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A Cashless Economy Locks Out the Poor (nytimes.com)
45 points by ChrisArchitect 9 days ago | hide | past | web | favorite | 80 comments





A society without cash is a society in which every person has no choice but to get the permission of someone they don’t know and will never meet each and every time they seek to obtain food, water, shelter, or transportation, and that permission can be revoked instantly, silently, and invisibly at any time.

This is now before the city council in NYC, as the article points out, so the topic has come up in conversation more recently (and it’s noticeable, my office is in the area profiled in the story) and it’s amazing how many people just haven’t considered the basic dynamics of that.


I agree with your assertion, however:

> that permission can be revoked instantly, silently, and invisibly at any time

This can happen with cash too, as 99% of Indians found out to their utter dismay on 8 November 2016!! [1].

Granted that this is a Black Swan event [2] and the revocation was done publicly. However, as someone who lived through this and experienced it first hand, I stopped trusting cash from that day onwards. I carry just enough with me to get by for couple of days.

I don't know of any other single event that sent shockwave through 1300+ million humans literally overnight.

[1] https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...

[2] I sincerely hope so. Though it's been carried out a few times in India, thankfully not within the same generation.


Yss but that’s an entirely different dynamic, as they can’t single you out personally in that scenario, they have to cause massive social disruption and — crucially — loss of their own credibility.

> However, as someone who lived through this and experienced it first hand, I stopped trusting cash from that day onwards. I carry just enough with me to get by for couple of days.

I suppose you leave the rest in a bank account. That won't help if all bank accounts are frozen, as I lived through in the early 90s here in Brazil (we called it "Confisco da Poupança", see https://pt.wikipedia.org/wiki/Plano_Collor#Medidas_do_Plano_...).


A country willing to destroy it's hard currency would have absolutely no problem seizing the bank accounts of it's citizens. So these types of events are not really arguments for or against cash, it's all dumb luck if you get to keep one or the other.

In stable countries with a functional rule of law however, bank credit is seriously inferior to cash for all purposes except convenience and security.


Can't we build trustable payment providers?

A system can never be more trustworthy than the people controlling it. The problem with that is simple: A perfectly trustworthy American military would be as trustworthy as Trump.

The government is not a monolith though. It would take a lot more than Trump to do serious damage to the credibility of the Treasury department.

The flipside of that is that there are many people, frankly, way worse than Trump in government that can't be dislodged by an election.

Cryptocurrency would bypass that.

No it wouldn't. Private key hijacks and exchange hacks do far more damage than any bank network failure ever could, and they're much easier to perform maliciously.

Bitcoin isn't the only one out there anymore.

Are you saying that I couldn't empty your alt-coin account if I got access to your private key?

My bank locked me out of my account because they didn't approve of the way I was using it (crypto whitdrawal). All fully legal, from an exchange account I hold in my name. They now give me the runarround asking me to prove with paper documents that I own the money (interesting reversal to physical interaction). No calls, no case person I can talk to, just an impersonal postage address, and if I contact the branch all I get is 'you need to send the documents'. I did, more than two weeks ago, I dropped them in this very branch. Sorry, we can't help you because "an investigation is ongoing". So I am guilty and without money until proven otherwise.

Bottom line, cashless without a citizen right to unreversible banking is a form of bondage. It creates a paralel, private justice system, where you have no rights and your are judged by the value you have as a customer of the bank. A small customer is worthless and rightless.


> It creates a paralel, private justice system

Can't you just bring the traditional justice system back into it, for instance, by suing them in small claims court demanding the release of your money? The judiciary supersedes whatever internal mechanisms the bank has; if the court tells the bank to give back your money corrected for inflation plus moral damages, they have no choice but to comply.


The point is, I shouldn't have to do that; if access to banking is necessary for survival then the burden should be on the bank to get a court order before they have the right to freeze an account.

