Eearly in the pandemic, “dirty money” began to take on a new, rather literal meaning, as businesses across Canada, from local stores to major retailers like Second Cup, banned the use of cash. Before understanding the aerosol transmission of the coronavirus, every surface seemed to be a threat: doorknobs, groceries and, of course, money. In May 2020, the number of “tap and go” transactions increased so much that the Bank of Canada appealed to retailers to continue accepting banknotes and coins “to ensure that Canadians have access to the goods and services they need”.
There’s no doubt that printed or minted currency is dirty and rather coarse (paper banknotes, according to studies, can be covered in everything from E. coli to feces). But we now know that its probability of spreading the coronavirus is as low as any other high-traffic surface. Yet the reluctance of businesses and consumers to handle money could prove difficult to shake. E-commerce has systematically dethroned cash in Canada over the past decade, and experts believe the pandemic has accelerated the trend. Indeed, according to a 2021 report from Payments Canada, around 40% of Canadians say the pandemic has made them away from cash for the foreseeable future. As Canada becomes one of the most cashless countries in the world, with a projected 70% drop in usage by 2030, we must consider the implications of a massive shift to digital payment.
These consequences will likely be invisible to those of us who don’t have to worry about accessing bank accounts and credit cards. But, if you’re someone who needs to worry, the digitalization of the economy could make it difficult to pay for food, basic goods and public transport. In our rush to abandon cash on the pretext of technological advancement, are we leaving behind the people who depend on it the most?
Iit’s easy to guess everyone has a bank card or line of credit, but according to social justice group ACORN Canada, 15% of Canadians are “underbanked,” meaning they have limited interaction with traditional banks, and another million are estimated to have no bank account. at all (this may be a conservative figure due to uneven data collection).
Some of these people may simply prefer to use cash or checks for personal or privacy reasons, but many are excluded for reasons beyond their control: prohibitive bank or ATM fees or no reliable access to bank branches, inability to qualify for credit or lack of knowledge or resources to access digital banking services. Without bank accounts, people tend to rely on cash, which means the popularity of cashless policies could quickly push them out of society.
In areas with few retail options, for example, the trend could seriously compromise access to basic necessities. In June 2020, Michael Bryant, then executive director of the Canadian Civil Liberties Association, told the CBC that pushing people to use electronic payment can actively “[threaten] food security” by making it difficult for people to buy their groceries reliably, adding “another layer of anxiety” to everyday life. According to research, most of these people are already low-income and marginalized, with Indigenous, disabled, homeless and remote communities being the hardest hit. Unlike some jurisdictions in the United States, such as Massachusetts, DC and New York, there is no law in Canada that requires retailers to accept cash, a Bank of Canada spokesperson said. to Global in 2020, only that they must accept some sort of valid payment. This means there are no safeguards for those who do not have access to credit or debit.
It’s not just shopping that’s difficult for the unbanked and underbanked — receiving payments, including government checks, can also become extremely expensive. Most communities in Nunavut, for example, have no bank branches. Similar situations exist in parts of the Yukon, which may leave some people with little choice but to rely on excessively priced check cashing stores. Bonnie Morton, a Saskatchewan anti-poverty advocate, told CTV in 2020 that people without bank accounts often face “huge fees” when cashing checks at places like Money Marts, which typically charge both a base rate and a percentage of the total value of the check. If, for example, you were to cash a $1,000 salary check twice a month, a fairly standard fee of $2.99 per check plus 3% of the value would set you back $32.99 each time, or nearly $800 over the whole year. As Morton said, “A cashless society only works for those who have enough money.”
Many rural and remote communities in Canada are also notoriously underserved by internet services, making it difficult to rely solely on internet banking. And, with banks closing their branches at a rapid pace for years, with more than 2,000 closures between 1990 and 2017, the situation doesn’t look set to improve anytime soon.
Jhere are the possibilities to solve the cashless dilemma without penalizing the country’s most vulnerable – if Canadian officials are willing to make the effort to make them a reality.
One idea that has become popular is the use of prepaid cards: reloadable payment cards that look like credit or debit cards. Historically, they have been an effective way for governments to quickly send money to people without access to banking services, as they are easily delivered by post and give recipients immediate access to funds. Governments have used them to provide aid in times of need in the past, such as helping victims of Alberta wildfires, and advocates say prepaid cards could have been useful had they been rolled out during the pandemic to deliver the much needed Canada Emergency Response Benefit. (CERB), which they weren’t.
To the extent that they have been deployed in Canada, prepaid cards have proven to be quite effective in spreading benefits; in Ontario, their use for unemployment and disability programs likely helped recipients avoid check cashing fees and reduced government costs by about $1.7 million per year. If adopted more widely and used for things like federal tax filings and other types of government assistance, prepaid cards could prove extremely useful in transitioning the unbanked and underbanked to a increasingly cashless society.
Another answer may lie in the busy hands of Canada Post. Many countries, including the UK, France, Italy and China, use their post offices to offer low-cost in-person and online banking services. In rural communities underserved by banks, the initiative has become vital. The establishment of such a service here is not unimaginable: postal banking services were part of Canadian culture for more than a century, until the lobbying of banking companies put an end to it in 1968. Despite continued resistance from traditional banks, the concept caught on widely. Support; more than 600 municipalities, in almost every corner of the country, have passed resolutions supporting postal banking. The Canadian Union of Postal Workers also supports it. John Anderson, a researcher and consultant, argued in a 2013 article that traditional banks, with their sparse distribution of branches and high fees, have long let Canadians down. With post offices in more than 1,200 communities underserved by banks, Canada Post’s infrastructure, which includes well-established networks embedded in local communities, could be key to extending financial inclusion to the most rural populations. and away from the country.
Expanding financial inclusion also means distributing the resources needed to engage in digital banking, such as providing low-cost laptops and phones to people who cannot afford them. We got a glimpse of what that might look like during the pandemic, when community initiatives provided electronic devices for people to attend virtual health appointments and ease isolation. But small-scale, charity-focused outreach can only go so far, especially when such outreach is often limited to large urban centers with decent internet. If Canada is serious about ensuring people can participate in the digital economy, communication devices and internet access may need to be viewed more as a right than a personal luxury.
The cashless trend could be inevitable. But there are ways to prevent the unbanked from becoming collateral damage. Canada could provide better access to laptops and phones for those who want them and explore imaginative solutions for those who don’t, while building on structures and methods that already exist. Financial inclusion advocates are more than ready to make the switch, but the penny hasn’t gone down yet for our political representatives.