Cash versus Cashless:
Should We Stay Or Should We Go?

By Al Colombo

Do you have any reservations about handing a sales clerk a plastic card with your name on it to make all your purchases instead of hard, cold cash? If you don't you should for plastic will eventually cost you more than cash by way of less financial and personal freedom and quite possibly later by way of higher transaction and service fees.

There are those among us who would have you and I believe otherwise. According to them, converting to a cashless money system would be in "our" best interest. As follows:

"The goal is to replace cash and checks with electronic transactions that cost just pennies to process. Citibank, a leader in this push for a cashless society, is developing what it calls an Electronic Monetary System that will permit consumers and companies to make payments electronically anywhere in the world," said Adam Zagorin, CASHLESS, NOT BANKLESS.[1]

"...transactions that cost just pennies to process." Do you fully understand what Zagorin said? Allow me rephrase: "...transactions that cost [the banks] just pennies to process."

It's the banks that have the most to gain by going cashless. The banks will pay much less to process transactions than the cash we now use. Why? Because they can then get rid of all the money counters and pretty tellers at our local banks. But wait... although plastic is suppose to cost our banks less to process, where's the savings for us? I don't see the cost of doing business with our local banks going down, do you? If anything they are continually rising.

Oh, But "Cashless" Is
So Convenient, No?

We are told that the benefits of a cashless system for the average citizen would be so good. Just what are these benefits? We've been told that cash is inconvenient because we have to carry it with us, and thus it can be taken from us at the point of a gun or knife. Also, when it is taken, it cannot be easily traced and replaced. By comparison, a cashless system would be good for the bankers for the following reasons:

1. "Cashless transactions will enable your bank to glean a portion of every penny spent."

   The International Banking community would be able to glean a portion of every penny spent where, with cash, each time you make a purchase, the bank cannot charge you a nickel.

   "Despite promises of a cashless society, 85% of everyday transactions are in cash or checks, which generate little income for banks," says Bernard Baumohl, John Greenwald, and Michael Krantz, authors of Going Cashless, TIME Magazine, April 22, 1996.[2] This is exactly why various institutions, including our government, want to institute a cashless environment.

   Consider for a moment what happens when you make a single trip to an ATM (Automatic Teller Machine) on a Saturday and obtain enough money for the coming week. Every monetary transaction you make all week long using that cash occurs without the bank's knowledge. Thus, they cannot charge you or the vendors you do business with for the use of that money. In this case, all the bank realizes is a single $1.50 transaction fee at the ATM. On the other hand, when you use a plastic debit or credit card, the bank is able to assess a transaction fee against each and every vendor that you do business with.

2. "Cashless transactions fail to provide the banking community with an audit trail of everything you buy."

   In a cashless environment, banking institutions will be in a position to collect and store purchasing data based on the purchases you make with your plastic card. With this information they can target advertisements to specific clients. Such advertisements might come from the banks themselves or from other vendors that purchase this information. Already the author has seen advertisements for health care insurance included in monthly bank statements.

   The fact is, many of the controls that banks were once subject to have been of late relaxed. For example, banking institutions can now sell customer information to marketers. Although this practice is not new among businesses, the kind of information that the bank has to sell is.

   Now, banks can sell or share most account information, including a customer's bank balances and payment history, with any company without notifying the customer. Banks also can share information from credit reports and loan applications if customers get a chance to say no. But regulators and consumer groups say some banks don't clearly disclose those rights," said Christine Dugas, author of Diverse Groups Push Bank Client Privacy, U.S. Today, 14 Oct 1999.

   According to Julie Williams, Chief Counsel for the Comptroller of the Currency, said that larger banks are now selling their clients' names, addresses, Social Security numbers, and credit card numbers to third-party marketing firms. She advised bankers who attended a recent California Bankers Association meeting to review their privacy policies with the concerns of their patrons in mind.

3. "The elimination of cash will enable the banking community to lower their operating costs."

