• Norbert Häring

    Norbert Häring is an economics Journalist since 1997, currently at Handelsblatt. After his phd in Economics, he worked for a large German bank. He co-founded the World Economics Association, where he provides a platform for less dogmatic and more pluralistic economics. He has published many bestsellers and was awarded with several publication prizes.

Brave New Money

PayPal, WeChat,
Amazon Go – A totalitarian world currency in the making

Introduction and overview

The future
of payments has arrived in early 2018, when the first Amazon Go store opened
its gates for the general public in Seattle. If you shop there, you will not
have to queue at the cash register. There is none, thanks to – as Amazon calls
it – the most modern shopping technology. You just download an app and sign on
before entering the store. Then you freely take everything you want from the
shelves and put it into your shopping bag – or put it back on the shelf, if you
change your mind. When you are satisfied with what you’ve got, just leave the
store, unencumbered by cashiers or shop detectives. Amazon’s surveillance
apparatus has followed you around the store and registered your every move.
Shortly after you have left the store, you will get a bill on your smartphone
and the money will be taken from your account.

Shopping
cannot be any easier than this. The activity of paying is eliminated in this
consumerist utopia that is just becoming reality. Without your involvement, you
will be rid of your money. You don’t even have to take out a card, give a
signature or swipe your smartphone. The seller and the person who manages your
money are merging. This is there we are headed, not just in Amazon Go stores. In
the future of payments, all convenience will be on our side, all the power will
be with the other side.

In China, a
different utopia is becoming reality. The Chinese government is working on a
system to assess the virtue of all Chinese citizens. If you treat customers
nicely or if you “volunteer” for some public service activities, you will be
rewarded with social points. If you are caught jaywalking by one of the
omnipresent surveillance cameras, which are increasingly equipped with facial
recognition software, you might have a few points taken from you social credit
account. If you dare criticizing the government or neglect to pay a fine you will
lose many points. If your account goes too low, you will be barred from booking
decent hotels or flights or fast trains.

The
standard way of paying in Chinese cities is by using the multi-purpose apps
WeChat or Alipay. You can think of them as a combination of Facebook, Google,
Amazon and Paypal. They cooperate closely with the government. WeChat even has
a special app which uses the services facial recognition feature to function as
official identity documentation for any purpose other than international
travel.

WeChat and
Alipay register and store everything customers do with their money and
otherwise, and use that information to make a numerical assessment about that
person’s virtuousness and trustworthiness. If you spend lots of time playing
computer games or if you have a patchy record of paying your bills on time,
your standing worsens and you will experience all sorts of economic or social
disadvantages. Given the close cooperation with the government, it can be
expected that these private assessments of creditworthiness and the government’s
social credit system will merge. All information about what citizens buy and
which services they use, where and when, can enter into the social credit
system.

It may be
an attractive idea at first thought, that a person’s virtuous or devious social
behavior should be recognized and sanctioned more than economic success or
failure. However, if a government has the power to decide and to sanction not
only what is legal and what is not, but also what is good behavior and what is
bad behavior, then the threshold to a totalitarian society has been overstepped.

The
Amazon-Go-society is different – at first glance. No supreme authority will
regulate your everyday behavior, as long as it is within the law. On closer inspection,
though, the two systems have uncomfortably large areas of overlap. Both are
based on reliable automatic identification of acting persons in any context and
on total surveillance of all actions. Cameras and other surveillance equipment
are following the Chinese with every move they make. The same is true for
Amazon-Go-stores. The fact that Amazon is marketing their surveillance
technology to police departments does not do anything to attenuate the
similarities.

