Produce your Apple Pay or debit card to pay for an espresso in Rome, and you’re often met with a pained expression. “Solo contanti,” they’ll plead — cash only.
Unlike, say, Scandinavia, the U.K. and the Netherlands, where many citizens have stopped carrying cash altogether, in Italy having a few euros in your pocket is a part of daily life. Italians, alongside Germans and Austrians, are among the most “cash prone” in Europe. Cash is how you pay for your morning cup of coffee, for fruit and vegetables at the grocer, for taxis, snacks and gelato. A survey in 2019 showed that 86% of transactions at the point of sale were in cash.
In 2020, the government introduced a new “Christmas cashback” scheme to try to encourage card payments, by offering people rewards and rebates. For every card payment people made up to 150 euros, the government would refund 10%. But right before the holidays this year, the country’s new hard-right prime minister Giorgia Meloni announced a budget that seemed to take Italy backwards, just as the rest of Europe, and indeed Italians, were embracing card payments — particularly contactless — in ever greater numbers.
“Cash must be king,” Meloni told Italians. She proposed that in 2023 business owners would be allowed to refuse digital payments for transactions below 60 euros without a fine. On top of that, she would raise the current limit for cash payments from 2,000 euros to 5,000 euros.
The European Commission in Brussels pushed back immediately. With one of the largest black markets and shadow economies in Europe, Italy’s former government pledged to Brussels it would reboot its flailing economy, while fighting tax evasion under EU guidelines. On this condition, the Commission gave Italy 220 billion euros (about $238 billion) in coronavirus recovery funds — by far the largest share in Europe.
But Brussels said Meloni’s plans went against Rome’s pledges to fight tax evasion, and Meloni was forced to scrap her plan to allow businesses to refuse card payments for bills below 60 euros.
Meloni still plans to push through her pledge to raise the overall legal limit for cash transactions to up to 5,000 euros. This is well below the Council of the EU’s proposed bloc-wide limit of 10,000 euros but above Italy’s previous pledges to reduce the limit to 1,000 euros by the start of the year.
“The world is definitely moving towards cashless society. Definitely,” Spiros Margaris, a Swiss fintech advisor and “futurist” venture capital influencer, told me on Zoom. But, he added, “the cashless society is both a curse and a blessing.”
A cashless society effectively spells a new era for shadow economies — it makes it more difficult for people to evade taxes and makes life harder for criminals, traffickers and those in the drug trade. Denmark just recorded its first year in history without a single bank robbery and it has an increasingly cashless society to thank.
But there are significant drawbacks. A natural disaster or war can quickly cut off access to electricity and, with it, our ability to pay for things. During Hurricane Sandy in New York City, New Yorkers walked miles uptown to withdraw cash, after electronic payments became impossible in many parts of the deluged city. In the aftermath of Hurricane Maria in Puerto Rico in 2017, the cash economy reigned as the power grid went out for months on end.
And while a cashless economy means more cash transactions are forced to take place above the table, anti-surveillance advocates say a cashless future would allow governments and banks to wield more power than ever.
“The problem with a cashless society is that it is a surveillance society. And not only can governments, banks and tech companies monitor what you have earned and spent in a cashless world, they can preemptively control it too,” wrote Silkie Carlo, director of the U.K. privacy group Big Brother Watch, in an op-ed in June. The writer Brett Scott, whose book, “Cloudmoney,” rails against the advent of a cashless society, says a cashless world is “a world where even the tiniest of payments will have to travel via powerful financial institutions, which leaves us exposed to their surveillance and control — and also their incompetence.”
With her November declaration that “cash must be king,” Meloni became a kind of antihero for the movement pushing back against a cashless future. Meloni said she was protecting poor people and small businesses, standing up against a world in which the elderly and homeless are locked out of the digital economy. But her critics argued that she was really protecting Italy’s enormous dark money industry.
“Meloni loves cash that is essentially untraceable,” said Mirella Castigli, an Italian author who has written several books on digital privacy. “But this seems not to be a right to privacy issue, but another way to give a wink to tax evaders. It’s anachronistic to say people should go back to where we were years ago.”
Italy’s black market is one of the largest in Europe, worth a sizable chunk of the country’s gross domestic product. And Meloni’s proposed upper limit on cash payments, says sociologist Marco Omizzolo, would “make things worse for migrant workers, it just allows for greater exploitation.” The higher cash limit, he explained, would mean traffickers could keep their transactions under the table and pay people well below the minimum wage with impunity.
In divergence with Meloni, many leaders around the world have vowed to crack down on their country’s dark economies by imposing cash limits — or withdrawing cash altogether from circulation. In 2016, Indian Prime Minister Narendra Modi announced that higher-value 500 and 1,000 rupee notes — 86% of the money supply — would be removed from circulation. The move was meant to tackle corruption, with one minister describing it as a “surgical strike” against black money. Modi, meanwhile, told the millions of people who rely on cash in India that demonetization would be “the chance for you to enter the digital world.”
The digital rights group Privacy International said at the time that the move had another aim, “linking financial transactions to identity.” Six years later “cashless India” remains a flagship Indian government program, which the International Monetary Fund has praised. The opposition, though, has pointed out that the move failed to eliminate black money and led to job losses and much economic hardship for the rural poor in particular. In a recent survey, over 75% of respondents said they still used cash to buy groceries, eat out and pay for home repairs, deliveries and other services.
While the jury is out on the success of Modi’s demonetization, it remains true that card payments are rising steeply as a proportion of transactions. Covid restrictions have also helped turbocharge the world’s progression towards a cashless future, as contactless payments were encouraged as a way of stopping virus transmission — a claim that had little in the way of medical or scientific backing.
“People were much more open to digital solutions and digital transformations,” said Margaris, the Swiss fintech advisor. “The adaptation [to a cashless society] was accelerated, and now people just have to digest it.” In Italy, too, Meloni will likely bow to the inevitable. But in the meantime, she has won brownie points with small business owners and those who see a cashless society as evidence of the concentration of power in the hands of government, banks and big tech.
