Dear Hubski,
I've been hearing more and more cheer-leading for the platonic 'cashless society', culminating for me in the Manchester cashless experiment and the recent transition of London buses to no longer accept cash. I would like to raise my voice in dissent against this trend and suggest that perhaps the benefits are not worth the hidden costs:
1. Disenfranchisement
Electronic payments require accounts. Accounts require formal identity. Formal identity requires such things as documentation, address, paternity, occupation, nationality. Not all people have the privilege of access to these. By prohibiting cash payments we make life for those with limited means more difficult.
2. Rent
Financial transactions are an essential part of most societies we are familiar with. Cash is a utility to facilitate financial transactions. The cost of maintaining a cash system is borne by the public through taxation. By prohibiting cash payments we hand over control of the financial transaction utility to transaction processors such as Visa. These processors already impose a cost on merchants. If cash were indeed to be prohibited or deprecated then said transaction processors would essentially be allowed to extract rent from society for providing the transaction utility.
3. Democracy
A related point is that society can exert increasingly less will on private institutions, so whereas we may have some say in how a public utility like cash is administered, we lose all control with a private transaction processor.
4. Cost
As with the privatization of any resource or utility, the ultimate benefactor will be the controlling party. Once the oligopoly of transaction processors is in place (most nails are already in that coffin) there is nothing stopping these institutions from levying higher fees. I admit that this is a 'slippery slope' argument, but there's sufficient evidence in other industries to support a hypothesis of price gouging within tightly controlled markets. Cash offers an economic alternative and thus anchors the price of transactions.
5. Privacy
There is no reason why anyone needs to have a record of what I buy at the supermarket, where I take the bus or a myriad other daily transactions. No one has any right to know, and I assert the right not to tell.
This is my cash manifesto. Simply summed, cash is a wonderful public utility which has many social benefits over private transaction processors. I encourage everyone to support cash the same way they would their public drinking water, electricity or libraries. I will not support a cashless society until electronic payments are socially just and under public control.
Remember, when someone says 'cashless society', they're actually saying 'cash prohibition'!
Would love to hear your thoughts.
I'm right there with you for every reason you listed. Here's an anecdote from the last week when my mother visited: In NYC, the buses are equipped with devices to accept change as a fare. Also, the metrocard machines support the use of cash to purchase said card. Now, there is a special bus that runs from LaGuardia into Manhattan upto Colombia University area called the M60. When she arrived in the city this last time, apparently, the MTA has removed the ability to board the M60 via change payment. Instead, you must purchase a special pass from a machine inside (there's nothing wrong with that). The problem? That machine accepts cards and only cards. So if you wanted to use that method of public transport, you have no choice but to use a credit/debit card. Thankfully, taxis accept cash however, that is an expense closer to $40 than the $5 to use public transport which does not have the appearance of being fair to anyone at all. Also, I have very little trust in the current social constructs and do not like the idea of having every single purchase I make recorded and distributed to advertisers and other not-so-nice government agencies for furthering questionable agendas of individuals within said organizations. I do not like the argument of "but it's so convenient and why not? It's not like I can be harmed." because it always opens up the door for exactly that. I just think us so called residents of the 1st world really really really need to start evaluating our reasons for creating the things that we do beyond "we can afford it and it makes me temporarily happy." *edited because wall of text
EXACTLY! You'd literally disenfranchise significant portions of the city's poorer areas if the MTA decided to nix cash metrocard payments across the board. The amount of human traffic caused by the metrocard machines no longer accepting bills and there's only 1 person in the booth is a massive problem during morning commutes and many of those people have jobs where they're punished for being not being on time.
excellent point! going to a cashless society would have ripple effects like this, and even further down. Having said all this… I LOVE my plastic. I love paying at the pump. I love parking meters that take plastic. I love that every vendor at the farmers' market has a square, or paypal, or other credit card reader slapped on their iDevice. I love it. I am fortunate to have learned a long time ago to live below my means and budget. Because of that, I have the luxury of earning bonus points for using a card. I am grateful for this skill and for this opportunity. but that's my privileged, educated, first-world situation. So many people don't have those luxuries.many of those people have jobs where they're punished for being not being on time.
