Cash transactions are disappearing around the world as more networks adapt to touch-and-go mobile and contactless card technology. Some businesses just don't accept cash anymore as the cash economy slips in status on its descent into extinction. Various cities around the world are pushing for all-digital economies. As they progress towards that goal, that means spare change and singles that would be tossed into donation boxes, handed to people on the street, and offered up as tips, will disappear.
What will the cashless economy mean for the poorest people in society? Are we moving toward a class-stratification that is even more sharply divided, with those at the lowest echelons of our cities excluded from commercial life and a mainstream existence due to their inability to participate digitally?
In November 2016, Prime Minister Narendra Modi of India announced that 500 and 1000 rupee notes would be removed from circulation (as of this writing, 500 rupees were equivalent to about US $7.75). This move was intended to force demonetization of the country, pushing it toward a cashless economy and forcing the untaxed corruption of the “black” economy into the light. The move also inadvertently moved the question of enabling access to the digitized world of consumerism for the poor to the top of the queue.
Part of the answer for Modi is creating “smart", connected cities with digitized public services, e-pay for utility bills, and digitally-purchased services such as train tickets. This works well when you're buying from the government, but when you're a small vendor hoping to sell your wares, it's trickier. Card readers are an outlay some can't afford, and using mobile phones to operate Paytm payment transfers is proving difficult for many.
The cashless revolution is far more primed in the EU, where 9 of the top 15 “most digital-ready” countries are, according to a report by Fung Global Retail & Technology. The report cites Sweden as holding the pole position — most likely to go entirely cashless first—perhaps by 2030 — the KTH Royal Institute of Technology's Niklas Arvidsson tells The Guardian. However, demographic gaps persist even in Sweden, where older, rural people are less likely to be on board.
All over the world, urbanites of the middle and upper classes prefer digital payment options, and are increasingly avoiding consumer options that are less convenient. Meanwhile, those “stuck” in the cash economy stay there. Wealth is, and has been, the controlling factor in who moves into the evolving digital economy — and who gets left behind.
Regardless of the country, the gap between the rich and poor widens as the cash economy gasps on its deathbed. In Amsterdam, the street magazine Z! — which is sold by city's homeless — is on its deathbed too, as its sellers are struggling to find cash customers. Although Z! trialled iZettle card readers in 2013, card payments didn't work for them; largely because of their complexity. They needed to carry their magazines, mobile phones, and a card reader — a challenge for many small businesses, nonetheless those that operate entirely on the streets. However, this limitation is already overcome by newer technologies: vendors could easily use ID codes on badges with lanyards for hands-free sales. Access is the real issue—as it usually is for the poor.
Kenyan citizens use a cashless system connected to cheap mobile devices called m-Pesa. The system lets people store funds digitally and transfer money by sending text messages; all without opening and maintaining a conventional bank account. EcoCash, a similar text-based service, is thriving in Zimbabwe.
Consult Hyperion director of innovation Dave Birch told The Guardian that advocating for the cash economy on behalf of the poor doesn't help anyone. “If you keep people trapped in a cash economy, you leave them to pay higher prices for everything, you leave them struggling to access credit, and more vulnerable to theft,” he says. “We’re going to replace cash with electronic platforms,” Birch adds.
“I don’t think poverty or being unbanked is necessarily a barrier, because everyone has a phone. Given the technology we have, we can develop new ways of moving digital cash around, even on the most basic of phones.”
The real obstacle is to make sure that platforms evolving along with smart city and cashless economy initiatives are inclusive. Not only that, but they must be connected in ways that make them accessible to everyone — which means finding a common payment ecosystem that's workable.
Bitcoin and other digital currencies based on blockchain technology provide a viable money storage and spending alternative for people who don't have bank accounts. The vision of money economies being central and universal is actually a fairly First World generalization; in many parts of the world, the money/currency economy has never been as strong or ubiquitous as it is in the U.S. This is great news, because it suggests that once we realize it, economies are more flexible than we may think. Ultimately, there are multiple options available to us.
“Money already works fairly well in America and Europe,” bitcoin thinker and digital currency innovator Jed McCaleb told Wired. “Today, the promise of these digital currencies is most seen in the developing world.”
Networks like McCaleb's Stellar connect micro-finance institutions (MFIs) digitally provide bank-like services, including loans, and allow for the transfer and receipt of money. These services are particularly needed by people without access to banks. Companies like Stellar offer digital infrastructure for exchanging money, and it doesn't necessarily have to be currency. The next step is to harness the power of blockchain technology to allow people to engage in these transactions without needing the MFIs, which may add costs to the process without adding real value.
Founder and CEO of blockchain application BanQu, Ashish Gadnis, points out to Devex Newswire that it is expensive to be poor in the developing world. As it stands, there are billions of people living in extreme poverty. For Gadnis, this is because, “multiple organizations interact with the poor in silos.” In other words, even a person who is the “named beneficiary” for multiple nongovernmental organizations, international organizations, and social enterprises can't break the cycle they're in due to lack of access.
A farmer living in poverty in the developing world does not “own their own identity” with regard to the organizations and institutions they interact with. They may get seed subsidies from the government in one form, participate in capacity building in another, use m-Pesa and their phone to buy supplies, and have to court investors on their own financial turf. The result is multiple data silos and lack of access.
For Gadnis, the solution to this problem is putting leverage and access back into the hands of the people by making governments, NGOs, social organizations, financial institutions, and others operate using blockchain — a distributed ledger that gives people an economic identity that is transferable across systems and that they control. Gadnis sees this as the key to economic resilience in a time of tumultuous change.
While blockchain technology pushes cash out and digitization in, it also presents opportunities for improved access. This is another salient example of why internet access for all is a core human right. Going completely cashless without enabling these kinds of solutions will widen the gap between the haves and the have-nots. We need to find a way to ensure no one is left behind.