   One way that instituting a cashless system will save banks money is by allowing them to downsize. This unamerican practice will enable them to eliminate a record number of employees. There will no longer be a need for money counters and local bank tellers. In fact, the move to cashlessness would likely change the face of banking as we know it today, resulting in the consolidation of branch banks, which means that one day there may not be a bank to go to with your concerns, complaints, and personal financial needs. Instead, you and I will have to deal with someone we do not know over the telephone. Instead of a friendly bank teller, we will have to deal with long waits on the phone and people we have never met. Sounds mighty attractive, no?

4. "Many people within government also want a cashless money system; wonder why?"

   Within the Federal Government, many want to see a cashless money system instituted. Although they will cite convenience and lower overhead costs as their reasons, there is question whether the true motive is the ability to track citizens using their monetary transactions. Consider for a moment the enormous amount of information that can be obtained about each one of us using our purchase history. If every transaction is made using funny money... I mean virtual money, then it would not take all that much to follow your every footstep throughout the day.

   In addition, because of the heightened degree of trackability, the government may someday be capable of gleaning more of your hard earned dollars (as virtual as they will then be) because they will have an accurate accounting of each and every dime made and spent. The most critical point of all is that you will no longer have control over your cash. It will then be possible for government and others to tap directly into your account without your approval. It's already happening.

   Perhaps the biggest concern of all is the audit trail that a cashless system will provide and how it will be used by law enforcement and politicians. Through the integration of databases, within both public and private sectors, operators will be able to closely scrutinize every monetary transaction that you make, simply by pressing a few buttons. This type of system gives new meaning to the phrase, "going on a fishing expedition?"

   Perhaps the most alarming part of this is the likelihood that anyone with access to a computer in law enforcement and multiple levels of local, state, or federal government will be able to tap into a wealth of information on each and every one of us. With any luck, safeguards will be instituted that will assure that government workers will be given access to only those portions of this data that is relevant to their work. You do not want a water department worker having full, unrestricted access to drivers license numbers, credit card information, etc. But, if it's hard to assure this kind of security now, can you imagine the nightmare waiting for all of us in a purely cashless world?

5. "Plastic debit and credit cards also make it easier for people to spend their money."

   Many years ago, before the use of plastic debit and credit cards, when the bank was closed you had to wait until it opened to obtain cash. If you needed cash for a monetary transaction, you simply had to wait until the next day. Because money is so available now through the use of an ATM and credit cards, people are spending money at a record pace. Much of this money would have normally been saved. This has given new meaning to the concept of "impulse buying."

A Cashless System
Is Not About Freedom

The number of people who are quite aware of the implications of a cashless society is growing. For example, in a letter that appeared in TIME Magazine, May 18, 1998, Mark Woodral stated, "With the emergence of megabanks and the use of electronic cash [BUSINESS, April 27], what will stop institutions at simply monitoring our purchases? If an electronic cash card is programmable, it can be turned on and off with a simple line of code. It could be used to regulate what we can buy, when we can buy and whom we can buy from. A cashless society is not about freedom, as banks would have us believe; it is about controlling the consumer. Such a society would be the end of America and the beginning of a banking-corporate dictatorship."[3]

Clearly there is much more to the "cashless" story than the elimination of the heavy change that jingles in our pockets. Quite obviously, the banks have much, much more to gain that those whom the banks serve. Because many within the federal government want the trackability that such a system would offer, and since the media is working hard to convince everyone that going cashless is beneficial to all concerned, it is highly likely that we will see the implimentation of this horrid plan within the next few years, whether the majority of Americans want it or not.

If you believe, as the author does, that going cashless serves only the banks interests, then perhaps you should make your feelings known to your Congressional Representatives. In most cases, you can send them a fax, e-mail, or you can phone them through a toll-free phone number that rings into the Capitol Switchboard. However, it is the author's belief that the most effective manner of communication is that of a mailed letter or hard copy fax. There is something about a piece of paper, whether it is mailed or faxed, that is hard for a Congressional Representative to ignore.

Some will say, "Why bother, I'm only one person; and, besides, they won't listen anyway."

This is not true. The fact is, the opinion of the masses is very important to them. They listen when they receive thousands of letters stating an opinion on a particular issue. They listen to polls for the same reason because they know that if the majority of Americans do not approve of what they are about to do, that come next election they may not have a job. Folks, don't delay; let your men anr women in Washington know how you feel.

Copyright©1999 Allan B. Colombo