With Facebook's Libra project sparking a new feverish round of debate on the pros and cons of digital payments, a Deutsche Bank analyst is making the case for old fashioned cash on the grounds of privacy.
Facebook has been at the centre of a data protection storm over the last year, thanks to, among other things, the Cambridge Analytica scandal, which saw the data firm get access to the private information of more than 50 million profiles and use it for political advertising.
With Facebook now prepping a massive move into the payments sphere, Deutsche Bank analyst Heike Mai has published a timely look into how the digitisation of transactions is creating a "growing information asymmetry" between people and companies and public authorities.
In many countries, cash use is falling as cards become more popular thanks, in part, to the rise of contactless. Meanwhile, mobile payments are also gaining ground while new threats - such as Libra - are on the horizon.
Mai notes that, while the information accompanying electronic transactions traditionally only used to facilitate the payment execution, it is now a valuable product. Personal data extracted from payments can be enriched with information from other sources, like market places or social media, and used for tailored, targeted advertising.
But, Mai argues, citizens have a right to preserve their personal privacy, making cash an attractive option. The digital nature of society means that notes and coins may not guarantee full data protection, but they do help.
The analyst warns against the "I have nothing to hide" response to data privacy worries. "This is a misconception. In any debate, negotiation or competitive situation, it is an advantage to know about the other party’s position in order to achieve one’s own desired outcome. It should therefore be in anybody’s interest to protect his privacy to strengthen his bargaining position."
Mai also dismisses the argument that firms and public bodies use anonymised data, arguing that it is normally only "pseudonymised". To prove her point, she points to a study which saw scientists able to correctly identify 90% of 1.1 million credit card holders only based on their "anonymised" transactions over three months, including day and shop of the purchase but without data like names or card numbers.
Finally, Mai insists the rush to a cashless society poses not just a threat in relation to companies. There is also a democratic risk: "Wherever civil rights are not respected by the government, cash - much more than digital payments - helps opposition activists to protect themselves from the illegitimate use of public power, e.g. from surveillance and intimidation."
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