Connect with us

Hi, what are you looking for?


Cash and Environment: Misconceptions about the Environmental Benefits of Electronic Payments

It is the new fashionable mirage: the slow arrival of the cashless world is said to be a step closer to environment-friendly development. The carbon footprint associated with cash management would indeed disappear, but only to be replaced with a far greater and more dangerous one.

Money isn’t free

Just as companies endure the cost of doing business, countries (and their respective governments) endure the price of money. Behind the distribution of the seemingly God-given, yet hard-earned, coins and the banknotes we carry every day is an enormous machinery of design, security, transport, management and accounting is constantly turning behind the scenes. Banknotes require, before they are even produced, a top-secret design which will keep counterfeiters at bay for as long as possible.

These costs are endured by the State, in charge of ordering and producing the banknotes, and all ulterior costs are endured by banks – who are just as keen to see this expensive type of money disappear as professor Pasquale Sgro, Head of Economics at Deakin University confirms: “Banks are a major force pushing for society to remove physical money from circulation.”

But cash isn’t hated merely for its operational costs, banks are mostly interested in how much more profitable money would be if they were completely electronic. High-frequency trading, for instance, is a perfect example of money being made ever more profitable, thanks to the fluidity of its electronic form. Using powerful servers, banks are able to make micro-transactions millions of times per second, using the microscopic variations of stock prices. Finally, a cashless economy guarantees banks that money can never evade the banking sector: it would only ever transfer from one bank to another.

Making a shady business acceptable to the public

For these reasons, governments in Europe are slowly phasing out cash. First came the suppression of high-value notes, then the limitation on transport and payments in cash, and a look abroad indicates that the trend should not end there. But because the entire operation needs a PR wrap around it, the angle which has been chosen to push this agenda forward has been the environmental one. The general idea is that digital payments are environmentally friendlier because they are immaterial.

This angle is surprising, to say the least, if not suspicious. A paper banknote has a remarkably low carbon footprint, already, and this footprint, if it were to be compared with its digital equivalent, would need to be divided by the number of times a banknote is used. S. Rochemont, from the Faculty of Actuaries, says: “Coinage is made of a copper-nickel alloy and is recyclable (2). Bank notes have also evolved, mainly for security reasons, i.e. anti-counterfeiting measures, and durability. The polymer notes launched in 2016 in the UK, last longer, so are more environmentally friendly than the older banknotes.” New technologies have made this excellent footprint even lighter, namely with new British banknotes made of completely recyclable polymer, and even more durable than cotton-based paper.

For the UK alone, the economy contains 3.6 billion banknotes, which will be used over 800 times, on average, before they are retired from circulation, carbon-free from the moment they’ve left the printing press. Digital payments, however, are nowhere green. They just move the carbon away from the user. BusinessGreen Madeleine Cuff writes: “According to this week’s report, each transaction on Mastercard’s network uses just 0.0007 kWhs of electricity”, estimating the number of transaction per year at 65 billion, on that network alone. Dr Rochemont adds: “We must be cautious with regards to the indirect or less visible environmental cost of technologies that underpins cashless payments: […] smartphones present substantial environmental cost at production, and their use impact demand on data centres, major consumers of electricity.

Cryptocurrencies place unsustainable demands on the grids, even as use of these decentralized ledgers is still limited.” Cryptocurrency, such as Bitcoins, is the “most electronic” of all forms of money: the energy they use, despite the nascent state of the market, is so staggering it has environmentalists alarmed around the world. Motherboard Christopher Malmo quotes senior economist Teunis Brosens from Dutch bank ING and writes: “Global Bitcoin mining represents a minimum of 77KWh of energy consumed per Bitcoin transaction. Put another way, it’s enough to power his own home in the Netherlands for nearly two weeks. Even as an unrealistic lower boundary, this figure is high […] Digiconomist’s less optimistic estimate for per-transaction energy costs now sits at around 215 KWh of electricity” he adds.

Esse quam videri

Latin philosophers recommended, “to be, rather than to seem”. The opposite is being done in the cashless push towards the world of digital payments. These new “government-friendly” payments don’t need to be green, as indeed they are not, but they need to seem green. The amount of data we generate has exploded in recent years. IFL Science Tom Hale writes “Ninety per cent of the data in the world today has been created in the last two years alone.

Our current output of data is roughly 2.5 quintillion bytes a day. As the world steadily becomes more connected with an ever-increasing number of electronic devices, that’s only set to grow over the coming years.” A large part of these communications is generated automatically, by digital payments. Each digital operation carried out on the global financial network, generates a flurry of back-office operations, each increasing the carbon footprint of the global operation. Swift’s official website states: “In August 2018, SWIFT recorded an average of 29.3 million FIN messages per day.

Traffic grew by 10.7 % versus August 2017 which brings the year-to-date growth to +11.6%”. Several experts have voiced their concerns about the amount of global energy being ingested by the infrastructure behind digital communications. Consulting firm Latent View specifies: “Mobile payments generate volumes of consumer point-of-sale data that businesses must have the ability to collect, mine and analyze for insights that can inform marketing and sales decisions.” Forbes reporter Radoslav Danilak studied the problematic increase in energy consumption from the infrastructure which we need to constantly expand, in order to meet the new demands of digital communications and payments.

He writes: “U.S. data centers use more than 90 billion kilowatt-hours of electricity a year, requiring roughly 34 giant (500-megawatt) coal-powered plants. Global data centers used roughly 416 terawatts (4.16 x 1014 watts) (or about 3% of the total electricity) last year, nearly 40% more than the entire United Kingdom. And this consumption will double every four years. This is a big problem, and it’s getting bigger.”.

Whenever a change management program is launched, such as in the war cash, PR specialists will be pulled in, to assess how the change can fit into the current zeitgeist. These days, environmental policies are popular, and so the war on cash was painted green. But being cautious with our environmental behavior isn’t about PR, it’s about the future of our planet.

Environmentalists around the world are blowing the whistle, as they have detected the skyrocketing increase in energy consumption linked to the digitalization of the Western hemisphere. If the 80 trillions of cash disappeared, their equivalent value would transit through electronic networks, and as many more terminals would have to be produced, aggravating the pollution crisis.

Written By

1 Comment

1 Comment

  1. vineet kayal

    December 19, 2019 at 12:55 pm

    You can save a little money and reduce your impact on the environment by paying bills electronically

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

You May Also Like


Going contactless Prior to the outbreak of the current Covid-19 pandemic, many businesses have started to adopt card payment options as an alternative to...


Many banks are dreaming of a future where the only thing you’d have to carry is a card – or maybe just your cell...