Facebook has made headlines for a privacy scandal that could ultimately cost the company billions of dollars in fines. The tech giant has thrust the privacy issue into the spotlight for its careless handling of user data, a topic that is paramount to a sector such as payments. Cash is no longer king in the current digital age and as a result, extra steps must be taken to ensure user privacy.
Digital payments are taking the economy by storm for a reason – they’re fast, convenient, and ultimately better for business. Tech innovation has ushered in products such as contactless cards, mobile, and even biometric payments and forever changed the landscape of payments. Trust has become a front-and-center issue among consumers and merchants alike now that lapses like the one at Facebook surfaced. And while cash is clearly the most private of all transactions, it’s losing its luster.
Regulation such as the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act in the U.S. represent steps in the right direction. In the U.S., there is also a push to create a federal law geared toward protecting consumers’ privacy, which would replace California’s state law. Consumers have responded to data privacy issues with the expectation that they are willing to share their personal details if there is transparency surrounding the way that information is disseminated.
Cash Is No Longer King
Cashless payments are here to stay, with products such as WeChat Pay having solidified their grip on society. In China, mobile payments accounted for $9 trillion in transactions in 2016 compared to $112 billion in the U.S. The rise of digital payments has come at the expense of cash. Cashless payments have been slow to catch on in the U.S. while in their neighbors to the north, cash is only used for 12% of merchant transactions and that number is dwindling.
Arthur Hayes, who is the CEO of bitcoin exchange BitMEX, predicts that “financial privacy will be dead in under five years.” He points to China in particular, where the majority of merchants no longer accept cash as a form of payment. He warns, however, that the People’s Bank of China is looking to “bring that in house [so that] they control everything,” because they are not a fan of cash given the privacy that is attached to it. Hayes goes so far as to say that the governments of China and India “will ban cash” in the next half-decade.
Source: USA Today
He expects that this will give way to the rise of blockchain payments, which are peer-to-peer transactions that do not require a centralized party such as a bank or government to control it.
Switzerland is an Exception
While digital payments have taken much of the world by storm, Switzerland is marching to the beat of a different drummer. For instance, Switzerland recently gave its 1,000-franc note a face lift, introducing a purple and yellow bill that is smaller in size and displays two hands shaking over a globe.
The banknote has been deemed controversial by some for the ease in which it can be laundered. However, it’s popular among consumers for luxury purchases, such as jewelry, that someone might want to keep private from a spouse because the item is a gift.
On the other end of the spectrum, consumers are also using cash for everyday purchases. A food-truck owner tells Bloomberg that “200 franc notes” are popular for “pita-bread sandwiches” which has a price tag of only 15 francs attached.
While cash across European Union countries as a whole is falling, the dynamics vary among individual countries. According to research, Germany remains “cash heavy” while cash is a rare sight in Sweden.
Depending on the region, the role of cash in the future of society differs. The U.S. in many ways is fighting the transition, as evidenced by nearly one-third of transactions still being completed with cash at the point-of-sale. In northern Europe, only 20% of transactions are cash.
While Facebook has catapulted the privacy issue into the spotlight, the company is seemingly no worse for the wear despite the scandal, the billion-dollar looming charges notwithstanding. As long there is trust between consumers and merchants, it seems the digital payments will continue taking over the world.