The Cashless Disaster

Posted on by Keith Marlow

Going cashless is presented as a way of modernizing our economy, a way of putting us at the forefront of modern financial technological development. In reality, this is more about financial institutions wanting to reduce their operational costs, raise transaction fees, and gain more visibility into what you do. This article explains exactly what the cashless disaster is and why we should not be going down this road, it could literally result in the end of Australian society as we know it.

What really is cashless?

Cashless Payment
Is it really worth it? Who benefits?

Simply put, being cashless means having no physical currency to transact, instead, you depend upon electronic payment ‘proxies’, typically these are credit or debit cards but can also be token cards (like public transport cards). All these proxies have to make use of a computer network to transmit, record, and ultimately settle the transaction; no physical ‘cash’ is ever involved, hence ‘cashless’. You are presenting an authorized token instead of cash and it’s processed through a computer network to settle the transaction.

On the face of it, this seems a great thing to encourage, no more fiddling with notes and coins to settle a transaction, instead you just swipe and go. The day-to-day convenience of this is highly attractive which is totally understandable, yet going completely down this road creates more problems than it solves, let me explain.

Cashless knows what you did and where

Compared to cash, cashless is totally traceable, everything from your weekly food shop to that coffee you just bought is recorded. Now on the face of it, this seems incident enough, yet this complete transactional history of you is highly valuable and who has access to this? Yep, your financial institutions. Such information can be used to:

  • Target their services to you – such as car loans, personal loans, insurance, etc
  • Target other companies’ services to you – buy a lot of coffee, maybe you might be interested in a loyalty card scheme? Recently bought a baby seat, how about a special offer on discounted nappies?
  • Profile you as a customer – does your transactions indicate something undesirable about you as a customer? Is there fraud going on? Should your accounts be shut down as a safeguard? Does the government consider you a risk?

The first point I don’t have that much trouble with, they have been effectively doing that for years, it’s the other two I have problems with. Once your financial institutions start sharing your financial transaction details (no matter how watered down or anonymized they are) it’s all out there and essentially impossible to bring back. Your very financial essence is there for companies to buy and trade. Plus, with the more information they collect, it becomes possible to deanonymize by the sheer weight of information collected. In effect, more data points allow the filling in of the gaps, which when combined with public data sources allow complete deanonymization.

The last point in the list is perhaps the most immediately scary, as this closing down of bank accounts has occurred in the UK and has occurred in Canada for those who sponsored the truckers. BTW Most banks have in their T&Cs the ability to shut down accounts for no reason.

Something I always find odd is that people don’t realize cashless records where you are and when. Every time you pay for something via cashless it creates a record of you being there doing that transaction at that precise moment in time. Every payment point is uniquely identified, and your literal walk through life is recorded in detail as a result.

Also with the knowledge of how much you spend at a certain time, it becomes possible to work out what you bought. For instance, visiting Star Bucks and spending $5.50 will indicate it’s likely you bought a large coffee. Visit JB HiFi and spend $1089. That can be matched to a certain TV that was the only item in the store at that price point at that moment in time. Going to your local petrol station once a week and spending around $50, you are filling up your car.

Then there is the other problem of retailers who have systems to track your buying behavior by using your cashless token ID as a tracer to build behavioral purchase profiles over time. They can then use this to target you for deals, or if they get your mobile number sell that information to a third party for targeted advertising. Now you are wondering why certain retailers are offering digital invoices, just give them your mobile number, it is so easy and convenient…

Cashless is Fragile

An aspect of cashless that is not discussed is that it is inherently fragile in operation compared to physical cash. A whole network of computers run by many different businesses is required to be working 24×7, reaching into every single place you could possibly transact. This is not fully reliable, there needs to be alternatives. We have had situations where the networks of financial providers have gone down for extended periods and those merchants and individuals associated with the impacted provider have been unable to transact, nothing worked. Don’t believe me, here is a recent list:

With each of these outages, millions of people were impacted. They were ‘cut out’ of the cashless systems, unable to either give or take payments.

Now, what happens if you live in an area with limited or zero mobile network coverage? Yep, if you depend upon your mobile phone to tap to pay, there is a risk it will fail. Most digital wallets have to update their token keys from time to time, so if you are unable to pick the update up, your wallet won’t work (the old token you have is not valid in the central system). Also if your merchant suffers a network outage or bad connections, they won’t be able to complete the transaction. Reminds me of taxi drivers who I try to pay at my house and they have to go up the drive waving the terminal around to get a signal…

Something also not discussed is the human error aspect of all these systems, the people running them do make mistakes from time to time, some of these mistakes do cause massive outages – but others can be more targeted in their impact. Member for Menzies Keith Wolahan recently encountered a form of such silliness when his cards were all declined, simply because his bank wanted to verify his driver’s license… Why they couldn’t notify him to verify his card prior to locking him out of his account is unknown, again human error in not creating a proper process.

