Commercial Motivations Don't Sit Behind Cash

by Malcolm McDowell

CEO, Note Printing Australia

As in any commercially-driven market, business competition by necessity involves public communication campaigns and marketing activity.  The financial payments market is no exception, in fact, as an industry credit card companies are one of the largest users of advertising in countries like Australia.

And in this commercial endeavour to grow revenues, there has been a concerted effort from electronic payments organisations to convince consumers worldwide that making payments using credit cards, mobile phones, and other electronic forms of credit-based payment offers certain conveniences worth paying for.

And good luck to them if people want to pay for the privilege of owning and using these forms of payment.

However, to argue that these forms of payment will fully replace the need for cash in the future ignores the vital point of difference between cash as opposed to all other forms of payment. 

Cash is a public good. 

It was created as a free service to the community by Government to provide our society with a means to translate one’s labour and services into a means to buy goods and services.

That free service is part of a public infrastructure that everyone in society can use and access.  It guarantees ease of use, a level of privacy, high levels of accessibility, is non-discriminatory, and offers a universal and dependable means of value exchange, especially in times of crisis.

Ironically, supporters of electronic payments have attempted to take the moral high-ground by asserting that electronic payments create a more complete and transparent record of transactions, but research provided by the University of Irvine’s Ursula Dalinghaus PhD in her white paper Keeping Cash (which has been published by the International Currency Association) shows that this does not pass the reality test.

In her paper, Dr Dalinghaus makes the point that not all electronic transaction data is transparent and easily trackable and that digital transactions can be easily obscured.  In addition, it is the customer that pays the tolls and fees currently required to access payment networks and maintain such records. 

This is an irony given that these card companies very effectively use the data generated to inform future marketing campaigns, making sales offers to new and existing customers to incentivise the use of additional credit cards or acceptance of higher credit limits.

Such arguments highlight to me the conflict of interest these commercial entities cannot overcome and that consumers should and must recognise: a credit card has usage and interest charges attached to it that weaken one’s buying power, and the more cards one uses the weaker one’s position becomes. 

Public institutions create cash to ensure stability, security, accessibility, and trustworthiness of the payments infrastructure.  Cash should be regarded as a public utility guaranteed by the state, similar to ensuring access to safe drinking water.  In this context, money as a public good means cash has a long-term role to play in the financial well-being of our society.

Malcolm McDowell is a Director on the Board of the International Currency Association.