The problem with cashless payments

Citizens living in the eurozone earn on average 13 payments per week of all kinds. They circulate through a range of channels and through a variety of media, including cash, payment cards, and online.

Our means of payment are constantly evolving, and they are doing so even faster during the COVID-19 crisis. Indeed, they have become largely digital: although most of the payments made in stores are made in cash, their number is constantly decreasing, and the share of cash in the total value of exchanges is already a minority. Some believe that we are on the threshold of a “cashless society,” which they believe the promise of economic efficiency and social progress.

Individually, most of us see benefits from the increasing digitalization of payments. While some adaptation may be necessary, they often seem more convenient, faster and safer. In the Eurozone, half of respondents say they prefer digital payments to cash. However, we also see that what may be perceived as rather positive for oneself as an individual does not necessarily translate into a vision of a desirable future for society as a whole.

Read more: Pros and Cons: Should We Eliminate Cash?

Among European respondents, a slight majority (55%) say that the ability to pay with cash in the future is crucial or very crucial to them. As in other countries, cash is being used less and less in France, but 83% of respondents said they were worried about cash disappearing.

Why are there such differences between practices and perceptions?

Monetary exclusion

One cause for concern is those who have a harder time adapting to digital payments. Even if this transformation can be seen as positive “on average,” it is not beneficial for everyone, and its negative effects fall mainly on those who are already most vulnerable.

Among the poorest 40% of the eurozone population about 20% are excluded from digital payments because they do not utilize any payment cards: this would mean more than 23 million people. For them, the increasing digitalization of payments complicates everyday life, causing difficulties in accessing goods and services, additional costs, loss of autonomy and a sense of relegation.

Some types of means of payment currently seem crucial for full participation in socio-economic activities, but they are not necessarily available to everyone. Digitalization therefore increases the number of people in a situation of “monetary exclusion” – they can have money, but not in the appropriate form.

More generally, as our forms of money evolve, something deeper is at stake that cannot be summarized in basic practical considerations. Money is not just a basic technical tool that makes our economic transactions more fluid, but social institution:our collective utilize of money helps shape our society.

From this point of view, the dematerialization of money is also accompanied by a loss of meaning: the meaning conveyed by the symbolic dimensions of our coins and banknotes. For example 2021 study found that after the euro was introduced in 2002, people identified more as European citizens. It is not certain whether this would be the case in a cashless society.

In the current context, cash should be legal tender, i.e. Mandatory admission as a means of payment – ​​more and more shops have already gone “cashless” (especially in urban centres). In several European countries, the usefulness of cash is becoming increasingly uncertain and access to it is becoming increasingly tough as bank branches and even ATMs disappear. It is this double limitation of users that explains the evolution of payment practices.

Read more: The crisis has not removed all reluctance to utilize contactless mobile payments

Nor is it so obvious that the types of payments used are increasingly less the public goods they should be. Indeed, given the central role that payment services play in our societies, they should be widely available and largely free to their users. Yet these services are increasingly subject to commercial management, guided by principles of profitability that limit their availability. This poses a risk to the legitimacy of our public institutions – to which money is always fundamentally linked – and to the trust we have in them.

With the digitization of our means of payment, the sovereign signs that represent our institutions are being replaced by commercial brands – payment card networks (notably Visa and Mastercard) or recent payment services proposed by GAFAM (for example ApplePay) and other technology companies. The process of digitizing money must be seen for what it really is: not primarily the dematerialization of our means of payment, but their increasing privatization.

Cash is no exception, as our coins and banknotes are largely minted and printed by private companies, and all are supplied to society by other private companies. If cash is disappearing today, it is primarily because it is perceived as a source of expense by those entrusted with its management.

The digitalization of means of payment is therefore not just a technical development. Since it translates into a greater commodification of the basic element of money, it is also a political and social issue. In a context in which everyone must be able to utilize digital means of payment satisfactorily in order to participate fully in society, the question of the division of tasks between the public and private sectors must be reopened.

This digital euro currently being developed by the European Central Bank could become an opportunity to reaffirm the public character of money and (re)invent a genuine public service in accounting and payment services.

Created in 2007 to accelerate and share scientific knowledge on major societal challenges, the Axa Research Fund has supported nearly 700 projects worldwide, led by researchers from 38 countries. To learn more, visit the Axa Research Fund website or follow us on Twitter @AXAResearchFund.