The rise of the cashless city: 'There is this real danger of exclusion'
The rise of the cashless city: 'There is this real danger
of exclusion'
Cities from Sweden to India are pushing for a totally
cash-free society. But as more shops and transport networks insist on
electronic payments, where does this leave the smallest traders and poorest
inhabitants?
By Adam Forrest Monday 9 January 2017 02.00 EST Last
modified on Monday 9 January 2017 02.02 EST
Scrolling through my online bank statements at Christmas,
I was surprised to find I had not removed cash from an ATM for well over four
months. Thanks to the ubiquity of electronic payment systems, it has become
increasingly easy to glide around London to a chorus of approving bleeps.
As more shops and transport networks adapt to contactless
card and touch-and-go mobile technology, many major cities around the world are
in the process of relegating cash to second-class status. Some London shops and
cafes are now, like the capital's buses, simply refusing to handle notes or
coins.
Could we see a whole city go cash-free? From Seoul to
Bergamo, cities big and small are at the forefront of a global drive to go
digital. Many of us are happy to tap cards or phones to hop on a bus, buy a
coffee or pay for groceries, but it raises the prospect of a time we no longer
carry any cash at all.
No spare change for the busker at the station, the person
sleeping rough in need of a hot drink, the market trader, the donation box.
Although even on-street charity fundraisers are now broaching the world of
contactless payments, what might the rise of the cashless city mean for street
vendors, small merchants and the poorest inhabitants?
Some experts now fear a two-tier urban realm in which
those on the lowest incomes become disconnected from mainstream commercial life
by their dependence on traditional forms of currency.
"The beauty of cash is that it's a direct and simple
transaction between all kinds of different people, no matter how rich or
poor," explains financial writer Dominic Frisby. "If you begin to
insist on cashlessness, it does put pressure on you to be banked and signed up
to financial system, and many of the poorest are likely to remain outside of
that system. So there is this real danger of exclusion."
Ajay Banga, Mastercard's CEO, has spoken about the
growing global risk of "creating islands, where the unbanked transact
[only] with each other".
In India, the question of how the poorest might connect
with the digitised world of the middle-class consumer is now of central
importance. In November, the prime minister Narendra Modi announced the removal
of 500 and 1000 rupee notes from circulation. Part of a wider attempt to jolt
the nation into joining the cashless revolution, Modi's government believes
restricting currency and pushing the take-up of electronic payment will help
tackle corruption and regulate India's untaxed, "black" economy.
Saurabh Shukla, the Delhi-based editor in chief at
NewsMobile Asia, says he has seen many small "mom and pop" store
owners introduce card readers and learn how to use Paytm, a mobile payment
platform, over the past two months.
"They realise a big change is here and they are
trying to adjust to electronic payment," he explains. "But they still
want to convert back to cash at the end of the working day or the working week.
It will be a gradual adjustment. We might not be able to create a completely
cashless India, but we can aim to create a low cash economy."
Modi is encouraging state government to create
"smart" cities by connecting their public services with the latest
online technology. Officials are aiming to make the Chandigarh - famously
designed by modernist architect Le Corbusier - India's first cashless city by
insisting all bills are paid electronically at government offices. And the
government of Goa is attempting to turn its capital Panjim cash-free by
offering discounts in digitally bought services like train tickets, and by
setting up classrooms to teach small traders e-payment technology.
Yet huge queues remain outside banks as many Indians
continue to demand cash. Some of the poorest street vendors cannot afford card
readers, and have struggled to operate Paytm payment transfers on their mobile
phones.
Aires Rodrigues, a human rights lawyer in Goa, says
traders in Panjim are suffering. Rickshaw drivers and fish market sellers have
been left with no way of accepting payment from middle-class customers now
inclined to do everything digitally. "It's senseless to try to make
everyone go cashless," says Rodrigues. "The government seems to have
lost sight of the plight of the common man."
If India's urbanites are being forced to undergo digital
shock therapy, city dwellers in much of Europe have been moving steadily away
from cash. Consumers like convenience. Governments like the idea of tax
transparency. And retailers like cutting down on the costs of cash handling.
According to a recent report by Fung Global Retail &
Technology, nine of the top 15 "most digital-ready" countries are in
Europe. It predicts Sweden could become the world's first completely cashless
society. Niklas Arvidsson at Stockholm's KTH Royal Institute of Technology
thinks it could happen by 2030.
Yet even Sweden has seen an enthusiasm gap emerge, mostly
along demographic lines. Older people in the rural north, tending to be the
least tech-savvy, resent the economic power of Stockholm and Gothenburg, now
almost entirely cash-free urban zones. The National Pensioners Organisation is
a key player in the "Cash Uprising" coalition now campaigning to make
sure older Swedes can still deposit and remove cash from banks.
Wealth, however, remains the key factor in determining
who might be entirely left behind by the evolving digital economy. Some of the
poorest people in Europe's richest cities have found themselves pushed aside.
In Amsterdam, homeless people selling street magazine Z!,
the Dutch equivalent of The Big Issue, now struggle to find customers still
using cash. Z! trialled card payments by giving a dozen of the city's vendors
iZettle readers back in 2013, but the method was deemed too cumbersome.
"After a few weeks, our vendors said, 'Look, this is
too complicated'," says editor Hans van Dalfsen. "It became too
clunky and time-consuming for the vendor to juggle their magazines, the card
reader and their own mobile phone connected to Bluetooth - all that stuff was
needed to carry out the transaction."
Van Dalfsen says he is now talking to a major telecoms
company to try to find a simpler way for homeless vendors to accept payment
using only their mobile phones, perhaps with help of unique QR code on their ID
badge.
"Like Scandinavia, we are close to being cashless in
Amsterdam," he says. "I'm an optimist, but we really need bright
people in the tech companies to come up with simple, convenient solutions that
work for everyone. We cannot let people become cut off from the life of the
city."
Like many of the world's poorest people, much of
Amsterdam's homeless population remain without a bank account. So even if they
own a mobile phone, most fall back to cash.
Kenya may offer a guiding light here, having found a way
to allow unbanked citizens access into the cashless society using cheap
mobiles. Launched in 2007, M-Pesa has become the world's leading mobile money
platform, allowing millions of users to transfer money to each other by sending
text messages and store their funds digitally without opening a conventional
bank account.
In Zimbabwe, last year's cash liquidity crisis led to
renewed distrust in the banks and helped mobile money platforms take off as an
alternative way of doing business, first in the capital city Harare, then in
rural areas. The country's most popular text-based service EcoCash now has more
than six million users.
"There has been a huge explosion in cashless
payments, down to the very poorest street traders using mobile money
solutions," says Nigel Gambanga, a Harare-based technology analyst.
"Everyone has begun to realise, 'If I don't figure this out, I might not
be in business tomorrow.' People are adaptable."
Dave Birch, director of innovation at UK firm Consult
Hyperion, thinks it would be foolish to insist on clinging on to cash on behalf
of the poor. "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 challenge for banks, regulators, tech innovators and
officials keen to push forward "smart city" initiatives, is to make
sure evolving platforms are accessible and keep everyone interconnected.
If we cannot find a common payment ecosystem, we may find
ourselves wandering through divided cities, separated by the sound of bleeps
and the shuffling of cold, hard cash.
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