Cash use is dropping steeply. It's down 14%

Jonathan Swift said that a true genius could be recognised when all the dunces were in confederacy against him. What, then, of a technology that brings together a confederacy of paranoiacs? The prospect of a cashless society – the end of physical money – brings together a diverse coalition of opponents. The paranoid right sees it as socialism by stealth and the harbinger of a socialist world government. The paranoid left sees it as the project of an authoritarian corporate state, an endgame after which the banks will really have our number, as well as every other scrap of information about us.

It’s inspiring to see people put aside their many differences and agree like that. But what does it mean? That at last emptying our pockets of coins and notes is genius, or not? Whatever the answer, it’s happening, and faster in Britain than in much of the rest of the developed world. Cash use is dropping steeply, down 14% over the past five years, according to the British Retail Consortium. Research by the Halifax bank this year found that only £17.99 in every £100 is spent in cash, down £3.03 on 2013. Contactless card payment is overcoming the idea that plastic is only for big purchases. The banks are pushing smartphone payment apps, such as Barclay’s Pingit. I was last paid for a piece of writing with another piece of writing, a cheque, in 2012; PayPal is more common now. London’s buses went cashless in July. Retailers and the state are working together on pilot projects that eliminate coins and notes, such as a cash-free day at a shopping street in Chorlton, Manchester, in June.

Frictionless spending is why my Kindle is loaded with quarter\-read books on topics that interested me for 30 minutes

We’re promised that a cashless society would be more efficient – handling cash is expensive for businesses and for the state – and more convenient. ‘Frictionless’ is the word, one of those words like ‘seamless’ that technologists love and consider to be unequivocally good. But perhaps friction is a good thing, as Oliver Burkeman argued in a wonderfully grumpy Guardian article in September 2013: “Frictionless spending is why my Kindle is loaded with quarter-read books on topics that interested me for 30 minutes once. Friction keeps you frugal.” And the research backs him up: people spend more freely with cards and penny-pinch when using actual pennies.

All of which makes it obvious why states, retailers and banks might prefer to cash out. But there are deeper, emotional issues at stake, and ditching physical money could unleash revolutionary change. David Wolman’s 2012 book The End of Money is an enthusiastic manifesto for the rising cashless age, but in the end even its author has qualms. “If cash is a representation of an abstraction, of a social construct, then digital money is an abstraction of an abstraction, inevitably diluting that sense of connection even further,” Wolman writes. “The truth is that I can’t be sure something won’t be irretrievably lost with an end to the production of physical money.”

None of us can be sure. Facing the anarchic and opaque welter of local currencies and cryptocurrencies that might thrive in the wake of cash, states may rue the day they discarded those symbol-covered scraps of metal and fabric that have been such a buttress of their authority. The very basis of the economy might shift. Dave Birch, an e-money evangelist, believes the end of physical cash would lead to a “reputation economy”, in which reputations and “social capital” replace credit. But one of the reasons cash emerged was to overcome the limitations of a reputation economy – reputations are local and subjective, and when you venture somewhere you’re not known, they’re useless.

But your cash is still good. Using cash, trust is placed not in the unfamiliar individual but in the familiar currency and the state and banks backing it. Technology can in theory overcome some of these problems, providing ostensibly impartial measures of social capital – such as LinkedIn connections, or the nefarious Klout. But there’s no getting away from intermediaries. Forwhom is Waitrose collecting Mr Birch’s social capital measurement, and how is it enumerated? A third party – Facebook, PayPal, a (social?) credit ratings agency – is inevitably involved, and that third party is going to get a lot of economic and social power in the process. And money is still being lent, and the assessment of whether to lend is going to be based mostly on ability to repay, very like a credit rating; identical, really. Ponder these problems and you find yourself reinventing the wheel – regulation, foreign exchanges, state-backed central banks.

A debt-based personal economy is more likely than anything based on reputation – indeed, it may be what Birch is really getting at. We’re accustomed to seeing money as a presence, because it has a physical presence. But if it’s just a number, what does it matter if that number has a plus or a minus in front of it? Already many people live their lives inside their overdraft, never leaving debt – this could be the norm, with your credit rating replacing your salary or bank balance as the most important measure in your life. We all, in effect, become little banks, borrowing against our economic ‘reputation’. The future starts to look like Gary Shteyngart’s novel Super Sad True Love Story, where the credit ratings of precarious, underemployed, post-privacy Manhattanites are on permanent display, creating a pervasive and pernicious new class system. And you begin to wonder if the paranoiacs have a point.