Amazon Go
is just a particularly advanced example of the pay-as-you-go-world that is
forming in front of our eyes. We don’t own and control anything anymore.
Instead we pay for using the services, which things we used to own, can
provide, and we do so in ever smaller instalments. This is economically
feasible only if usage can be automatically registered by surveillance
equipment and automatically charged. In the Amazon-Go-store, the removal of an
item from its shelf is a separate purchasing-action, which has to be surveyed
and individually charged. This is the road to complete surveillance that we are
led onto in other matters, too. They are not selling the bits and bytes of a
computer program to us anymore, which we can use at will. They are selling the
right to use the bits and bytes of a program that remains in their ownership
and under their control – and with it, all our data. If they decide to do so,
they can block us from using the program. We do not buy bikes anymore; we rent
a bike by the minute. We do not pay the government any more to build roads for
us, we pay for using them by the mile or kilometer. From this, the government
and those who run the payment infrastructure gain almost complete knowledge of
the whereabouts and itineraries of all citizens. You cannot even pay cash on buses
and trains any more in many places, to partly escape this complete
surveillance. Increasingly, we trigger automatic payments with every step and
click we make. This pay-as-you-go-system is relying on and is at the same time fostering
the same complete surveillance that is currently implemented in China. It
renders individuals completely dependent on those who exercise control over the
financial bookkeeping and access-rights-management in the background. If they
decide that you do not have the financial claims to all or any of those
services, or if they deem you unworthy of using them for some other reason, you
will be completely paralyzed, unable to do anything. Just like Joe Chip in
Philip Dicks Science Fiction “Ubik”, written half a century ago. Chip is unable
to leave his apartment, because he cannot pay the door to open, due to lack of
funds. Dick, who became posthumously famous for writing the book on which the
Blade Runner movies were based, was a real imaginative genius. The term sharing
economy was more than four decades off, when he wrote this, and paying
digitally instead of with cash was far from being the norm at the time.

Automated
facial recognition and other technologies used for implementing the
pay-as-you-go-system are helping to merge the digital world with the real
world. What we do in the real world, is mapped into a digital representation
with increasing completeness. These digital representations of our lives are
used for personal profiles on everybody, profiles, which anybody can obtain,
who has the money or the power. This can be a potential landlord, a potential
employer, a bank, an insurance company or a powerful mother-in-law. All these
users of our data will make assessments of our worthiness just like the social
credit system in China.

In the same
way as in China, such assessment systems serve to promote desired ways of
behavior. This is exercised in a more decentralized way in the western system,
to make better consumers, more docile employees or more careful insurance-customers
of us. Even in the arena of political behavior there are areas of overlap with
China. Big data applications to statistically assess your trustworthiness and
value as a customer are prone to treat political activism and social behaviors
that stray from the norm as liabilities. If such a system is implemented
without strict checks on which data can be used – checks which are increasingly
hard to implement, society will be pushed toward subservience to authority and
strict adherence to prevalent social norms.

It is not
simply an unintended side-effect of the pay-as-you-go-system that it produces
and requires so much data. This is the main attraction of the system for those
who push for its implementation. Just take computer programs. They do not cost
anything to produce. Producers could easily give governorship to everyone who
pays. They don’t want to do that anymore. They want complete control and all
data. Corporations wanting to commercialize our data work together in harmony
with governments eager to survey and control populations, for purposes that may
range from tax-enforcement to crime prevention and political oppression.
Reliable identification is a crucial ingredient in the agendas of both of these
main actors. Thus, it is terribly convenient that pay-as-you-go is a major
driver of biometric identification via facial recognition, iris-scans or fingerprints
in everyday-life.

Cash is in the way

As long as
every other transaction is settled with cash, a complete digital representation
of everything that the population does, is out of reach. The stubborn
preference for cash is a major stumbling block on the way to the
pay-as-you-go-world of total surveillance. This is why they tell us, that cash
is outdated, dirty, fishy and inconvenient. However, the preference for cash is
based on some real and strong advantages of this payment technology, which has
served us well for thousands of years. Some of the more important of these
advantages are not becoming less, but more important, with increasing
digitalization of all walks of life.

The
following are the advantages of paying yourself with analog money, rather than
asking someone to please pay for you with digital money:

