Daily CSR
Daily CSR

Daily CSR

Daily news about corporate social responsibility, ethics and sustainability


Cashless economy in Europe: whom does it benefit?



08/09/2017

What was deemed a crazy idea just a decade ago has now drifted its way into mainstream politics. More and more ink is being given to the idea of making our economies cashless. In the eyes of promoters, it would make our societies more modern, safer, and fairer to ordinary people. But when theories are being promoted, the arguments they contain are often carefully selected, in order not to reveal who is really pushing for it. So, in the end, who really wants cash to disappear?


The first and largest category of cashless promoters is States, and superstates. Currency has been a thorn in the governmental side ever since it existed. Cash reduces a state’s ability to steer the economy, because it is invisible on cyber-radars and escapes bank control. It also is the preferred vector for fraudulent and criminal operations : cash is used to sell drugs, weapons, to hire undeclared workforce, to evade taxes, and many other illegal activities. Tracking down criminals is therefore made difficult when they work with cash, which leaves no paper trail.
 
But above all, killing cash would amount to hitting a jackpot for governments. Julia Werdigier wrote for Global Business : “Governments worldwide lose more than $3.1 trillion in annual revenue because of tax evasion, according to a report published Friday. The equivalent of more than 5.1 percent of global gross domestic product never reaches the coffers of 145 national governments in the form of taxes, according to the report by The Tax Justice Network, an independent group that promotes financial transparency.” When promoting the suppression of cash, governments usually imply (or outright state) that the reform would increase tax revenues, and therefore enable the reduction of taxes for “ordinary citizens”. Whether governments would indeed decrease tax rates after increasing their tax base, is up to every voter to choose to believe or not.
 
The second category is banking institutions. Cash is the least profitable form of money they can hold. We ordinary citizens may not realize this, because we usually hold too little, but paper banknotes are in fact quite bulky and heavy, when held in large quantities. A mere million dollars (rather little money by banking standards) forms a four-foot high and 25-pound stack. Banknotes must also be moved, using costly cash management vehicles, and replaced, and stored, and protected. Finally, cash is a liability for banks. Beyond the unlikely-but-deadly risk of a bank-run, cash evades fiscal and monetary policies. In recent months, for instance, the negative interest rates imposed by the Central European Bank has made it, quite strangely, expensive (instead of profitable) for customers to deposit their monies at the bank. As a result, they convert their savings to cash, and slowly drain banks. For all of those reasons, banks in general are quite fond of the idea that cash would disappear. Some banks even have done it, invoking safety and digitally modern reasons. In November 2016, Clancy Yeates reported “​Citi is removing cash from its Australian bank branches, because it is no longer worth offering a service that is used by less than one in twenty customers. As consumers embrace digital banking and the role of cash dwindles, the US bank said its six Australian retail branches would remove cash handling services, because of falling demand from customers who instead manage their money digitally. “
 
And the third and last is businesses themselves. Although some small companies may appreciate the flexibility which cash provides, and also sometimes the ability to leave certain profits undeclared, most companies don’t, especially large ones. Cash increases the risk of their sales outlets being robbed, putting their employees’ safety at risk. It increases the temptation for the staff to skim off discretely some profits. It requires secure transfers to the bank on a daily or weekly basis. It raises suspicions within fiscal bodies, and therefore increases the chances of being audited, which is tedious and costly, even when no evidence of wrongdoing has been found by the audit. It requires counting and adding up everyday, providing far less automated manageability than nice clear figures on a computer screen. Ruth Reader wrote for Fastcompany, on Sweetgreen’s decision to go cashless : “ In 2017, Sweetgreen will go fully cashless in nearly all of its 64 stores after successfully testing the concept for about a year, cofounders Jonathan Neman and Nicolas Jammet tell Fast Company [...] Getting rid of cash might also speed up transactions, alleviating Sweetgreen’s peak lunch lines, which often spill out the front door and onto the sidewalk. The company says that employees can perform 5% to 15% more transactions every hour when they don’t have to handle money.” For all these reasons, and while most companies wouldn't consider refusing cash outright, they tend to prefer virtual payments.
 
The most important aspect of this issue is : why, despite the critical nature of the potential decision, is this staying out of mainstream media? No talk-shows are being hosted on the matter, it isn't discussed in newspapers, and the only places where debates are really held, or opinions expressed, is on independent platforms, such as blogs. The reason behind this is that those who wish for this economic reform to be implemented (banks, governments and businesses) do not wish for the subject to be debated : they wish to present it as the natural evolution of economies. And therefore, not worth arguing about. Civil rights and individual liberties defenders beg to differ, however. They consider this matter certainly should be debated, due to its potentially weighty and devastating consequences. In the list drawn above, of who would benefit a cashless economy, no paragraph is dedicated to citizens.