Digital payment has taken over this new era. There are a variety of apps that allow users to pay online effortlessly: Venmo, Zelle, Paypal, Apple Pay, Google Wallet, etc.
While their practicality and convenience cannot be argued; there are real security, ethical, and social concerns to be addressed. Many of these concerns are not discussed, and perhaps not truly considered.
Some benefits of digital payments include their convenience and speed. Every day it is made easier and easier to pay online through instant transfers, online payments, tap to pay. No need to handle physical cash and if someone does not have a bank account, they can create a mobile wallet.
Other benefits include having your personal data encrypted and having fraud detection algorithms to detect unusual spending behavior. In a sense, when payments are made online it is harder to steal than cash. It is not likely that someone will be held at gunpoint to send a Venmo request or something similar.
Importantly, in many cases of a fraudulent transaction or scam, banks are able to reverse the action and if a credit or debit card it can be disputed and canceled.
Nevertheless, the second you use online payment systems you are still making yourself vulnerable to online attacks.
Systems can be hacked or data breaches may occur leading to stolen money or identity theft. Plus, from an ethical standpoint the loss of privacy is to be expected as every transaction is tracked, companies store data in order to build behavior profiles for users. This lens includes the loss of control an individual has a company can choose to freeze their account at any time, a fraud detection algorithm might make a mistake and deny transactions.
Psychologically, the rise of digital spending leads to more debt due to overspending in some consumers. Without the physical action of handing over cash, people tend to spend more.
That is why having physical cash is safer in many ways.
While it still has it’s own share of liabilities. Unlike digital money, it is much risker to move cash over long distances as there is always the risk of it being stolen. Cash is vulnerable to physical elements such as fire, water, and misplacement.
Unfortunately, in our ever-digitizing world many stores are now going cashless. This could grow into a social issue as cash-only people face exclusion in certain locations.
Yet, cash comes with the social advantage of being anonymous. It is much harder to track physical cash to the original source than it is to look at transaction records online.
Your wallet cannot be drained remotely from some far away dot on the map, if your money is stolen you are more likely to know or be able to find out who took it.
With physical cash there is no need to worry about system failures, network blackouts, or power outages, making it more resilient than digital cash. It is also accessible to low-income groups, elderly people, and people who are in rural areas. This includes people who may not have stable internet.
The power of the mind works in mysterious ways. It is clear that having to physically hand cash over leads people to think about their financial choices more, leading to less spending and effective budgeting.
Therefore digital money/online payments reduce the threat of physical theft, but they increase systemic, remote, and large-scale social vulnerabilities; completely shifting the risk from an individual to the system as a whole.