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Does the Cashless Society Discriminate?

Categories : Cash is a public good, Cash is available to all users
August 13, 2020
Published in : Acceptance of cash, Access to cash, Coronavirus, Regulation
Recent research undertaken by the Mint Directors' Conference and member mints has confirmed that Covid-19 has accelerated the use of digital payments - and that the move to contactless transactions has thrown the spotlight on inequalities.
Ross MacDiarmid

Secretary-General,

Mint Directors Conference

Mint Directors Conference (MDC) member research of 6,000 people in Europe and Australia has confirmed that many retailers are refusing cash payments altogether, effectively locking out societal groups who do not qualify for cards, or cannot afford cashless payment methods.

These are people without the financial means or ability to participate in cashless payments. They may not be able to afford a smartphone, cannot qualify for a debit card or lack the technological ability to operate cashless payment methods.

Two groups in particular are less able to participate in cashless payments – the elderly and the poor or socially disadvantaged.

When faced with being locked out by retailers, people in some low income groups are either being forced into going cashless – with flow on effects including financial penalties such as overdraft fees – or left unable to purchase basics such as food.

Between 10 and 27% of respondents were unable to buy goods

Our research found between 10% and 27% of respondents (depending on their country) did not buy goods at a particular point in time due to being informed by a shop that cash payments were not accepted.

The disparity extends beyond the countries canvassed in the MDC survey. Black Americans are less likely to have bank accounts than other groups in the US and according to a June report published by the Bank for International Settlements (BIS) the same is true for low income groups in Europe.

On average, 37.5% of our survey respondents agreed they had been influenced in their use of cash by retailers. Besides their own mostly hygiene related motives (influenced by news and own research), the attitudes of shops seems to have been the most important trigger for the change in payment behaviour. However, around half the respondents expected to return to using the same levels of cash as before COVID-19, while up to 44% expect to use less cash after COVID-19.

Also importantly, not all businesses want to move to cashless. Small businesses tend to bear the highest costs for card payments, and the BIS report also shows that cash transactions remain cheaper for merchants to process at point of sale.

Small Businesses are the Losers in a Cashless Society

Our research indicates small businesses believe they are being placed at a disadvantage by the move to cashless payments. In Australia, small businesses considered themselves as the losers in a potential cashless society which would ‘give more control to institutions and banks’ with a strong view that new technologies were very expensive for business in regards to merchant fees.

It is not just tech-disadvantaged populations who are vulnerable to often unintended discrimination in a cashless society. Intentional and unintentional biases can emerge based on the data profiles developed by fintech companies with access to customers’ financial habits and social networks, which can also be shared with third parties, sold for profit or be vulnerable to hackers.

Who is responsible for financial inclusion of the elderly, poor and disabled?

These findings are an urgent reminder of the need for governments to protect financial inclusion for people who are unable to participate in the digital environment. This pressing concern precedes Covid-19, demonstrated by the report published in the UK last year from a Treasury select committee that called for government intervention. Then early this year, a report by the UK’s Institute for Public Policy Research argued that shaping the transition to an increasingly digital economy to deliver economic justice will require continued access to cash, alongside improved access to digital financial services that work for everyone.

“For communities across the UK, barriers to accessing and using cash are growing. As our population ages and trust in digital payments remains low among broad groups of consumers, it is clear that digital solutions will need to adapt to better meet a wide range of consumer needs, and that cash will continue to play a critical role as a universally accessible means of payment.”

Some governments, for example in France, have already made it illegal for merchants to refuse cash or charge a different price to customers depending on the type of payment they use. In the case of Sweden where the majority of Swedes were initially happy to move to cashless there has been a growing backlash to the move and the Swedish government has since stepped in to pass a regulation requiring banks to provide a minimal level of cash services.

Laws and Regulations to Protect Cash

To ensure that all groups in society are able to fully participate – and in some cases survive – governments should consider the introduction of regulations and laws to protect cash acceptance. Requiring banks and businesses to continue accepting cash could provide a safety net so that people aren’t left behind.

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