  1. Cash-transactions are anonymous.
    Only those who observe the transaction on the spot will know about them. The
    seller need not know the name of the buyer. Nobody can see from my account,
    what I have bought when and from whom. This is true for intelligence services,
    the police, a social credit authority, bank employess, credit card companies,
    rating agencies, spouses and parents. None of these will know from our account
    statements where we spent our days, and what we were doing.
  2. With cash, neither the buyer, nor
    the seller needs to give up something in advance and trust that the other side
    will stick to their promises. If you sell your car to an unknown person, you do
    not want to hand her the car and trust that the money she promises to wire,
    will arrive. If you are the buyer, you do not want to wire money before you
    have control of the car. Providers of new, faster digital payment methods like
    to make you think that these can achieve the same. So far, this is not true.
    The money transfer can be cancelled after the fact.
  3. Cash helps you keep to keep tabs on
    your spending. This is particularly important for those who struggle to make
    ends meet. If you pay everything electronically, even small and tiny payments,
    you will not have the visual and haptic control of your wallet emptying out and
    you will be so swamped with receipts that effective control is not realistic
    any more.
  4. Cash is a very robust payment
    technology. It does not require any technological infrastructure. It can be
    used even during major disruptions of the energy supply or the mobile network.
    The civil protection strategies of countries like Germany explicitly recommend
    that people keep a decent supply of cash around for such technical emergencies.
    If we only have the option of paying digitally, a breakdown of the internet or
    the mobile network will paralyze large sections of the economy. If only your
    own technological infrastructure, like your smartphone or your credit-card malfunction,
    you can be in deep trouble, if you are travelling and need to pay for a place
    to stay or to travel home.
  5. The same is true, even more
    radically, if, due to an error or for some other reason, all your accounts are
    suddenly blocked. Only with cash, you can keep paying for food, shelter and
    travel. Cash empowers.
  6. Cash is also a very inclusive
    payment technology. Children and people with physical or mental handicap often
    have a much easier and safer time using cash than digital payment methods. You
    will give your children small sums of cash to go and buy something, but you
    will probably hesitate to give them your credit card.
  7. Cash is the only possibility we have
    to store our money in a way that it cannot be lost in the next banking crisis.
    Digital money is nothing but a claim on a bank. If the bank goes broke, the
    money is gone, unless a well-capitalized deposit insurance system covers the
    loss. None of the existing deposit insurance systems, however, is well enough
    capitalized to cover the deposits of one of a large bank, let alone all the
    deposits of a failing banking system.
  8. Cash also protects us from a milder
    form of expropriation in favor of a failing banking system: negative interest
    rates.
  9. Cash is the cheapest payment
    technology for users. Banks and payment service providers charge for executing
    our payments. MasterCard and Visa have profit margins, which are quite a bit
    higher than those of your regular company. Someone has to pay for these.
  10. Of course, the advantages of cash
    are not only valued by law-abiding citizens, but also by criminals and other
    rule-breakers. Tax evaders and drug traffickers also like the anonymity that
    cash affords.

One man’s
meat is another man’s poison. For banks, payment service providers, IT-firms,
governments and some merchants the list above as a list of disadvantages of
cash.

Those who
want to sell as much as they can to us, or want to give us as much credit as
they prudently can, dislike that cash helps us control our spending. Police and
intelligence agencies think of the anonymity of cash as a major disadvantage.
They can convincingly argue that catching the bad guys and preventing bad
transactions would be easier if cash was not available and thus financial
surveillance was more complete. However, in order to prevent criminals from
taking advantage of citizens’ rights for privacy and other freedoms from
government interference, one would have to do away with those freedoms
altogether and democracy with it. To argue that some crime can be prevented by clamping
down on the use of cash is just a first step in an argument. All too often, the
second step is not mentioned. Not even an attempt is made to prove that the gains
in terms of crime prevention outweigh the loss of civil liberties.

In a
democracy, this judgment should be made after public discussion by lawmakers in
a transparent procedure. Instead, as we will see, the far reaching removal of
privacy in financial affairs has been decided far away from parliaments in a
diffuse transnational nowhereland, through the mechanism of standard setting
groups expert in evading democratic control.

Cash is
also a costly nuisance to credit card companies and IT-firms who want to have
our valuable financial information. Every transaction that we perform without a
data trace can distort the profile that they collect on us and thus make it
less informative and valuable. We are likely to settle the more sensitive
transactions in cash – transactions, which might allow conclusions about our
employability or health, or creditworthiness or our inclination to incur risks.
A potential employer who wants to screen out sickly or nonconformist
candidates, an insurer who wants to screen out risk lovers and the sick, will
not want to pay as much for a profile, if it does not reliably tell them, if I
drink, buy lots of drugs or medical services, practice a dangerous sport or
read a radical magazine. ´

Banks would
much rather see our money locked-in in the banking system than to allow us to
remove it at will in the form of cash – including in the most inconvenient moments
for them. If there was no such cash-exit anymore when the next major banking
crisis hits, banks would not have to rely on already overstretched governments
bailing them out yet another time. They could simply be made whole again by a
devaluation of our deposits. This works, because our deposits are legally a
debt of the bank to us. If the banks assets lose much of their value in a
crisis, its capital is depleted. By writing down the banks’ debt, the banks’
capital, which is value of assets minus value of liabilities, is restored. This can happen in one go, by
writing down deposits by 20, 30 or 50 percent, or it can be done gradually by
negative interest rates on deposits of say 3, 4 or 5 percent. If this was
possible, banks would not have to rely any more on governments rescuing them,
and governments would be rid of a big headache.