The "underbanked" are a segment that the CC companies are now essentially fighting over. They've all begun to issue cards that are "reload able" with cash at certain places, i.e. Walmart and can be used like a credit/debit card. This is a way to "get them in to the system." It's essentially "cash" though so the "live outside of your means" thing isn't an option. Also, the truth is, most large organizations would rather not deal in cash but a cash equivalent like a "MTA card" or a reload able cash card.
pre-pay cards that are not attached to anything specific is seriously one of the largest growing financial investment markets in existence right now. So I'm struggling to understand why it requires a card that's attached to your personal identity.
For the record, while I think you make valid points, Banks absolutely do not do this - to advertisers at a minimum. The gov't can come in and investigate your account through certain procedures, so I can't speak to that, but when banks give your information to advertisers, it's not your transactional information. I know I'm asking you to trust me on this, but I know what I'm talking about. On a side note if you search the word "regulation" on hubski, you won't find my post but you'll find some very interesting discussion. I'm going to have to go back to it.Also, I have very little trust in the current social constructs and do not like the idea of having every single purchase I make recorded and distributed to advertisers and other not-so-nice government agencies for furthering questionable agendas of individuals within said organizations.
Hey that was a great thread and I didn't actually ever realize you passed (has it really been 250 days) but it's esp. great because if you scroll down to the bottom of the page you witness thenewgreen using the word 'droll' to mean 'dry', which is a misapplication, but one that is only interesting if you happen to be reading the Droll Stories of Honore de Balzac right now, as I am. They certainly are not the Dry Stories of -- anyway. You get the point. What was the point? EDIT: the point was that your transactional history falls under the jurisdiction of a warrant for your arrest, I think.
I think part of what should be considered is that these theoretical corporations who would be buying your transaction history really don't care that much about individuals on an individual level. Big companies such as Target already track everything you buy, even if you don't have some kind of card with them or a rewards program - they track your debit card number as it is used, and record the history of all items. Then they go do crazy things and tell you you're pregnant. Additional transaction information, such as what you buy at other stores, probably wouldn't be very helpful or informative to them, unless they were considering expanding into other types of businesses or providing other services. In addition, selling transaction history could potentially violate laws like HIPPA (as it would be possible to see whether you were going to doctor's appointments, especially specialist doctors or psychiatrists) and it would take manpower to scrub the transaction history of those purchases, and I don't think a bank would be willing to invest that much time into a situation like that. It's a matter of practicability in application - I don't think many corporations would want that information, and I don't think banks would find it profitable to provide it. I also highly doubt it would be legal, but as you believe, there's a wide gap between what banks should do and what they don't do[1] so I encourage you to think about it from terms of practicality and profit. In short I highly doubt it would be a profitable venture for a bank to sell transaction history. In addition, if regulators came across such a process, they would clamp the fuck down on it ASAP. [1] I have mixed opinions on this but that's not he point of this discussion
I think that cash should always be an option. That said, I can't tell you the last time that I wanted to use cash instead of plastic. Why would I use cash when I receive additional rewards for making the same purchase? Given the volume of purchases I make, I can essentially purchase a trip for myself and my family every year with rewards points. Why wouldn't I use plastic?
I don't think the OP is suggesting a plastic-less society. The points simply lay out the reasons to keep cash on the table as a viable option. I actually agree with you both. I spend a good deal of energy maximizing the rewards points I get. However, I love being able to buy a [insert product here] from another individual without an institution or government knowing about that purchase. The disenfranchisement is a HUGE issue. You and I live on plastic, but SO MANY people I work with live in a cash only world. Whether impoverished or living on cash by choice (it's actually something I recommend when counseling people on budgeting - there's a whole system) - some people CANNOT live in a plastic world.
