My guest on the podcast today is Ross Clark, author of The War Against Cash: The plot to empty your wallet and own your financial future – and why you MUST fight it.
We’re constantly being told that we are on the cusp of a cashless society. And if you’re anything like me, more and more of your financial transactions are becoming cashless.
According to Ross Clark, the financial services industry would certainly like to see it that way. We’re being enticed with contactless cards, mobile phone payment apps, and methods of bank transfer: all, apparently, for our convenience.
But as Ross Clark argues in his compelling new book, The War Against Cash, it’s not in our interests to surrender the right to use cash.
He argues that commercial interests want us to pay electronically in order to collect valuable data on our spending habits, while governments would love us to move to cashless payments in order to control the economy in ways which suit them, not us.
If we choose to pay electronically, that is one thing, but we will regret it if we do not defend the right to pay with cash.
Ross is a journalist who writes extensively for the Spectator, the Daily Mail, the Daily Express and for many other publications. For many years he wrote the Thunderer column on the Times.
He’s also the bestselling author of How to Label a Goat: the silly rules and regulations that are strangling Britain, and several other excellent books.
Here’s my conversation with Ross Clark, author of The War Against Cash, in episode 290 of Informed Choice Radio.
Martin: Well, welcome to Informed Choice Radio, Ross Clark, author of The War Against Cash. Ross, you’re a journalist and a bestselling author. When did you first develop an interest in this subject, the war against cash, the subject of your new book?
Ross: Well, I think the first sort of stirrings of what was going on came to me, perhaps, when I drove up to the Dartford Tunnel one day in Kent and realised that they’re no longer taking cash payments. They’re expecting you to pay online. There was, theoretically, a way that you could pay by cash. We had to stop at a shop somewhere, leave the road, stop at a shop. I just thought there’s some ridiculous underhand programme here to stop us paying in what has always been a very convenient way.
I think the moment, then, of real realisation what of a sort of international project there is to abolish cash was when, last year, I read a book by a Harvard professor, Kenneth Rogoff, The Curse of Cash, in which he lays quite bare the reason why so many governments might want to abolish cash, because last … In the 2008, 2009 financial crisis, as we know, interest rates were reduced this emergency 0.5% in Britain and a bit lower in other places.
Next, if we have another recession, which we will do because we always have recessions from time to time, if interest rates start off at naught .5%, central banks are going to want to reduce them below zero. I mean, that was argued in the paper yesterday by UBS. The trouble is that banks can’t reduce their … very difficult for them to reduce interest rates below zero, at the moment, because we’d all take our savings out and turn it into cash, keep it under the mattress. Of course, in a wonderful cashless society that Kenneth Rogoff and others would like to create, we’d be trapped. Our savings would be eroded by means of forces we could not evade.
Martin: You had this experience at the Dartford Tunnel. I guess your journalistic instincts kicked in at that point. What’s the extent of this move to a cashless society here in the UK? I’m guessing it’s more than just toll roads and tunnel crossings and things.
Ross: Well, you can see it in all sorts of places. I mean, there are several chains of shops now which refuse to accept cash. There are car parks. You try and park anywhere in London now, you find the machines have been taken away, and it just says, “Pay by phone,” and you’ve got to sort of download some fiddly app on your phone before you can pay to park, which … What particularly annoys me about that, it’s always that it’s for our convenience. Of course, it’s not for our convenience. It’s for the convenience of the payments industry, which stands to make a rather lot of money out of us.
Martin: Well, also, I guess, the shopkeeper or the manager of a car park who no longer has to do the banking run at the end of each day and take bags of coins and bags of notes to the banks get them changed over.
Ross: There is a cost of handling cash, of course, as you say, but it’s not as big as the cost of handling cashless payments. We’re used, in Britain, to using our contactless cards and so without paying a charge, which isn’t the case everywhere in the world, but the retailers pay. I mean, you look at the figures from the British Retail Consortium, it costs retailers significantly more to handle cashless payments than it does cash payments.
Not only that, the cost falls disproportionately on small businesses. I mean, if you’re a big chain retailer, then you can handle those costs. But if you are a small shop or a bed and breakfast or something, you would take occasional payments, but the cost of investing in the machinery, hiring the machine you need to take cashless payments, it’s a serious proportion of your income. Of course, there’s nothing big business likes more than rules which makes life difficult for their smaller competitors.
Martin: Are we alone here in the UK in this move to a cashless society? I saw the Indian government banned some high-value bank notes last year, and that prompted riots in some cities in India. Is this a solely UK move or is it a global movement?