If I sue the bank, it's an absolute guarantee I will be locked out of the account for a few months to a year until the case is settled. And it will be a civil claim against a commercial entity, the burden of proof is on me, I don't have access to a free lawyer and so on. The parallel justice system has already scored a massive victory against me from day one by stripping me of most civil rights.

That's fine and dandy in a world where banking is optional and banks are businesses like any other, but in a cashless world being locked out of banking is a sentence to homelessness or death. How many days of rent delay will your landlord accept until he evicts you? How many days can you live on the streets before you are being fired from your job? What is the average life expectancy of a homeless person with no income and how often do they win in court against major financial institutions?


> The point is, I shouldn't have to do that;

Don't worry about it. You can't.

https://tax.findlaw.com/tax-problems-audits/ten-things-to-re...

Things that can be done to you without any (beforehand) judicial oversight , by the IRS. Or, for that matter, can legally happen without so much as warning to you.

    File a tax lien against you;
    Levy your bank account;
    Garnish your wages;
    Close down your business;
    Seize and sell your home;
    Damage employment and business relationships;
    Assess you personally for corporate employment taxes;
    Put you in a monthly installment payment arrangement that is too high;
    Contact your banker, neighbors, friends and business relationships concerning your tax liabilities;
    Go after third party transferees of your assets.
Note that, at all times, you should consider that you might need to hire, and retain for ~a year, an accountant and a lawyer, plus add the same amount in reserve for court fees and the like.

We are effectively proposing adding "taking every last dollar out of your, your family and kids and anyone you did business with wallet directly".

The government is not very reasonable when it feels it is owed money.


Small claims courts have very low limits. So he would need to sue in a federal court ( unless it is a state chartered bank ), which takes time and costs a lot of money.

This is why one should have multiple bank accounts spread all over jurisdictions as well as keep some cash and credit lines ( also spread among different banks )


> My bank locked me out of my account because they didn't approve of the way I was using it (crypto whitdrawal).

How much did you withdraw? You may have hit an anti-money laundering trigger. Nobody cares if you withdraw small sums of money, but anything over $10k usually sends alarm bells ringing.


I've traveled to developing countries (not Africa).

Reality is mobile money is big - it basically lets the poor / unbanked have kind of a virtual wallet it seemed. I never signed up (westerner with a Visa card and USD) but didn't feel like it was locking people out. Folks using these wallets could transfer funds internationally to relatives surprisingly easily it seemed (I'm used to western union) as well.

Be interesting if something like these non-bank mobile wallets ever come to US (in overseas countries you can load your wallet with cash on street everywhere so you don't have to have a visa / debit card to do so).


As a counterfactual the other hand everyone in China appears to pay by mobile phone without problems using WeChat Pay and Alipay and no one seems to be locked out. Almost no one I know carries cash - it's just for the tourists who can't access that system. In Africa, mobile payments seems to have driven financial inclusion rather than the reverse.

The cashless economy certainly drives de-anonymization, but very little evidence of "locking out poor" exists where this has actually happened


Only about 60% of all Chinese even have a smartphone. [1] "Everyone" you saw was probably a relatively well-off member of the middle class in a first-tier city. As a tourist, you obviously won't see anyone who can't afford visiting a touristy area. Try looking for a place more than an hour from any public transport and check again whether the people there all use cashless payment.

[1] https://www.statista.com/statistics/257045/smartphone-user-p...


> As a tourist, you obviously won't see anyone who can't afford visiting a touristy area.

This is totally untrue. Tourist areas attract beggars.

Beggars may not have smartphones, but penetration in first-tier cities goes much farther than "relatively well-off members of the middle class".


Interestingly, beggars even have QR codes for WeChat payments: http://www.asiaone.com/china/no-loose-change-beggars-china-n...

China is not a cashless society, and as long as you have the option to use cash the effects are minimal (as described in the article).

A cashless economy will not only crush the poor, but also hit the middle class: it allows for a negative interest rate (can't withdraw your savings). I also suspect that it could enable many subtle ways to coerce consumers into certain behaviour: All your money is now just the number you see in your bank's app, giving the bank's marketing department a lot of power how you see and interact with and ultimately use that money.