I don't think the OP is suggesting a plastic-less society. The points simply lay out the reasons to keep cash on the table as a viable option.
Yes, that's why I started my comment with, I think that cash should always be an option.
Whether impoverished or living on cash by choice (it's actually something I recommend when counseling people on budgeting - there's a whole system) - some people CANNOT live in a plastic world.
I couldn't agree more, if yo cannot spend responsibly with plastic, cut the card up RIGHT NOW. Otherwise, get yourself a rewards card that maximizes points in the areas where you spend, fuel, travel, groceries etc and rack yourself up some points and USE THEM. Otherwise, dirkson is right that most businesses factor in the cost of processing credit in to their pricing structure and your paying for someones rewards points. -They might as well be yours.
I use cash at the bar so I don't have to wait in line to cash out my tab. I tip in cash so that people I'm tipping don't have to get taxed. I use cash so that I can just slap it down and walk away instead of waiting for my transaction to go through. I give homeless people cash (fuck the people who say that you should only give them food and that they will only use the money for drugs and booze. I give homeless people money so that they might have some chance of a small pleasure or succor in their otherwise horrible days, be it money for a hotel, a shower, drugs or booze these are all things that I enjoy why shouldn't they). I use cash because I know that paying for my coffee with my card scrapes 5% of the merchant. I want to see the business I frequent stay around and prosper, it gives me more pleasure knowing that the bloodsucking credit companies don't get to buy another boat or mansion but the guy who owns the food cart gets to buy their kids something nice than the points off my coffee purchase ever will. I use cash because I don't really want to expand their dossier of my consumption habits anymore than I have to.
Your points are no less valid given what I'm about to write, I only write it because it's nice to have an accurate picture. The guy at the food truck is likely using Square to process his transactions, like 90% of them do. If so, it's a flat 2.75%. It's still a cost, and they are certainly better for having your cash but honestly, unless a business owner is an idiot, they're not paying 5%. In fact, I know a lot about this stuff and since I know you are opening a business, I'd be glad to consult with you via PM. There are right and wrong things to do. Businesses processing at 5% tend to be ones that make the mistake of getting in to a POS system that mandates a particular payment processing company. Guess what? Now you are fucked because they'll steadily jack up your rates and unless you are willing to divest yourself from the $20k POS system you put in, you're not going anywhere. It sucks. The credit card processing industry is a very nefarious one with a lot of crooks and criminals walking around in suits and ties, signing people up for 3-5 year contracts and terminal leases at $300 a month for something that can buy for $50. I purchase most things with my card and here is how I handle the scenarios you raise: 1. I'm an exorbitant tipper, much to my wife's chagrin. Honestly I tip 25-35% on average. 2. There are many situations when paying with a CC is actually faster than cash. Grocery stores come to mind etc. It's amazing how bad people are at making change these days, I guess we can blame CC for that. 3. Homeless -I've taken to carrying $5 Gift cards that I hand out to the homeless in our area. There's one spot near a Starbucks where they are often panhandling. They seem glad for it when I give it to them and I know they're not buying drugs with it. But your point isn't lost on me. Cash rules if you are a business and I think it's cool of you to accommodate that.
Yeah, or they could get a sandwich. Their call, but it's certainly more than they had prior to me giving it to them and in no way harms them. I try to give it with a kind word and a smile which seems to be of more value than the card/money.
I don't know how much the kind word is valued, I don't appreciate the vocal tip at work (sans monetary especially, It's good to know I'm doing my job alright I suppose). Seeing an ancient skeletal begger weep at a $20 is pretty heavy. So little meaning so much is not something I find uplifting, makes me feel sick about the world.
Im of the mindset that you can never go wrong with kindness. I've dolled out a few of those $20 gifts to homeless myself. It's a cool experience for both involved for sure. I've NEVER only given a verbal tip.