We
mentioned advantages of cash for criminals and tax avoiders, so let’s also look
at the disadvantages of cash for these groups. To transport cash in large
amounts is difficult and expensive. If the sums go into the two- or three-digit
millions, cash is not used any more. Rather, the mafia, the ultra-rich and
large corporations employ banks and specialized law firms to transfer digital
money into tax havens in a way that ownership is concealed. Criminals use
forged freight papers and similar tricks to insert dirty money in large volumes
into the legal money circuit. Those who pretend that pushing back the use of
cash would eliminate money laundering, crime or even terrorism never mention
that the bulk of money laundering and terror financing is done with digital
money. They use the argument that cash is unwieldy, to argue in favor of
getting rid of large-denomination notes, but they fail to admit that even with
large-denomination notes cash is too unwieldy for really large transactions.

For
companies like Visa, Microsoft and Vodafone which provide the technical
infrastructure for digital money transfers, cash is a nuisance, because they
are not involved and don’t gain money and data from cash transactions. Every
transaction that is digitized means additional business volumes for them. Also
their market power increases. If the alternative option of using cash is
eliminated, they will increase their margins.

Thus, Visa,
MasterCard and their allies are running large global marketing campaigns to
tell us how foolish and old-fashioned it is to pay autonomously with cash and
how modern and convenient it is to have someone else manage your payments
digitally. They bribe restaurants into refusing to accept cash. They provide
vendors of homeless-newspapers and churches with card readers, because this
provides terrific PR for cashlessness. Governments worldwide issue laws and
regulations to prohibit or restrict autonomous payments with cash. They make them
harder or more expensive and generally cloak them in the suspicion of
illegality.

It is not
only the Chinese government, who wants to know everything about their citizens.
Western governments, too, strive for the totally transparent citizen. The
leading power, the USA, even wants to bring every person on earth into the
digital system of automated surveillance. And so it happens that governments of
all colors, from Sweden to Saudi Arabia, are working together in harmony with
one another and with the leading private corporations of the IT,
telecommunications and finance sectors in a global public-private partnership
against cash.

A coordinated global campaign

The
surprise move of the Indian government in November 2016 to take 86 percent of
cash out of circulation with only four hours warning was one of the more
visible actions in this global campaign to digitize all payments. In most
industrial countries, more indirect and less visible ways of pushing back the
use of cash are employed. The ATM-network is thinned-out, banks start to charge
for cash withdrawals, rules are passed, which prohibit merchants from passing
on the cost of card-payments to customers, taxi-drivers are required to enter
into contracts with card-companies and prohibited from refusing to accept
credit cards. Banks and merchants who deal with cash payments are harassed with
pointless and tedious rules. Laws are passed, which require travelers who want
to cross a border with a few thousand dollars or euros in cash, to tell any
border official who deigns to ask, where the money is from and what exactly
they want to do with it, lest it be confiscated.

According
to a forecast from 2016 of the then-CEO of Deutsche Bank, John Cryan, cash will
be gone by 2026. In Europe, a general upper-limit for cash-payments is under
discussion. Several countries have already prohibited their citizens from
paying larger bills autonomously, without the help of banks or card companies.
At the same time, rules and regulations proliferate, which make sure that none
of our digital payments and accounts remain hidden from police, intelligence
services, the taxman and social security authorities. The last remains of bank
secrecy have been eliminated.

It is no
coincidence, that similar moves and regulations against the use of cash can be
observed all over the world. Malawi, Nigeria, the Philippines, Mexico and
several dozens more countries have even declared the official aim to become cash-free
countries as soon as possible. At the same time, these countries are working on
forcing their whole populations into large government-run biometric databanks. Digital
payments and biometric databanks are two parts of a coordinated global
campaign, which is driven forward under the camouflage-terms financial
inclusion and digital identity. Financial inclusion is Orwellian newspeak for
taking away the option of using cash. Digital identity is a devious nod to a
development goal of the United Nations, which asks for every newborn on earth
to be given an official identity. Even though, there is no mention of “digital”
and “biometric” in the development goal, and even though, biometric
registration does not work well for newborns, this campaign is pushing for the
forced digital-biometric registration of every person, under the pretext of the
development goal, even for the large majorities of the affected populations, who
are already well equipped with identity documentation.