> All your money is now just the number you see in your bank's app

That is effectively the reality of any modern economy.

https://www.investopedia.com/terms/f/fiatmoney.asp

Banks don't have the cash if everyone rushes to it and cashes out.


Putting your money in a bank _was_ your choice though; you could have kept it under your mattress.

It really isn't though.

Try paying 600€ worth of taxes in Portugal with cash and all you'll get is a fine because its banned.

Try to buy a macbook? You better have a bank account because its illegal to buy it using cash.

You owe 3000€ to a friend who lent it to you? Can't just give him the money 100€ bill at a time because that's illegal too.

Anyone who says "you're not forced to use banks" or "cash has value because you must pay your taxes with it" is either ignorant or intentionally misleading.


I don't think that law is common, though; even the European Central Bank was quite critical when it was presented by the Portuguese assembly.

Actually...I doubt that. At least in US, for the company I worked for, I don't think there is an option for me to be paid in cash in the first place. Even in reality people use check though, that still requires a bank account.

I've recently had to cash checks without having my own bank account for a couple of months. The experience left me hating the banking industry. Certain banks won't even cash their own checks anymore! Other banks will cash their checks but want to take a $10(+-) fee for the privilege.

I ended up using Walmart to cash a check (the ones which weren't hand-written because Walmart won't do that) and using their moneycard as my debit/credit card for payments. This system worked reasonably well, but I do not want to go back to it.


In those society, most people are more poor than we are. So what you think are the poors are not. To be poor means there is such a difference in lifestyle from the majority of people in your country that you can't afford the basic things that they can. What is a basic things change from place to place.

So what's poor in Africa or China is way more miserable that you think it is. And those persons, instead of being excluded like in our society, are either cast slaves (india), dead (africa) or in camps/prison (china).

You don't see no cash affecting them because there is no opportunity for them to be.


I don't agree with your statement about poor people are in China's camps/prison. The poorest groups are not in those places

Would you say the poorest are working in the fields then, using cash and never living their village ?

> everyone in China appears to pay by mobile phone without problems using WeChat Pay and Alipay and no one seems to be locked out.

That is not true. I met people who don't have Alipay/WeChat on weekly basis. China's central bank beat those who refuse to accept cash payment with a big stick - Alibaba's Freshhema is a high profile target the central bank recently picked, there was actually a news article on that yesterday.

For me, I am more concerned about the fact that people's life could be dramatically affected if both Alipay/WeChat ban their accounts, say due to some business disputes. There is so far no regulation on this whatsoever.


Are they the only service providers in China?

they have 95% of the market share. other minor players are not accepted by most businesses.

For other people who were confused: Alipay is apparently the official English name for 支付宝.

A cashless society allows every single transaction to be tracked, I do not want this.

And controlled remotely. It gives massive power in the hands of those who control the tech. It's downright dystopian. I mean... the tech itself is great... but combined with what we know of human nature, it's a recipe for high-tech feudalism.

I mean it already gives such power, there's no one stopping someone adding couple of zeroes next to their account.

Well, now you can take your money out as cash under extreme necessity. In a fully cashless society your entire life savings are just a few bits on a hard disk...

Another side-effect is for donations. In London it's possible to live without any cash. Even markets are accepting cards now.

There are often charities that are asking for money at the entrances of the tube. The UK is depending quite heavily on charities for people in need. This year it looks like they started equipping themselves with contact-less payment systems. It would be interesting to be able to see the numbers behind the scene.

What is quite sad is that beggars are not able to equip themselves with contact-less payment systems. I assume that they necessarily will become dependent on the charities to be able to survive.


> What is quite sad is that beggars are not able to equip themselves with contact-less payment systems

In Sweden I've seen a beggar with a "Swish" number displayed. (Swish is the domestic cashless person-to-person payment system, all you need to use it is a cell phone and a bank account). So it's not impossible for beggars to be cashless.