I hate giving my money to the homeless, nothing cool about it. I want to spend that money on myself and my family. I have a tiny sliver of understanding about how shitty their lives are and it compels me to give up a small portion of my hard earned bread to them, out of...compassion I guess, maybe sorrow. I should give every cent away if I were a decent human being but you know what, Fuck em, they probably made their bed and they will get what I give them, my shitty crumbs I guess. I've seen people who's hearts I admire more than any others give their last 5 bucks to shitty gutter punks who were traveling. I wish I were that kind if person but I'm just not. I hate that homeless people get my money but I hate the idea of anyone needing it that bad. Whole thing, my loss their desperation, makes me sick.
Why not? Because the money you're saving is actually money you're paying anyway. Although it seems free to you, merchants have to pay a rate to the plastic-processing companies to accept your card. Usually between 3% and 10% of the purchase price, depending on various factors. And when merchant costs go up, the cost of the product they're selling goes up. So prices today, in the age of plastic, are inflated slightly more than they would otherwise be. Your reward points are just the card company sharing some of its gains with you, to encourage you to push their product. So here we have a tragedy of the commons - Individuals are better off defecting, so that they can partake in the rewards. But society in general is worse off as individuals defect, because now goods cost more than they otherwise would. Cheers!
Why is it that cash discounts rarely exist? A big reason is that (wait for it...) many businesses don't mind accepting credit cards at 2-3%. I know you'll find it hard to believe but it's true. They like the ease of pay and in many industries they get paid much more quickly than they would with ACH. Many people can have a card on file and get paid NET 10 when with ACH, they fall back to NET 60+ which is horrible for cash flow purposes. This is why bitcoin is such an attractive thing to many merchants, it carries with it the ease of pay and convenience of plastic but without the 2-3% transaction fees. Also, if plastic were to disappear tomorrow, do you really think that retailers would lower their prices 2-3%? Nope. I could also argue that in a cashless society, there is a far lesser need for in house accounting, check writing, paper-invoicing, bad debt collection, factoring etc. There are advantages and disadvantages to both cash and plastic. In my opinion the craziest thing is that the banks can charge .5-1.5% to process debit cards. This is essentially risk free, cash transaction that has zero rewards attached. That's a racket. I see the industry changing drastically in the next 3-10 years though with the advent of crypto currencies and peoples willingness to participate in the digital payments space.Why not? Because the money you're saving is actually money you're paying anyway.
Okay, but in lieu of cash discounts (which rarely exist), it's money I am paying regardless, so I might as well receive the rewards. Also, unless you are running a highly, highly risky business there's no way you are processing at 10%. The national average for V/MC in retail is 2.62% Amex is slightly higher and typically is about 2.89%.
I would like to add to this - while saying I agree with every point made in the above post - Mastercard, Visa, and US financial regulations provide recourse in the case of unlawful billing. This doesn't just mean "someone stole my card and used it" or "someone charged my card when I told them I couldn't" - you could argue that without plastic (using only cash), at least the latter circumstance wouldn't occur, although theft (of cash) is always a concern. There's also "I bought something and it wasn't what the merchant said it was" and "I bought something that never showed up" (if you are paying with credit), for example. This is not a reason to eschew cash completely. However, I think when considering the pluses and minuses of currency types, it's important to consider that you are protected using plastic in a way that you are not protected with cash. However, you have the privacy, which I consider extremely important. I wonder if gov'ts are pushing for cashless societies because it would take a toll on the black market? However then I anticipate the black market would just become a barter system.
aside: I know that there are people in foreign countries that, because they can't send cash (over a certain amount) to the US, will do debt swaps in order to pay someone. For example, I owe a guy in china 25k and a guy in China owes you $25k. Instead of me paying the guy in China, I'll just pay you and the guy that owes you will just pay the guy I owe money to in china and everyones happy. This is a method of money laundering that occurs. So much shizzle going down in the world of payments these days. Exiting times, not sure what the future holds.I wonder if gov'ts are pushing for cashless societies because it would take a toll on the black market? However then I anticipate the black market would just become a barter system.