Ross: Oh, not at all, no. I mean, in the developed world, there’s … Sweden is sort of, well, it would call itself leading the way. There are banks in Sweden now which refuse to handle cash. Somebody turned up at the bank with some bag of cash they’d gathered at their village fair from running a stall or something and found the cashier, “Sorry. No, we don’t take cash in this bank anymore.” It’s sort of like a pub without any beer, a bank without any money. What’s, perhaps, more insidious is the way that the developing world is being used as a sort of guinea pigs for the great cashless move. What the payments industry would love to do in Britain, abolish cash, they’re sort of trying to do in countries like Kenya, Bangladesh. Not only that, they’re doing it, in many cases, with British aid money or western aid money.
In Bangladesh, there was an experiment backed by the UN, I don’t know why, but where factory workers were paid, not in cash, but in mobile money, that they had to have a mobile phone before they could get paid. There’s a lot of these poor workers, they couldn’t read. I mean, they couldn’t read the screen. 40% of Bangladeshis are illiterate in their own language, let alone English, which is what the screens are in. What they are having to is to go to agents who are sitting by the roadside who charged a fat fee to turn their mobile money into cash so they could actually spend their earnings. I think it’s very, very disturbing the way that the third world, developing world, is being used in this way to sort of push the cashless society.
Martin: You touched a moment ago on some of the possible motivations behind a move to a cashless society. What do governments and big corporations stand to gain?
Ross: Well, I thought there are three main motivations. One is the opportunity for the payments industry to levy fees. As I said, it’s … The costs of handling cashless payments, they’re often quite opaque. But, I mean, to take a figure from the Boston Consulting Group, estimates are … At the moment, the payments industry, that’s banks and the companies that run credit cards and so on, they take a total of $1 trillion in revenues worldwide from $400 trillion worth of payments. By 2023, they estimate it could be $2 trillion if the public can be persuaded to use more cashless methods. There’s a huge amount of money sort of rolling in this idea of force us to go cashless.
There’s a negative interest rate, the opportunity to levy negative interest rates, as I mentioned earlier. The other thing, really, is marketing data. When we use our credit cards, little known to us are … The fact that we bought a vest in Marks & Spencer’s or wherever, that information, linked to who we are and our other spending habit, it’s all sort of correlated into data, which is then sold on to marketeers so they can hit us with cold calls, special offers, and all this sort of stuff. At the moment, companies like Master Card and Visa, they now have divisions which handle this data set up to market this data which they farm from the use of credit cards. At the moment, of course, they’re only harvesting about 50% of our purchases in Britain because the other half are in cash and much more difficult to pin down to collect data on.
While that might sound sort of innocuous, this marketing data stuff, and as we know, Facebook and the like collect data on us all the time, there’s no real discussion of that. The public’s sort of quite unaware, really, of why so many marketeers, so many in the payments industry, and why they are pushing so hard for a cashless society. As I said, it’s not for our convenience. It’s so they can collect an awful lot of data on us and make money from that.
Martin: Well, I’m trying to look for some positives in this too. Obviously, convenience is one of them. I have to say, personally, I’m a huge fan of the Apple Pay System. I don’t carry a wallet with me anymore. But there must be some other positives. For example, talking about collecting marketing data, surely that means that we’re able to access offers which are tailored to us, which give us the best deal somewhere, or is that me being too sort of positive about the whole thing?
Ross: It depends if you want your spending habits to be manipulated in these ways. I mean, firstly, when I spend some money, I want to make the decision. I don’t want be bombarded with junk email. I don’t want to be bombarded with special offers by phone text or pounced upon by a salesman in the shop. I mean, this is just taking one of the sort of possibilities of a cashless society. Let’s say a marketing organisation collect data on what we spend. I mean, that could then be connected back to our mobile phone and, as soon as we walked into the store, you could have a salesperson on the other side of the shop suddenly told to go down to the, I don’t know, the shirt department or whatever, because a high-spending customer has just walked in the door, and you should work on him and make him buy a shirt. I really don’t like that sort of manipulative way in which we’re being used as consumers.
Martin: No. I wouldn’t want to be pounced upon every time I go into Marks & Spencer’s because they know that I’m a high spender on chocolate. That would be an awful thing.
What about security, though? Surely, moving away from carrying cash with us to carrying, maybe, an encrypted device with a thumbprint sensor to get access to it makes it slightly more secure on a day-to-day basis?
Ross: Well, this is the great argument of the cashless lobbyists, and it’ll cut crime because cashless payments are traceable and cash payments aren’t. Well, that would be a more valued argument if it wasn’t for the fact that there is a vast amount of online crime, electronic crime, which just isn’t being solved. In 2015, British consumers lost a total of £755 million due to online and electronic fraud, entirely cashless fraud, which is … It’s actually far easier to spirit money out of the country electronically than it is physically. If I want to get £200,000 out of the country in a suitcase, there’s a bit of a risk to that. I could get stopped at the airport. I mean, airports even employ cash-sniffer dogs trained to sniff out the ink used in bank notes.
