What do we lose when we lose physical cash? Engaging with the economy is an essential and critically important part of citizen life. Payments represent a digital footprint of citizens’ online and offline behaviour. Covid-19, and the consequent lockdown, seem to be accelerating the adoption of digital payments. The Covid-19 pandemic presents a unique case study for the movement towards emerging ‘cashless’ economies.

Cash affords both privacy and universal market access. Digital payment systems and the management of associated digital information have implications for trust, identity, privacy, and security (TIPS). This project investigates future digital payment systems with respect to TIPS, contributing to the identification of policies and technologies that best serve the public interest. Our multidisciplinary approach investigates pre and post Covid-19 financial information, analyses legal, policy and regulatory aspects, assesses innovative technologies for digital payments, proposes simulations of future scenarios, and engages stakeholders and user-groups to understand perspectives, opinions, and concerns. The project also aims to further advance this line of enquiry by identifying suitable pathways for future research.

The project has identified several features of cash that would be beneficial in future payment systems. Those features include inclusivity and fungibility (anyone case use cash, and anyone’s cash is as good as anyone else’s), the user-centric control and trust (compared to e.g., bank-centric approach of digital cash via e.g., credit cards), the resilience and finality of transactions, privacy by design (no traces of previous owners are embedded into cash), as well as the socialisation aspects around cash (in-person exchange).

The less-desirable features include expensive management of cash (from printing to maintenance, to eventual retiring of older banknotes and coins, and replacing those with new ones), the circulation outside of regulated contexts (e.g., black markets, other countries), and impossibility of knowing whether missing cash is permanently lost.

The research team has been engaging with policymakers in the fields of financial, economic and data protection regulation. Based on their research findings, written responses have been submitted to the following public consultations:

• European Data Protection Board’s Guidelines on the interplay of the Second Payment Services Directive and the GDPR – see the Team’s response here.
• Financial Conduct Authority’s Call for Inputs: Open Finance – see the Team’s response here.
• HM Treasury’s Call for Evidence: Access to Cash – see the Team’s response here.
• HM Treasury Payment Landscape Review: call for evidence – see the Team’s response here.
• European Central Bank proposals for a Digital Euro requirement – see the Team’s response here.

This project’s impact is raising awareness of the inherent limitations of modern retail payment systems and the risks inherent to a low-cash or cashless society.

This project is innovative, because it provides a foundation for understanding the salient features of physical cash, such as privacy and end-user control, that serve an important social purpose and for evaluating digital payment systems in terms of these features.

The team considers submitting several proposals to develop the idea further, including payments in emergent mobile payment technologies, merchants’, and banks’ incentives for cash vs. cashless payments, the fungibility of digital tokens, and the legal compliance of private payments.