Can everyone get a bank account in Sweden?

I don't know if the experience of giving some physical money to someone necessarily translates well. Do you know if people actually bother to read/scan the "Swish" number to do donations?


I read something the other day about the Big Issue experimenting with contactless card readers for their vendors

On the otherside, Charities are a good way to stash cash and skip tax in some countries.

The government should increase the taxes and spend that money on the poor/people in need.

They're half way there. They've got the first part down to a fine art.

There is an important point to be discussed, that happens mainly in violent/poor countries: the frequent robbery (and it's consequences, like murders).

A cashless economy will help solve this problem that affects everyone, especially the poor (paradoxically).


They just need to work in pairs; they'll demand your card/phone and PIN, then hold you while they buy something with it. It's well known that criminals use unofficial currencies when they can't use cash.

I agree, but this is a more elaborate crime and demand an improved strategy/logistic.

I'm referring mainly the common "default" crime: a man with a gun robbing a shop and run with all the sweet money. It's far common in many countries although not so common in many other places.


lol what?

they going to make you open your phone. send your money away to them. then steal your phone.


It's quite different. We're talking about digital money, traceables transactions, improved security systems and so on.

I'm not saying that this will solve all problems, but will make things difficult for the thieves.


but that would leave a (digital) paper trail, so would make the crime more complex to pull off.

A cashless society requires computers to work flawlessly to function. It requires those controlling the network to make decisions with the public's best interest foremost.

If the problem is that some people don't have a checking account, wouldn't it better to provide them with a cheap/free checking account?

Even if all local shops accept cash, there's still tons of stuff you can't do without a checking account.

On the topic of cash-free living: I only use cash for 3 things these days: to buy cheese, to pay my cleaning lady, and for my son's weekly allowance. Even the babysitters accept online payment these days.


1) What is more secure - Venmo behind face ID on an apple phone or a checking account that literally anyone who has the numbers (which you give when you write a check) can take money out of, either by creating a versa check or doing an ACH debit so all your money disappears? You are a poor person - are you in a good position to see dispute resolution through?

2) Garnishment orders - can the state or other collectors garnish the checking account - so all your money disappears?

3) Will the bank allow the account to go negative, charging major fees, then blacklisting you with checksystems?

4) How controllable is saving money in these accounts? Some folks "save" money by not cashing their checks, then going to a check cashing place when they need the money.

Is it possible that a few % of population have medical debt, tax debt or other support orders that make using a normal checking account difficult? Past experience with fraud or being ripped off in a checking account?


1) Why would you allow other people to take money out of your account? Modern checking accounts require two-factor authentication. (And who even uses checks these days?)

2) Not without a court order I would hope.

3) Depends on what you choose and what the bank will allow. It's safer not to.

4) I'm still puzzled over the relevance of checks.

I admit, every time I discuss such financial issues with Americans, I keep being surprised by how medieval American banking still is. Isn't there a market for modern banks over there?


> What is more secure - Venmo behind face ID on an apple phone...

Anything broadcasting transactions, by default, with no way to turn off egregious abuses strikes me as a personal security risk. See https://www.google.com/amp/s/www.wsj.com/amp/articles/whats-...


> wouldn't it better to provide them with a cheap/free checking account?

I don't know about everywhere in the world, but aren't most 'checking' (most people don't use checks any more) or current accounts already free? They make money off investing your deposit. How much are people paying for their current accounts?


In the USA, most checking accounts are "free" as in "Free if you jump through hoops" - I mean, often they are hoops that are trivial for those of us who have a good job, like "free if you have direct deposit"

I mean, remember that if banks are making money off investing your deposit, they don't have much interest in maintaining accounts for people who don't have much money to invest.