On the other hand, we’ve got this vast amount of flows of criminal money from one continent to another, one country to another. While, theoretically, it might be traceable, that doesn’t mean, actually, any authority is actually doing the tracing. If you have had money stolen online, you go to the police and say, “I have had money nicked from my online account,” or something, you don’t get a very good reception. It’s just sort of seen as an operational occupational hazard of online banking. You might get if refunded, if you’re lucky, by your bank, but there seems little actual effort being made to stop the cashless criminals in the way that criminals who use cash are caught.
Martin: What could happen, then, if we moved to a truly cashless society and then we’re faced with another major banking crisis or, perhaps, some big technological failure at the banks? What would happen to our access to cash and our ability to go about our day-to-day lives?
Ross: Well, this is one of the big problems. I mean, these electronic systems, they are prone to failure. They can and do fail. There was a big failure of the RBS system a few years ago, people unable to get cash, unable to make any kind of payment for several days. I mean, that’s happened on a number of occasions. We can protect against it, to a certain extent, by having several different cards or link to different accounts and operated by different banks. Even so, the backup of cash is a very important part of economic resilience. We could end up in severe trouble if payment systems went down and there was no way … The whole economy would grind to a halt.
I mean, there’s also, bear in mind, our own electronic … I mean, I mentioned the way the bank systems go down, but we’re being told to pay for things by mobile phone. I don’t know about you, but I mean, every other day I seem to get to the end of the day and my smartphone has run out of battery juice. I would have absolutely no access to any money if I fell for the marketing garb and carried only a mobile wallet, as the industry wants me to do. I just want to be able to use cash as a backup. If we ended up with a full-scale banking crisis like we did in 2008, of course, there’s no alternative. We would all be, necessarily, caught up with this. I mean, if you have a large amount of cash, I mean, you could potentially lose a fortune.
It’s interesting that I was looking at the figures for the amount of cash in circulation, bank notes in circulation, and it suddenly took a 25% leap between 2007 and 2009. You got to ask yourself why did it suddenly do that? Must have been people taking out large amounts of cash from banks which they no longer trusted and keeping it at home somewhere or keeping it, actually, in a … keeping their savings in a physical form. Well, you don’t want to do that. I mean, I don’t keep vast amounts of cash under the mattress. I don’t keep any cash under the mattress, actually, and I wouldn’t want to. Why remove that facility? Why make [inaudible 00:17:00] sort of more vulnerable to a banking crisis?
Martin: What happens to people operating within the black market when cash is no longer part of the equation? I mean, from what you’ve said, it sounds like a cashless society would be pretty bad news for drug dealers, not our typical listener, hopefully, for this podcast, but window cleaners, tradespeople who might deal, otherwise, in just cash.
Ross: I mean, there is this sort of theory, isn’t there, that anybody who takes payments in cash is somehow a criminal or tax dodger? I don’t think that’s true at all. I mean, there’s a very good reason why you might want to accept a payment in cash. If you’re selling a secondhand car, for example, you don’t want someone to give you a check that bounces two days later and the car’s disappeared.
Card payments are reversible, and that’s something a lot of people don’t understand, often. Retailers get hit by it all the time. I mean, they’ve sold something, they’ve accepted a payment, but two days later, they can find the bank has rejected the payment because there was some problem in the account, the person spending the money had a huge overdraft or something, and they’ve reversed the payment. If you’re a small tradesman trying to collect money from people who often might not want to pay, might want to avoid paying, I mean, cash is very important for that reason.
The other thing is, I mean, another way or a situation which cash is absolutely vital, at the moment, is for businesses in remote rural areas. I go up to the Scottish highlands quite a lot and stay in remote bed and breakfasts where there is no internet connection. No internet connection, no phone coverage. You think how on Earth would they handle cashless payments? I think the whole sort of cashless idea tends to be dreamed up by people who spend most of their time in urban areas with connected to wifi all the time and simply don’t understand that that coverage doesn’t exist everywhere and probably will never exist everywhere. However much is invested in broadband, there will always be remote places where you’ll struggle to get a signal.
Martin: We’ve got this anti-cash agenda coming from governments, coming from large corporations, but at the same time, we’ve got cryptocurrencies, things like Bitcoin, becoming more popular. Clearly, cryptocurrencies are not driven by government agenda. Do you think that’s related to a response to a cashless society or just something that’s growing up separately?