Nominally,
this campaign is run by the G20-group of governments of the most powerful
countries, under the name Global
Partnership for Financial Inclusion
. The goal is to push back cash,
digitize all payments and to biometrically register all earthlings. The real
drivers are global leaders in banking, the credit-card-business and information
technology from the US, together with the US-government. They have formed
public-private lobby-groups with names like Better
Than Cash Alliance
, Consultative
Group to Assist the Poor
and Alliance
for Financial Inclusion
. These groups have written the strategy papers of
the G20-Partnership against cash and they have been invited to drive the campaign
forward as “implementing partners”. It is always the same companies that hide
their commercial interest behind these benevolent-sounding catchwords and
group-names. They are MasterCard, Visa, Citibank, Microsoft and PayPal
sometimes directly, sometimes through their foundations.

The most
important weapons in the stealth-war of the G20-partnership against cash are
the international standard-setting bodies and the international financial
institutions IMF and World Bank. The standard-setters are informal clubs of the
world’s more powerful governments and/or central banks. They set the standards
for what is considered best practice in finance. Very few people have even
heard of these very powerful groups. They go by cryptic acronyms like FATF,
CMPI and BCBS, which stand for Financial
Action Task Force
, Capital Markets
and Payments Infrastructure Group
and Basel
Committee for Banking Supervision
. They have no formal mandate or power and
can only give recommendations. At the same time, they are exceedingly powerful
and largely unaccountable. Their recommendations are almost always transformed
into binding law around the world, without any serious discussion in
parliaments, because they have already been declared the “global standard” by
the G20-governemnts. In the countries not represented in the G20 and their
standard setting bodies the international financial institutions use their
power to make sure that these standards are abided by anyway.

The World
Bank and the IMF, the standard-setting bodies and major agencies for economic
development, like USAID, have all vowed to use their regulatory and financial
power to further the goals of the Better
Than Cash Alliance
. This is the explanation behind the otherwise surprising
fact, that so many governments of very poor countries, who should have other
things on their minds, have recently made it a priority, to become cashless and
to register their whole populations in biometric databanks.

It is from
the transnational nowhere-land of the standard-setters’ realm, that the
EU-commission has been prompted to think about a general upper limit for cash
payments and to pass a regulation that allows customs officials to confiscate
cash at the border, even if no rule has been broken. It is here that the harassing
rules have their origin, which forces banks and merchants to eliminate every
minute risk of money laundering with the involvement of cash is involved, while
at the same time, nobody seems to care about large-scale tax-evasion and money
laundering as long as it is performed digitally. It is in this shadow-empire
that the rules are negotiated without the disturbing interference of
parliaments, which ensure that almost nothing can be bought anonymously over
the internet any more. The general public and parliaments hardly even notice
that this is going on. This is why there are always heated discussions about
new data preservation rules in telecommunications, while the much more
intrusive, very long-term storing and even active surveillance of our financial
accounts and transactions go almost unnoticed.

The trend toward a
digital world currency

The winner takes all is a basic rule of the digital
economy. Whoever is ahead has a large advantage, just from being ahead, and has
a good chance to end up as a quasi-monopolist. This has two main reasons,
called network effects and economies of scale. Network effects make digital
services more attractive, if more people use them. This is true for social
media or trading platforms as well as for computer programs like Word or Windows.
Economies of scale arise, because once a digital service or a programme has
been developed, it often costs next to nothing to provide it to more customers.
Thus, the leader, who has the most customers, can offer the most attractive
digital services at the lowest cost. This is the reason why Google, Amazon,
Apple, Microsoft and Facebook have risen to the top of the league of the most
valuable American companies within only a few years. Together with their
Chinese look-alikes Alibaba, Baidu and Tencent hold the global top-spots. They
all have a near-monopoly in their industry and can command very high profit
margins.

The winner takes all applies also to money in a
digitalized and globalized environment. Digital money can be produced at
near-zero cost, and its utility increases with the number of users. What is in
the way for one currency to gain a near-monopoly is only the desire of national
governments to have their own currency and their power to enforce its usage at
home. This power of national governments, however, might wane in an era of
globalized digital commerce.

Control
over a national currency has for a long time been an important factor
underpinning the power of national governments. If this authority should move
to the Silicon Valley, a big part of traditional power of governments could
move with it. The captains of the digital industry have made it clear, that
they would not be shy to pick up such power, if it came their way. They have
quite immodestly laid out their visions of world governance by “international
networks”, i.e. by them.

