A cashless society, in which digital payments largely or wholly supplant physical currency, raises important questions for economists. Proponents highlight gains in efficiency, reduced transaction costs and improved tax compliance. Critics, however, point to risks of exclusion for vulnerable populations, entrenched socio-economic inequalities and potential erosion of democratic participation. This essay examines these concerns, with particular attention to the position of migrants and to the broader implications for democratic institutions.
Economic arguments for and against cashless systems
Transitioning to digital payments can lower the costs of handling and storing cash while facilitating real-time settlement and reducing opportunities for tax evasion and money laundering. Central banks have explored central bank digital currencies partly because they promise cheaper cross-border transfers. Yet these benefits presuppose universal access to banking infrastructure and digital literacy. Where that assumption fails, efficiency gains accrue mainly to already-banked households and firms, widening rather than narrowing gaps in economic opportunity.
Exclusion of vulnerable groups and migrants
Cash remains the primary payment instrument for individuals without bank accounts or reliable internet access. Migrants, especially those arriving after humanitarian crises, frequently lack the documentation required to open accounts swiftly. In the United States, Federal Reserve data indicate that foreign-born households are more likely than native-born households to be unbanked, disconnecting many from mainstream financial and social-security systems. This disconnect compounds vulnerability: without cash, individuals cannot purchase food, transport or medicine during the initial settlement period. Similar patterns appear among displaced populations from Syria, Afghanistan and the Rohingya crisis in Myanmar, where limited formal identification blocks entry into digital payment platforms and further entrenches socio-economic inequality.
Such exclusion carries political consequences. When large numbers of residents are effectively barred from the payments system, governments face pressure to accommodate informal or parallel economies. In extreme cases, sustained marginalisation can feed political instability, as excluded groups seek alternative channels of economic and social participation outside state oversight.
Threats to democratic underpinnings
A fully cashless economy concentrates control over the medium of exchange in the hands of central authorities and private payment providers. Transaction data become centralised, enabling detailed surveillance of individual behaviour. John Locke argued in his 1691 writings on money that currency functions as a social convention agreed upon by the community to facilitate exchange and protect property. Locke viewed metallic money as a store of value that individuals could hold independently of the sovereign. In a cashless environment the equivalent store of value exists only as ledger entries controlled by intermediaries, weakening the individual autonomy Locke regarded as essential to legitimate government. If citizens must rely on state-approved digital wallets to exercise basic economic rights, the consent-based foundations of political authority are arguably strained.
Moreover, the removal of anonymous cash transactions reduces the practical space for dissent. Populations already marginalised—whether through migration status or poverty—lose the modest privacy cash affords, increasing their dependence on institutions that may not recognise their claims. The resulting asymmetry of information and power can further weaken democratic accountability.
Conclusion
While cashless systems promise operational efficiencies, the evidence on financial exclusion demonstrates significant risks for migrants and other vulnerable groups. These risks are not merely technical; they threaten to deepen inequality and to undermine the individual economic autonomy historically associated with democratic legitimacy. Therefore, any move toward comprehensive digitisation of payments must be accompanied by robust provisions for identity verification, offline functionality and non-digital alternatives if democratic and egalitarian commitments are to be preserved.
