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The Digitisation of Payment Instruments Undermines the Public Nature of Money

Categories : Cash connects people, Cash ensures competition among payment instruments, Cash has legal tender status, Cash is a public good, Cash is a social network, Cash is a symbol of national sovereignty, Cash is the first step of financial inclusion
March 17, 2023
Tags : Financial inclusion, Monetary Exclusion, Privatisation of money, Public good
The digitisation of payment instruments increases the number of people in a situation of monetary exclusion. Digital payments have become essential to fully participate in socio-economic activities, although they are not accessible to all.
Tristan Dissaux

Economist and researcher in socioeconomics and financial innovations [and member of the CashEssentials’ Steering Committee]

This post is also available in: Spanish

This article was first published in The Conversation in French under a Creative Commons license.

As citizens of the euro area, we all make, on average, 13 payments per week (all payment methods combined): which offers numerous opportunities to circulate units of our common currency. Although they are all euros, they circulate via various channels using different media.

These have constantly been evolving and have done so all the more rapidly during the Covid-19 crisis. Our means of payment have indeed been greatly digitised. Although most of our payments in shops are still made in cash, that number is constantly decreasing, and the share of cash in the total value of transactions is already a minority. Some believe that we are on the verge of a “cashless society”, a society where cash will have been eliminated and which would promise economic efficiency and social progress.

At an individual level, most of us can see advantages in the increasing digitisation of our means of payment. Even if some adaptation may be required, digital payments often appear more convenient, faster, secure, etc. In the euro area, half of the respondents now say they prefer digital payments to cash. But we can also see that what may be perceived as somewhat positive for oneself as an individual does not necessarily translate into a vision of a desirable future for society.

Among European respondents, a larger share (55%) say that it is essential or imperative for them to be able to continue to pay in cash in the future. In France, where cash is, as elsewhere, used less and less for payments, 83% of respondents say they are worried about seeing cash disappear. Why are there such discrepancies between practices and perceptions?

Monetary Exclusion

Perhaps some people are thinking of those who find it more challenging to adapt to the digitisation of our means of payment. Even if this process can be seen as positive “on average”, it is far from favourable to all. Its negative impacts mainly affect those who are already the most vulnerable.

In the euro area, among the poorest 40% of the population, it can be estimated that roughly 20% of people are excluded from digital payments because they do not use a payment card: this amounts to more than 23 million people. For them, the increasing digitisation of means of payment results in various complications in their daily lives, difficulties in accessing goods and services, additional costs, loss of autonomy and a feeling of relegation.

Digitisation increases the number of people in a situation of monetary exclusion who, although they may have money, do not have it in the right form. Certain means of payment have now become essential for one to fully participate in socio-economic activity, although they are not necessarily accessible by everyone.

More generally, don’t we all feel that with the evolution of our different forms of money, something more profound is at stake, something that cannot be limited to simple considerations of convenience? After all, money is not just a simple technical tool that makes our economic transactions more fluid. It is, above all, a social institution: our collective use of money contributes to social cohesion.

From this perspective, the digitisation of money also leads to a loss of purpose, including, for instance, the meaning conveyed by the symbolic dimensions of our notes and coins. It has been shown, for example, that following the introduction of the physical euro in 2002, people identify themselves more as European citizens. It is not certain that this would have been the case in a cashless society.

In the current context, while cash is supposed to be legal tender, i.e. in theory, it should be mandatory to accept it as a means of payment, an increasing number of shops have already switched to cashless (especially in urban centres). In several European countries, the acceptance of cash is becoming increasingly uncertain, while access to it is becoming more and more difficult as ATMs and bank branches disappear. This dual constraint on users also explains the evolution of payment habits.

Are Payment Instruments a Public Good?

What is not necessarily apparent to users of the various payment instruments is that they are less and less the public goods they should be. Indeed, given the central role that payment services play in our societies, they should be universally accessible and mainly free of charge for their users. However, these services are increasingly subject to mainly private ownership, guided by profitability which limits their accessibility. This poses a risk to the legitimacy of our public institutions – to which money is still fundamentally linked – and to the trust we place in them.

With the digitisation of our means of payment, the sovereign tokens that represent our institutions fade away and are replaced by commercial brands: those of the international payment card networks (Visa and Mastercard, in particular) or those of the new payment services proposed by BigTech companies (ApplePay, for example) and other companies. The digitisation of money should therefore be seen for what it is: not primarily the dematerialisation of our means of payment but their increasing privatisation.

Cash is no exception since our banknotes and coins are minted mainly and printed by private companies, and all of them are delivered and supplied to the public by other private companies. If cash is disappearing today, it is primarily because it is seen as a cost source by those entrusted with its management.

The digitisation of means of payment is, therefore, not just a technical development. As it leads to a greater commodification of this fundamental element, that is, money, it is also a political and social issue. In a context where everyone must be able to use digital payment instruments to participate in society fully, it questions the division of tasks between the public and the private sector.

The digital euro, on which the European Central Bank is currently working, could be an opportunity to reaffirm the public nature of money and to (re)develop a genuine public service for account and payment services.

This post is also available in: Spanish