What these
would-be world governors from the Silicon Valley promise us as advantages of
the new digital payment world has much in common with Aldous Huxley’s Brave New World. Crime is history,
evading taxes is impossible, terrorism cannot be financed any more.
Unreasonable self-damaging behaviors can be prevented. If you have high blood
pressure, you cannot buy wine and salty or fatty foods without losing your
insurance coverage. Almost everybody is happy in Huxley’s brave new world. They
all have been conditioned to happily accept their respective roles in society
and they are provided with plenty of happy-pills. Still, most everybody reads
Huxley’s book as a dystopian phantasy, not least because autonomous thinking is
reserved to a few decision makers at the top of the social pyramid.

Huxley put
a French quote of the Russian philosopher Nikolai Berdjajev in front of his
book:

“Utopias
seem to be more reachable than ever. We are confronted with a new, worrisome question.
How will we be able to prevent them from becoming reality? Utopias can become
reality. Life is striving towards them. Maybe, a new century will come, one in
which intellectuals and the educated will think about how to prevent utopias
and how to return to a non-utopian society, less perfect but with more
freedom.”

In 1949,
Huxley wrote in the foreword to a new edition:

“Overall,
it looks as if we are much closer to utopia than anybody could have imagined 15
years ago. At the time, I put this utopia 600 years in the future. Today, it
seems quite possible that this horror will come upon us within a single
century.” (My retranslation from German.)

Huxley was amazingly
prescient with this prognosis. Given current trends, 2032 seems like a
realistic date for the realization of his dystopia. It seems that the 21st century
is the one in which we have to prevent a dystopia from becoming reality-one that
is already well recognizable in its contours. We will only be able to prevent
it from becoming reality, if we manage to unmask its dystopian qualities, and
the plan behind it, in time, before people have lost their ability to imagine
alternatives.

Given the
might phalanx that is working to push back cash and civil liberties, the
longing for technical fixes for the problem is all too understandable. Many
people are hoping that cryptocurrencies like bitcoin can be such a fix. They
promise to transfer the good aspects of cash into the digital future. They
promise anonymity and the protection of our money from bank failures. Others
are hoping instead that the governments themselves, via the central banks,
would issue their own cryptomoney as digital successors of the legal means of
payment. It would be money that would not be threatened by bank failures,
because the government would guarantee for it, not a bank. And, so it is hoped,
the government could put in place protections for privacy of the users of this
money.

Alas, those
who hope to solve societal problems with technological fixes will almost always
be disappointed. New technologies will work in the desired way, if societal
conditions and power relations are favorable. If they are not, the powerful
will take every technological tool that we would like to use and turn it
against us – as they are already doing with regards to cryptocurrencies and as
they are sure to do with an official digital currency.

Instead of
hoping in vain for technological fixes, we need to go the way of pushing for
political and societal changes. We have to pull parliamentarians out of their
deep sleep. We have to tell them and the citizens at large which game is being
played. They have to know that the decline in the use of cash is not a
development that is unfolding naturally but something that a powerful alliance
is pushing ahead by and coercion in the background. Ministers and central
bankers have to be put under pressure to justify working in a partnership with
companies like MasterCard and Visa against cash, despite all their public
assurances that they want to do cash no harm. If this partnership is widely
exposed dissolved, we will see that cash is anything but doomed. If allowed to
thrive, cash will see a renaissance, because in a world in which more and more
aspects of our lives are under surveillanceand recorded, cash offers a refuge
that will become more valuable for privacy and more valued by the people.

MasterCard, Bill Gates und their „war on cash“

If people
write about a war on cash, even well-meaning readers will tend to think of them
as doomsayers with paranoid tendencies. However, many will have second thoughts
if they hear that there is indeed a Better Than Cash Alliance, which has the
goal of replacing cash by digital payments on a global scale, and that this
Alliance is doing this with the explicit support of the government of the 20
most powerful countries. The term “war on cash” was coined not by critics, but
by keymembers of this Better Than Cash Alliance,
as a rallying cry in their drive to increase their profits.

