replacing the banks, fintech embedded banking further into everyday transactions, with payment apps and card systems aligning with established financial frameworks. Instead of breaking free, consumers found themselves even more enmeshed in a system dominated by powerful corporations.

This shift has also revealed a hidden agenda: big financial institutions and tech giants actively promote the elimination of cash not due to popular demand, but as a top-down strategy to extract profits and collect data. Digital payments involve fees, while cash transactions occur without cost to intermediaries. Moreover, cashless transactions generate valuable consumer data that companies use to target advertisements and influence buying behavior.

Examples

• In 2007, the launch of the iPhone catalyzed the fintech industry by enabling app-based innovations.
• PayPal started as an alternative to traditional banking but now partners with major banks and credit card companies.
• Businesses increasingly discourage cash payments, despite a lack of widespread demand for a cashless society.

Insight 2: The True Costs of Digital Payments

While digital payments promise speed and convenience, they come with hidden costs for both consumers and society. When people pay digitally, multiple fees and middlemen are often involved, making each transaction more expensive than using cash.

A simple example is buying a drink at a cashless bar. Beyond the price of your drink, corporations like Visa, Mastercard, and payment apps take a commission. These fees—typically invisible to customers—are higher than the expenses tied to cash payments. In addition to cost, digital transactions can expose consumer data to major tech companies, fueling an ecosystem of surveillance and targeted advertising.

These hidden layers disproportionately harm small businesses that must absorb transaction fees and individuals who lose privacy. What's being sold as convenient often results in both financial and societal burdens for ordinary people.

Examples

• Studies show digital payment fees can be 50-150 percent higher than cash transaction costs.
• Facebook or Google’s login options for payment apps allow them to harvest consumer spending data.
• Ads driven by collected purchase data often influence future buying decisions, benefiting corporations, not consumers.

Insight 3: Covid-19 Accelerated the Push for Cashless Transactions

During the Covid-19 pandemic, businesses adopted measures to prioritize "hygiene," often encouraged by payment companies eager to eliminate cash. Many retailers stopped accepting cash, claiming it was a transmission risk. However, this rationale is questionable when examining reports on real viral transmission risks.

England’s central bank revealed that card payment machines and shopping trolleys posed greater risks than handling banknotes. Despite facts undermining the argument, cashless payment systems gained ground during the pandemic, further marginalizing cash users. This period demonstrated how misinformation and corporate lobbying intertwined to accelerate the transition to digital payment dominance.

Examples

• Retail chains like Decathlon stopped accepting cash early in the pandemic, citing hygiene concerns.
• Studies contradicted hygiene claims, showing touchless terminals carried higher contamination risks than cash.
• Payment companies spent heavily on PR campaigns to portray cash as outdated and unsafe.

Insight 4: Cash is Resilient in Crises

Cash has a unique strength: it never fails during crises. When the unexpected strikes—be it natural disasters, power outages, or financial crashes—cash serves as an accessible, reliable form of payment. Digital systems depend on power and connectivity, both of which may be unavailable in emergency situations.

For example, during hurricanes or extreme weather events, people often withdraw large amounts of cash to prepare for potential outages. Similarly, during the 2008 financial crisis, consumers worldwide lined up at ATMs to ensure they had physical money in hand. As digital ATMs and bank branches decline, the safety net that cash offers erodes.

Examples

• Hurricane-struck areas often see surges in cash withdrawals due to the reliance on powerless "offline" money.
• ATM closures in the UK accelerated by 24 percent between 2015 and 2020, limiting access to cash.
• The phrase "cash doesn't crash" highlights its reliability during economic upheavals.

Insight 5: Digital Payments Widen Inequality

Cash provides an inclusive financial tool for working-class and marginalized groups, many of whom struggle to access or trust banking services. Unlike credit cards or digital payments, cash doesn’t create debt or exploit consumer vulnerability.

Studies show that people spend more when using cards than when paying in cash. A customer paying with a card at a family restaurant typically spends 40 percent more than a cash-paying counterpart. The physical act of handing over money creates financial awareness that digital payments overshadow, often leading to overspending.

Examples

• Visa’s own research found that card transactions encourage higher spending than cash payments.
• Many low-income households distrust financial institutions due to systemic exploitation and lean on cash for independence.
• Cash serves as a budgeting tool, helping users track and limit spending effectively.

Insight 6: Cash’s Role in Social Change

Throughout history, cash has fostered progressive movements and supported those operating outside traditional systems. For example, during Prohibition in the United States, cash-funded underground bars and industries. Similarly, the legalization movement for cannabis depends heavily on cash transactions due to banking restrictions.

Cash enables these "gray areas" by ensuring privacy and flexibility. As cashless payments rise, creative deviance—raves, protests, and underground economies—faces mounting obstacles. Digital records of transactions make it easier for states or corporations to monitor and block activities, eroding liberties and independence.

Examples

• Prohibition-era speakeasies thrived thanks to cash.
• Medical marijuana sales rely on cash in states where federal laws restrict banking for cannabis businesses.
• Environmental activists often rely on cash for fundraising and direct action efforts.

Insight 7: Cryptocurrencies Fell Short of Expectations

Bitcoin and other cryptocurrencies began with the vision of creating decentralized digital cash, but this dream has largely faltered. Crypto has shifted from being a useful means of exchange to a speculative asset, with fluctuations in value making it impractical for everyday payments.

Further, crypto prices remain tethered to traditional fiat currencies, undermining their intended independence. Rather than becoming digital cash for the masses, cryptocurrencies now serve more as investment tools for the wealthy.

Examples

• Few if any products are priced directly in Bitcoin or other cryptocurrencies.
• Early adopters debated whether crypto should act as "digital gold" or cash, with the "gold" supporters winning.
• Market instability makes it risky to rely on crypto for financial transactions.

Insight 8: Central Bank Digital Currencies Show Promise

Central bank digital currencies (CBDCs) offer an alternative to corporate-controlled digital payment systems. By giving consumers direct accounts with their central bank, CBDCs eliminate costly fees and make government aid distribution, like universal basic income, more efficient.

However, CBDCs raise concerns over potential state surveillance. A privacy-oriented CBDC model could address this issue, combining blockchain anonymity with state-backed stability. This hybrid approach might represent the closest thing to truly digital cash, providing independence without corporate interference.

Examples

• Sweden and China are pioneering CBDC systems to reform payment infrastructures.
• A CBDC could reduce consumer dependence on profit-driven financial institutions like Visa or PayPal.
• Blockchain-based anonymity in CBDCs could balance security with privacy.

Insight 9: The Cash vs. Cashless Metaphor

Proponents of cashless societies often compare cash to horse carts, implying it’s obsolete. A better metaphor, however, likens cash to a bicycle coexisting with cars. Bicycles are slower but offer safety, accessibility, and simplicity—important traits also embodied by cash.

Cash complements digital systems rather than obstructing them. It serves as a parallel option and a safeguard when digital infrastructures fail. Meanwhile, the elimination of cash prioritizes convenience for the tech elite over autonomy for the average person.

Examples

• Bicycles still hold value alongside cars, much like cash remains relevant alongside cards.
• The gradual disappearance of cash mirrors the automobile industry's sidelining of bicycles in the mid-20th century.
• Digital payments often struggle with outages or cyberattacks, but cash remains unaffected.

Takeaways

1. Choose where and how you pay to prioritize protecting your privacy and reducing corporate fees.
2. Advocate for policies to preserve access to cash, especially in underprivileged communities.
3. Educate yourself on potential future systems like CBDCs to support fairer payment ecosystems.