Bad Actors

One aspect of this that is not often discussed is say you are a state actor with evil intentions for Australia, how easy would it be to take down the cashless systems and cause a prolonged outage? I would argue that it would be relatively easy for a competent state actor to seriously perturb such systems. I won’t describe the mechanisms of how this could be done, as that would be irresponsible, but knowing how the Internet and telecoms networks are put together and how businesses utilize such networks in many different ways – bringing it all to a screaming halt is quite viable.

Going cashless also enables a form of surveillance that bad actors could tap into. Any business connected to the cashless financial system is a worthwhile target as pieces of information can be merged together to gain an increasingly accurate overview of someone’s activity. Plus bad actors are able to just buy activity information from information brokers by pretending to be a marketing agency. Armed with such knowledge a bad actor can create very convincing phishing emails. There have even been cases of advertising platforms used to target malware to known persons of interest.

Cashless is not Green

Hopefully, it has not escaped your notice that in order to have the convenience of Tap-to-pay, a whole network of computers and terminals need to be powered 24×7 to process those payments, this is an enormous power consumption combined with physical resources consumption. Just think every time you Tap-to-pay for your coffee you could be contributing to the climate problem. Cash in comparison consumes very little and is very reusable, coins and notes are designed to be very durable.

Cashless Won’t Stop Criminals

Cashless is often presented as a mechanism to deal with the Grey or Black Economy, a way of stopping criminals from washing money and enacting fraud. In part, yes, it will help but I would argue they would then adapt to the new reality. In a way, they are already adapting by utilizing ‘innocent’ 3rd parties to perform their transactions, and financial institutions are having a hell of a time trying to stop it.

What I’m referring to is the use of ‘mule accounts’, this is where a criminal will gain access to someone’s financial account, and then use it as a means to move money around between 3rd parties without involving themselves directly. In effect, they ‘wash’ the money through the mule account. This is on top of scammers gaining access to financial accounts and clearing them out.

Also, criminals are free to associate value with other forms of exchange, such as gold, diamonds, etc. All of which are completely untraceable. So I don’t think cashless is going to have a big impact on the Grey or Black Economy, rather it will catch the stupid criminals, but the smart ones will still get away as they always do.

What should you do?

Given the above and how cashless can often fail at the most critical of times. I recommend the following:

  • Carry on you at least enough cash to get you home from work via a taxi times 2. Why times 2? Well if there is a mass outage of cashless services, the taxi rates will likely go up. Although you will be one of the few able to pay your way, you might be able to haggle!
  • Keep enough cash at home to buy the essentials for at least 1 week, i.e. 1 food shop and 1 car fill-up. This way you will be able to keep your home fed and move around.
  • For the smaller transactions, say under $10, go back to using cash. You might also find things are a little bit cheaper as the transaction handling fees or surcharges often silently get added on when using Cashless, this can be as high as 2%, which quickly adds up.
  • Contact your local MP and point out you are not happy with the bank branch closures and this move to being exclusively Cashless.

Conclusion

Cashless, like all technology solutions, has its pros and cons. Unfortunately, I think in Australia, the upswing in cashless transactions during COVID is being used as an excuse to fundamentally scale down the cash part of the economy to save operational costs for banks, whilst the same banks are getting an uptick in transaction fees (which adds up to a lot) from the cashless settlement. With the current 80%+ usage of cashless, they can see it won’t take much to push out cash. This is not being driven at all by improving your convenience, you already have that, rather it’s to improve profitability for the banks.

I think this wholesale move to cashless is a massive disaster waiting to happen and will make Australia an easy target for state actors (or sophisticated hackers) to perturb when they want. Add onto this the fact the legislation to support this new financial order is woefully lacking in checks and balances and you can see why I think it is a bad idea. Cash has its uses and will continue to have its uses and needs to remain an equal method of settlement as cashless.

Did you find this article interesting? If so, please consider following me on LinkedIn, I often post stories relating to cybersecurity, national security, and technology. Also have a look at the blog on this site, where I often post longer-form articles and stories. Thank you.