At a
conference on payments in 2005, representatives of credit card company
MasterCard talked about a new generation of card solutions, with which they
wanted to “go to war”. Competitor Visa was confident, that they would “win the
war on cash”. Together, they wanted to “eliminate cash from the financial
system”. In a friendly report on the conference in the industry-journal
European Card Review with the title War
on Cash,
the author says that while banks and governments have a shared
desire to eliminate cash, governments prefer to let the card companies take the
initiative, because they are afraid that the public would not like the war on
cash. “[1] A department head of the EU-Commission is quoted
saying: „We agree with the war on cash” and continuing with a plea to lower
prices for card payments in order to be more successful in this war. Alexander
Labak, President of MasterCard Europe said in a speech on The Future Beyond Cash that the war on cash had to be won and would
be won, because these old-fashioned coins and bills were so expensive for
society.[2] The EU-Commission assisted with questionable
calculations about the high cost of cash, while the leading US-consultancy
McKinsey provided the rationale for the furor: They presented a study according
to which the profits of the financial industry would increase massively, if
cash could be pushed back.

At their
industry meetings and in front of financial analysts, banks and card companies
like to be bold and explicit about their goal to get rid of cash. However, if
the general public is listening, the strategy is one of laying low. The
International Monetary Fund (IMF) recommends letting  the decline of cash appear to be a gradual and
unplanned side-effect of unrelated measures and developments. The fund advises
governments to let the private sector go ahead, because direct official action
would cause popular resistance. If they did act, governments should start with
harmless seeming steps like phasing-out large denomination notes or (initially)
generous upper limits for cash payments. While measures against cash should be
presented to be unplanned and independent, they should in truth be closely coordinated
with the private sector, recommends the IMF-author.[3]

McKinsey also
advised governments, banks and payment providers to cooperate in a “systematic
war on cash”. The consulting company has conveniently provided a list of harmless-seeming
steps for governments to take. Many of them have recently been enacted all over
the world. They suggest are to require merchants to accept card payments and to
prohibit them from passing on the cost to their card-paying customers. On the
other side, cash-users should be confronted with the true cost of their
payment-methods, including all indirect costs. Standards for security and
maintenance in the cash circuit could be made more stringent, to make cash more
expensive. McKinsey praises the Finnish who managed to push back cash by
forming a cartel of banks and payment providers, which made cash more
expensive. Also in Canada, Norway and Australia, they write, central banks and
commercial banks together had achieved the same good result:[4]

The Better Than Cash Alliance

It is not hard
to find the allies of Visa and MasterCard in their war on cash, once you have found
a group called the Better Than Cash
Alliance
. This is a group that likes to stay in the shadows, but does not
really make a secret out of its existence. It was founded in 2012 by the
foundation of Microsoft founder Bill Gates and his wife Melinda, and by the
Omidyar Network of E-Bay-founder Pierre Omidyar, by the largest US-Bank
Citibank and Visa. The US-government was involved via USAID, the development
agency, which is part of the department of state. The United Nations Capital Development Fund (UNCDF) in New York
provides the secretariat and the offices.

MasterCard was
not among the founders. Maybe they needed a bit more cooling-off of their
fierce commercial campaign against cash, lest the press and the public might
develop doubts about the strictly altruistic goals of the new organization.
With a delay of one year, though, MasterCard joined this public-private
partnership of Wall Street, Silicon Valley and Washington. There is a strong
indication that MasterCard was closely involved already in the preparations for
this anti-cash-alliance much earlier. In the two years before 2012, the Bill
& Melinda Gates Foundation and MasterCard happened to be the most generous
financiers by far of the UNCDF. They covered over 20 percent of UNCDF-budget in
those two years, while in earlier years they had made some small contributions
at best. This generosity can be assumed to have helped to ease the UNCDF into
offering the Better Than Cash Alliance shelter and a prestigious sounding
address. This address allows the alliance to pretend that they are part of the
UN family, seemingly giving legitimacy to their claim to act in public
interest. In truth, the UNCDF is not a full member of the United Nations family
itself. It is an autonomous organization under the umbrella of the UN,
something like an illegitimate child, always short of funds and thus relatively
easy to bribe into such endeavors.[5]

It is also a
stretch to claim that you are part of the United Nations, just because an
organization with “UN” in their name provides you a secretariat. The Better
Than Cash Alliance does so routinely anyway. It they publish a brochure meant
to mobilize governments and other cooperation partners for the fight against
cash, they call this brochure a “UN-report” and call themselves “a UN-based
organization”. [6]

The goals of
the alliance are neatly summarized in the lengthy subtitle of a press release
by MasterCard, declaring their joining of the alliance: „ $1.5 Million Grant
Adds Momentum to Global Movement to Empower People and Grow Economies by
Shifting from Cash to Electronic Payments.“