Ross: Well, I think it was the growth of Bitcoin and so on was very related to the last banking crisis because people suddenly didn’t trust banks. They didn’t trust the currency, the way it’s being sort of debased through quantitative easing and, in another banking crisis, might be debased through negative interest rates. I think the trouble with Bitcoin … I mean, obviously, it has become a bit of a … earned a bit of a reputation for being the currency of drug dealers and other criminals. But, I mean, more recently, it seems to me it’s become a straightforward Ponzi scheme, a way of transferring wealth from suckers who are very late onto the Bitcoin boom, transfer their wealth to lucky people who got in there early, and who’ve … The value has just been beat up by a lot of speculation, which makes it really quite useless as a currency.
I think if we did end up with a cashless society, people would reinvent cash. It’s interesting what happened in the Gold Rush in California in the 1840s, 1850s. There was a shortage of dollars. A huge number of people going over to California, some of them lucky enough to discover gold and became theoretically rich, and there physically wasn’t enough cash to keep the economy going. What happened is these private currencies got printed. People would print unofficial dollar coins and so on.
I think, if we did get to a situation where cash was sort of no longer officially in circulation, people would start to circulate tokens, instead, of some kind. There are a number of towns, by the way, sort of market towns in Britain, which have experimented with their own token system in order to … It’s an interesting idea. I think, if we had a cashless society, it would explode enormously.
Martin: Well, one of my favourite places to visit in South Devon is Totnes, and they have the Totnes pound, so maybe that could become the new currency.
Ross: Well, exactly, yes.
Martin: We could move away from pound sterling and have Totnes pound. Ross, in the book, you explain why we must fight this war against cash or, at least, the war against moving to a cashless society. How can we best defend our right to pay with cash in the future?
Ross: Well, protest at every move towards making us cashless. I mean, don’t just sit and suffer the payment system on the Dartford Tunnel, contact your MP and complain, and write to the Minister of Transport. Boycott shops which refuse to take cash and, generally, make a noise about it. I think, if consumers do make enough noise about it, it won’t happen. We won’t get to a cashless society because government will take fright.
By the way, there was … we did come sort of quite close to becoming a … the government committing itself to becoming a cashless society in 2015. It very nearly made its way into David Cameron’s conference speech. He was going to announce that Britain would become cashless by 2020. It was only George Osborne who had cold feet about it and warned that consumers might not actually be very happy about this. But, I mean, we could, by now, be sort of two years into this campaign. I wouldn’t rule it out surfacing again in future, maybe even next week’s budget, but I think if consumers make it quite clear that they do value cash and would not be happy with entirely cashless payments, then we will hold government back on that.
Martin: I wanted to, before we finish, take you back and ask you something related to another book you’ve written, How to Label a Goat, that was subtitled The Silly Rules and Regulations that are Strangling Britain. How do you think that a vote for Brexit was an effective way or wasn’t an effective way to do away with silly regulations? When you were writing that book, did you discover that many of the silly rules and regulations came from Brussels or were they generated here in the UK?
Ross: Well, there’s a mixture of both, the various sort of figures for the percentage of rules which come from Brussels, and it’s very difficult to really establish exactly how much, because what happens, has happened, throughout EU membership is EU comes up with a directive. It may be a silly directive. It might be a sensible directive. Then it has to be incorporated into UK law. The Westminster then has to pass an act which incorporates the provisions of the EU directive in it. Often, what happens is the UK government would gold plate the regulations, as it called, they’ll sort of make them more severe than they need to be.
Really, vote for Brexit gives us a blank sheet of paper. It doesn’t mean that we’ll have fewer silly rules and regulations in future. It doesn’t mean we’ll have more. What it means is that Westminster will have very much more power to decide exactly what regulatory environment it wants in future. We could end up with fewer silly rules. We could end up with government passing more silly rules. It really depends who’s in power at the time.
Martin: Well, anything’s possible. Ross, thank you so much for joining us today on Informed Choice Radio. Before you go, where can we find out more about the book The War on Cash, and how can we connect with you online?
Ross: It’s available from all good book shops, and probably a few bad ones as well, or you can go to the Harriman House website, that’s the publisher, harrimanhouse.com., H-A, double R, I-M-A-N hyphen house.co.uk, I think, or Amazon even. I have a Twitter account. It’s @RossjournoClark. That’s my Twitter handle, I think. You can also see me … I’m regularly in The Daily Mail, The Daily Express, The Spectator writing on current affairs, and this issue, and many others besides.
Martin: Fantastic. We’ll make sure we put links in the show notes for this episode so our listeners can find the book nice and easily. Ross, thank you for joining us today in Informed Choice Radio.
Ross: Thank you very much.