I know at times when I didn't have direct deposit (corp to corp contractor, before I figured out how to setup all the requisite infrastructure on my end) I usually ended up paying like $10 a month or more for my personal checking. Every time I went in the bank, the teller would have some different wacky scheme for getting me free checking, usually involving transferring money between my accounts every month... but it was a lot more work keeping up with how to get the free checking (the requirements for people without direct deposit kept changing) and $10/month was cheaper than the time to figure it out.

But, I mean my point is that I think checking is not free if you don't have a decent job. add to that the money they charge you if you aren't organized enough to make sure there is enough money in the account to cover the fee, and yeah, I can totally see how poor people wouldn't have a checking account.


Ahh, here in the UK you have to ask for a cheque book. And all the big banks have free basic current accounts. I have never paid for my accounts e.g.

I believe I pay a couple of bucks a year for a bank pass that lets me pay or use ATMs everywhere in the world. I don't know if it would be cheaper or free if I got a more limited pass.

Most Dutch bank accounts do cost a bit, as far as I know. I remember when this was first introduced in the late 1980s, and I immediately switched banks then. But by now the amounts is negligible, and the convenience of modern banking easily worth it.


Why do you need cash for buying cheese specifically?

Excellent question! I wondered if anyone would pick up on that.

It appears the owner of my favourite cheese shop is a bit of a Luddite. Or at least, he refuses to get a pin transaction machine, and only accepts cash payment. No idea why. Might be ideological in some way.


I can see the potential problems, but maybe a part of the solution would be to legally give the poor a right to a basic/free bank account.

Forcing people that are struggling to live day-to-day to use bank accounts just makes life worse for them.

The first thing that happens when they're in debt is that their bank account gets frozen to pay the debts leaving them with nothing.

Forcing all transactions to be electronic takes away the margins they live in. It's no longer possible for them to pay 1/2 their rent with a promise to pay the rest in a couple of days when they get paid so that they can feed their children during that period. The rent comes out of their account on time and their children go hungry until payday.


This depends on the laws. In the UK there are requirements lenders and collectors must follow. You can get an agreement for a low repayment based on your required spending.

> It's no longer possible for them to pay 1/2 their rent with a promise to pay the rest in a couple of days when they get paid so that they can feed their children during that period.

Why not? You can transfer money whenever you want.


Something like crypto coins/cash would have best of the both worlds: good as cash, transactable online.

Instead of stopping business from doing what is best for them, why don't we help the poor by providing them with the tools necessary to take part on the economy? Is it possible to help those less fortunate to have access to the right tools?

Having cash as an available option throughout the economy greatly complicates a whole range of bad behaviors by private entities and governments.

Having a cash option available benefits society and just giving poor people electronic banking would not confer the same benifits.


Why are businesses in large cities going cashless? Are there any sinister reasons for doing this? The article seems too harsh. I thought going cashless was mainly to speed things up during check out.

A hipster-ish coffee shop I use has now gone cashless entirely - you cannot pay with cash.

They must have hit a tipping point where the faff of cash drawers, trips to the bank and so on were not worth it.


Seem to remember something about 'legal tender'. Meant you had to accept cash payment. Of course you could refuse the customer on other grounds...

Might not be a thing in the land of hipster-ish coffee shops.


> Legal tender has a very narrow and technical meaning, which relates to settling debts. It means that if you are in debt to someone then you can’t be sued for non-payment if you offer full payment of your debts in legal tender. [1]

[1] https://edu.bankofengland.co.uk/knowledgebank/what-is-legal-...


So what differentiates an unpaid bill from a debt?

I don't know the laws, but I know they don't have to accept it. It falls in the same lines as places not accepting payment in pennies or car dealerships refusing to sell a car to anyone paying the balance upfront. Weirdly, this doesn't seem like much of an issue when buying a house.

It's not a thing anywhere, there is no compulsion in law associated with the "legal tender" status, that seems to be an internet myth.

Nobody has to accept a jar of pennies, or a house purchase in singles, or even cash at all.


Apparently nobody has heard of prepaid debit cards?



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