The text
continues:

“MasterCard is
excited to join the Better Than Cash Alliance to help educate and engage the
public on the cost of cash to society which can be as much as 1.5 percent of a
country’s GDP,” said Ann Cairns, President, International Markets at
MasterCard. “Electronic payments have been proven to boost economic growth and
accelerate financial inclusion – but we recognize that to move the needle,
businesses, governments and NGOs need to work in partnership.
[7]

It takes some
chutzpa, to talk about empowerment while you want to take away the option from
people to pay autonomously, and instead force them to employ middlemen, using means
of payment which are under the ultimate control of others.

Until at least
2010 MasterCard made no secret of the fact that their war on cash was only
meant to increase their profits. Then, ostensibly, in 2011 the company hit upon
the realization that it matters more to be a good global citizen and to fight
poverty. The term “war on cash” did not fit any more into this new corporate
responsibility narrative from wonderland. Thus the last time the term was used
by MasterCard-representatives was presumably in 2010, the year in which Bill
Gates and MasterCard started setting the scene for the Better Than Cash
Alliance. At the time, the business magazine Forbes wrote an article about massive increases in profits that
MasterCard expected. Quote: “The gains, the company says, will be coming from the
growth of card and other electronic-based means of payment, which are a product
of what MasterCard chief executive Ajay Banga calls a ‘war on cash’.“[8]

The Better
Than Cash Alliance explains their goals on their website in the following way: “The
Better Than Cash Alliance is a partnership of governments, companies, and
international organizations that accelerates the transition from cash to
digital payments in order to reduce poverty and drive inclusive growth.”[9] What used to be called “war on cash” to increase the
profits of the financial sector, was rebranded as a campaign for financial
inclusion to help the poor. In truth and practice though, financial inclusion
and “war on cash” a synonyms. The goal is to push back cash payments – with a
focus on poor people in poor countries, who have until now not been using
formal banking services. This would be a worthy goal in principle. It is the
normal commercial goal of financial institutions and it can well coincide with
the interests of the targeted customers. If the financial industry offers
services to the poor which are affordable and more useful for some purposes than
cash, , that would can help the poor while at the same time generating a
profit. This is the invisible-hand of a market economy in action. It is nothing
special and nothing particularly worthy of special official promotion.
Promoters of financial inclusion try to make something very special and
important out of it by arguing that financial inclusion is something like a
magic wand against poverty and underdevelopment.

“Financial
inclusion has been broadly recognized as critical in reducing poverty and
achieving inclusive economic growth“, the Better Than Cash Alliance claims on
their website in telltale passive tense. Also inequality is claimed to be
reduced and women are claimed to be empowered if more payments are done
electronically.

Since they
have declared their own business interest as being completely in sync with the
fight against poverty and underdevelopment, MasterCard and Visa and their
partners can openly push ahead with an ostensibly well-meaning global
conspiracy to eliminate cash. Even though they don’t give press conferences and
try to keep the whole affair in specialist circles, real secrecy is not
required. If they are confronted with the suspicion that they just want to
increase their profits, they don’t even have to deny it. They will just ask you
what is wrong with making a profit while you are doing such a grand thing like
erasing poverty.

The only
problem with that narrative is that they have been swinging this magic wand for
more than 20 years now. They just gave it a new name every time it became too
obvious that it was not nearly as effective in fighting poverty, as it was in
generating corporate profits.


[1] Jane Adams: „The War on Cash.” European Card Review. März/April 2006. S. 12–18.

[2] Alexander Labak: „The Future Beyond Cash – Europe’s
Debit Alternative.“ Speech to Delegates of the Fourth Annual MasterCard Debit
Conference. Genf. 10.3.2005.

[3] Alexei Kireyev: The
Macroeconomics of De-Cashing.
IMF Working Paper 17/71. 2017.

[4] McKinsey & Company: McKinsey on Payments. March 2013.

[5] uncdf.org/history.

[6] Siehe z. B.: UN
report: Social network payments now reach nearly US $3 trillion in China
. Message
posted at https://www.betterthancash.org on 19.4.2017.

[7] MasterCard: „MasterCard Joins Better Than Cash
Alliance.” Press Release. No date (2013).

[8] Carl Guiterrez: „MasterCard Goes To War With Cash”. Forbes (online). 15.9.2010.

[9] https://www.betterthancash.org/about

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