Money Times - November 10, 2015

Posted by Jill Kerby on November 10 2015 @ 09:00




The phasing out of one and two cent coins by a voluntary campaign between retailers and the Central Bank that began on October 28 has probably gone unnoticed by most of you. 

Coin rounding is part of a wider programme however, to move Ireland closer to a cashless society. And some people suggest it’s a trend that we may come to regret.

Why go cashless?  The positive implications far outweigh the negative, claim its supporters, who include Bank of Ireland, which is about to introduce high cash limits to its teller service to discourage the use of cash by customers.  (The Bank has also been forced to agree to exempt ‘vulnerable, elderly’ customers from these new conditions.)

Cash notes and metal coins are expensive to produce, distribute and secure and they need to be physically replenished and replaced, we are being told. They can also be lost or stolen and are an expensive cost for both businesses and the deposit taker. Coins and notes also fuel the black economy and criminal activity and facilitate tax evasion.

To this end, some EU countries like Italy and France have already legally banned cash retail and commercial transactions of more than €1,000 and €3,000 respectively, on top of the standard money laundering rule that requires EU banks (including Irish ones) to question cash deposit or withdrawal limits in excess of €10,000. (The limit is $10,000 in the USA.)

The cashless-society cheerleaders insist that billions of euro can be saved by abandoning paper, ink and metal for plastic debit cards and electronic purses, like the new contactless payment debit cards that allow you to buy up to €30 worth of goods without having to queue at a cash register. They site Denmark and Sweden as countries where very little cash is used for everyday purchases.

So what are the downsides?  Aside from the fact that the transition period is sure to inconvenience some people (cue Bank of Ireland) who are not comfortable with the technology involved, once paper and metal money is phased out, you will have no choice but to deposit your income or savings with a financial institution sanctioned and presumably regulated and supervised by the state that will issue the plastic money card (or phone app) that will substitute for notes and coins..

A very real risk is what happens to your money and ability to purchase real goods and services if there’s a local bank or widespread computer or electricity failure. Does the grocery store or chemist agree to let you walk out with your purchases and send you a bill?  How will you fill up your car at the petrol station?  Or buy a bus or train card to get to work or school?

In an entirely cashless society it would be even easier for the forces of the State to track your income, savings and wealth. Gone will be the private – hidden - mattress, jar or wallet stuffed with notes and coins…because the physical money will no longer exist.

And how tempting might it be for governments to impose emergency levies in the form of, say, a transaction levy on every cashless transaction in the event that the authorities (here or in the EU) believe that they had to ‘save the banks’ or rescue Greece again.

(The State already has laws on its books which allow the Revenue to dip into your state pensions, welfare payments, bank account if you don’t pay your taxes. Since 2010, via the Pension Levy it has ‘dipped’ directly into every private pension fund account in the state.)

Make the transaction levy small enough (say just a cent or two) and most people probably wouldn’t complain, especially since there is no alternative anymore – notes and coins that you keep in reserve – to use in place of your compromised electronic cash card.

Will a cashless society diminish tax evasion and criminality? Maybe. But criminals are already reportedly getting around the crackdown on larger cash purchases by demanding their ‘clients’ pay them via popular pre-paid cash cards and Bitcoin.

The cashless society has been presented as ‘modern’, ‘progressive’ and inevitable. It prompts the naïve to repeat that hoary old chestnut, “if you have nothing to hide, there’s no harm” in allowing the state to monopolise not just the issuing and price of money, but the method by which we make our purchases.

A cashless society may be on its way, but it comes at a cost that hasn’t been debated enough – and the loss of personal privacy might end up being the biggest price of all.

Do you have a personal finance question for Jill or would you like a copy of her new Talking Money Guide (which can also be downloaded directly at www.irishlife.ie? Write to her c/o this newspaper or by email: jill@jillkerby.ie



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