There's no doubt that money laundering is far more difficult with credit than it is otherwise. Still, businesses in the US that make a transaction over a certain dollar amount have to report it thusly, whether it's on credit or otherwise. It's much easier to hide cash though. You can hide $10k influxes in to a cash business like a bar/restaurant much more easily than you can in a b2b space that typically uses ACH/Credit. That's why those gangsters are always running bars/stripclubs/casino's. -Over the counter cash transactions.
I don't want to live in a cashless society because it will make purchasing illicit substances much more risky and difficult. Without the ability to make untraceable cash payments, psychedelics will basically disappear from the market.
I wasn't counting the Silk Road because the Silk Road as an entity crashed and burned last year and has yet to be replaced by a reputable website of similar purpose. I stand by my previous statement, which is to say that I have never met a single pot dealer in the flesh, who I bought from, who took bitcoins. Maybe someday. Not today.
I agree with your assessment for the most part, but I'm not sure your rent critique is complete. Sure, transaction processors would be essentially taking a non-governmental tax in exchange for the service of processing our transactions, but a.) that already happens and b.) there's nothing inherently wrong for charging a fee for a service which the government no longer provides. The issue, I think, comes along when you consider that this incentivizes these processors to process more transactions, and at a higher rate, which you come closer to in the cost argument. (Incidentally, this is also why I'm fundamentally opposed to privately owned prisons - their owners have an interest in increasing rates of incarceration, and tend to act based on this interest.) One other thing: 'cashless society' isn't exactly the same thing as 'cash prohibition'. The mere fact that the government no longer produces physical currency has no bearing on the ability of private citizens to produce, assign value, and use their own cash in transactions.
Thanks for the insightful criticism. I'll try my best to address some the points you make. 1. Alternate Currencies I only have the following to say on this topic, it's not a complete thought so please be gentle:
The value of legal tender is that it is valid for all debts private and public. Alternate currencies have value among the groups that value it. To use this value outside the group, it must be exchanged. This necessarily means gatekeepers and rentiers who exploit their positional privilege to increase their wealth.
*Edit: Also this would be the effect of the Disenfrachisement critique writ large. 2. 'Cashless society' does not equal 'cash prohibition' Maybe a bit sensational but I'm trying to get all this down to elevator pitch length. In fact I do believe that the two are identical. Take the example of JackTheBandit's mother. She has been prohibited from using her hard earned cash to pay for carriage on the M60. Previously she was allowed to, now she is not. The upshot is that her cash is a little bit less valuable now than before. The cashless society will be upon us when, after a progressive series of such prohibitions, cash is deprecated to the point of being valueless.
Also the expression 'cash prohibition' helps to refocus the conversation on the fact that this policy is taking away rights that we previously had. 3. Rent Redux The economic rent that transaction processors already extract is factored into the cost of things that you buy. I doubt their contribution to the effort required to furnish the item to you is worth the x% that they charge. Further, they likely charge a similar x% at every step along the way that was taken to produce and deliver the item. All of these costs must eventually be recouped through the sale price.
The project of cash prohibition is a classic case of rent-seeking as it is an attempt to impose ownership over a resource that didn't previously have an owner for the purpose of exploiting the positional privilege.
Unfortunately this point is a bit obscure but I think it is the second most important one. I would greatly appreciate any help to make it more concise and meaningful.
1. Yeah, I agree. I just think you have to be careful about implying that a cashless society means the absence of any kind of physical currency (rather than just the absence of gov't-backed currency) 2. See 1, and I'm fine with the expression "cash prohibition" as a tool for persuasion as long as you're clear about this being prohibition of gov't-backed physical currency. 3. I'm still not convinced - as you mentioned in the OP, the gov't already charges a sort of "rent" for using currency, i.e. taxes. As such, the shift away from cash wouldn't mean rent where there was none, only a shift in who's collecting the rent. (And re: their contribution not being 'worth it', arguably because there are a number of such providers in competition with each other and the price is what it is, the price is at equilibrium, or close to it, implying that a sizable percentage of consumers do think the rent is worth it.)