A recent move by New York State to ban businesses from accepting only digital payment methods reminded me of this article from a few years ago, which made the argument that digital payment methods are essentially privatised money:
‘Cash’ is the name given to our system of physical tokens that are manually passed on to complete transactions. This first mode of money is public. We might call it ‘state money’. Indeed, we experience cash like a public utility that is ‘just there’. Like other public utilities, it might feel grungy and unsexy – with inefficiencies and avenues for corruption – but it is in principle open-access.
In contrast, digital payment methods run
… off an infrastructure collectively controlled by profit-seeking commercial banks and a host of private payment intermediaries – like Visa and Mastercard – that work with them. The data inscriptions in your bank account are not state money. Rather, your bank account records private promises issued to you by your bank, promising you access to state money should you wish. Having ‘£500’ in your Barclays account actually means ‘Barclays PLC promises you access to £500’. The ATM network is the main way by which you convert these private bank promises – ‘deposits’ – into the state cash that has been promised to you. The digital payments system, on the other hand, is a way to transfer – or reassign – those bank promises between ourselves.
In the US, where cashless means primarily credit cards, it’s been argued that “…it’s incredibly discriminatory not to accept cash because some people can’t get credit”. In India, anyone with a bank account can technically pay with UPI, but it does require an iPhone/Android phone. One can also pay via a debit card, but setting and managing a PIN can be hard for people to do. Of course the NPCI, which runs UPI, is a consortium of banks, but it’s sufficiently quasi-governmental to qualify as a national payments mechanism.
But as the Aeon article describes, privatising money, or having private entities mediate transactions, means a third party entity makes a cut of every transaction for providing this convenience: whether your bank or a payments network. It’s why the Indian government has mandated zero ‘merchant discount rates’ on RuPay cards to use them.
The problem of course with making RuPay and UPI free for customers and merchants is that last-mile payment providers still bear the costs of providing payments infrastructure. The Payments Council of India, a payments industry body, compared the move to scrap merchant payments to ‘nationalizing the payments industry’.
While I’d say access to payments, and now digital payments, should be a civic right, I think we’re going to have to find a way to make offering and accepting digital payments near-zero-cost for those who are new to digital payments while maintaining incentives for the payments industry to expand and innovate.