THE term “contactless payment” is a misnomer. After all, you still have to place your card on the electronic reader when you make “tap and go” payments. But that’s not the only odd thing about it. After years of dedicating our financial security to “chip and pin” where you put a card into a reader and then enter a number known only to yourself, suddenly we’re going pinless.
Of course, contactless cards are only for small transactions, under £30, where the likelihood of fraud is reduced, but as this technology spreads, and the cash limits are raised, this ease of transaction will become a new frontier of fraud. So why is it happening at all?
Well, convenience, obviously, since it means not having to carry change in your pocket. Some people apparently don’t like using dirty coins and notes that have been handled by countless other people. Marketing departments like it because it gives real-time information about what’s selling where. Retailers like it because it makes it easier to part you from your cash through impulse buys.
At least when you have to reach into your wallet to take out physical currency you stop and think for a moment; with tap and go you don’t have to think at all. This means that the mental comparisons you make with similar items bought elsewhere stop happening. According to an analysis by Mastercard, people spend 25per cent more when they go cashless.
But we might as well get used to it. According to Nationwide, one in 10 of us has already stopped carrying change in our wallets. It claims that debit cards will take over from cash as early as 2021 as parking meters and vending machines stop using coins and paper notes wither in our wallets.
Like self-driving cars and CCTV, this is one of those technological trends which seems unstoppable without any of us really thinking about the consequences. The disappearance of cash will greatly increase the transparency of our lives. Not only will the phone in your pocket give the authorities real-time information on your location, contactless payments will tell them your entire purchasing history: what books you buy, films you view, items you hoard.
A lot of authoritarian regimes, from China to Turkey, will find this kind of information very handy. In China, you can be arrested for buying magazines that expose official corruption. Here, it may soon only be criminals and terrorists who’ll carry cash – or that’s how the authorities will look it.
Information overload will provide some defence here against the surveillance state – the billions of bytes of information take time to process. But not, perhaps, in future with the snooper’s digital friend: Big Data. Algorithms are already being applied to the mountains of information appearing on the internet from social media, official databases, police and health records to determine where and when crime is most likely to take place. They call it Predictive Policing in America.
With our entire purchasing history digitised, artificial intelligence will be able to make predictive policing one step further. Just don’t buy fertiliser and sugar on the same day. And don’t be surprised if one day you find yourself under police investigation because a computer has analysed your psychological profile and decided that you present a potential risk.
But paranoia aside, there are profound socio-economic implications. Cash has been the basis of the market economy since the dawn of civilisation when people started using precious metals as a store of value and a means of exchange. But the “hidden hand” of the market – as Adam Smith called it – may no longer be hidden with the coming of digital exchange. Once every transaction is recorded, tracked and analysed, society could become altered in ways we can scarcely imagine. All currency will effectively become bitcoin.
This could yield huge efficiency gains as markets become optimal and arbitrage, and hence things like hedge funds become redundant. Taxation could become almost painless as artificial intelligence takes a tiny slice of billions of transactions. Super computers using big data might even try to manage the entire economy, using predictive pricing to direct economic activity. Algorithms could redistribute wealth through a universal citizen’s income which ensures that demand always exists to match the goods being produced. Economic depressions could become a thing of the past.
It could be contactless heaven, it could be cashless hell, but it’s coming faster than we know. And that’s worth talking about in anyone’s money.