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There are good reasons for providing electronic payment systems to the less formal parts of the economy, for people who deserve better than cash.

As Professor Douglas McWilliams entertainingly described in his Gresham College lecture (14th February 2014) called “Prostitutes and software developers — A short history of the Italian black economy”, Italy decided to revise its GDP calculations back in 1987 in order to obtain membership of what is now the G8 by including estimates for its “black economy” in the figures. When these estimates were added, Italy’s GDP surpassed the UK’s and Italy was asked to make a greater contribution to the European Union! Oops. Anyway, to restore fair contributions, some years later, European Union statisticians revised their methodologies to treat the black economy equally in all EU countries and things like software and drug-dealing and prostitution were added to the figures in 1995.

In Diane Coyle’s excellent “GDP: A Brief but affectionate history”, she talks about this statistical revision and says that “the largely cash-based informal economy of moonlighting, avoiding taxes and regulations, but creating work and output, has been placed inside the production boundary”. So it’s measured, but the people in that economy are not contributing their fair share to the national piggy bank. We [the payments industry] don’t spend much time thinking about the black economy, but it’s an untapped market for electronic payments. Why? Well, yes, there’s a tax penalty to switching to electronic payments, but on the other hand dealing in cash is not always the optimum transactional solution. There are problems living in a cash economy.

When I went to a strip club where I could pay in Bitcoin, a dancer told me she had been tipped in Japanese and Pakistani currency in the past and had no idea what it was worth until she went to a money exchanger to cash it in. The latter wasn’t even worth changing for dollars.

[From 21 Things I Learned About Bitcoin Living On It A Second Time]

I was fascinated by this story about the weakness of cash in relation to Bitcoin and it reminded me of something I’d seen elsewhere about the relationship between cash and, and I hope readers of a gentle disposition won’t be offered by this phrase, “sex workers”. People who live on the margin get screwed by cash.

In the eastern Indian city of Calcutta, a non-governmental organisation has started a programme to help sex workers recognise fake currency given to them by clients,

[From BBC News – Teaching Indian sex workers to spot fake currency]

I can genuinely say in all of the impassioned rants against cash that I have made an industry gatherings, it had never occurred to me that one of its failings was that people would use counterfeits to defraud prostitutes. So another count is added to the prosecution charge sheet.

Prostitution is illegal in India, meaning the country’s estimated three million sex workers cannot complain to police if they are paid with fake notes. But a campaign group known as the Committee for Indomitable Women has now begun a training programme in Kolkata’s notorious Sonagachi red light zone, where an estimated 8,000 sex workers ply their trade.

[From Indian sex workers learn to spot counterfeit currency – InterAksyon.com]

Should I ever go to Calcutta, I swear I will go to meet the Committee for Indomitable Women and offer them my full support and a mobile POS. In a country where counterfeits are widespread, it is obviously the marginalised groups trapped in the cash economy who are the big losers. Fortunately, the Indian central bank has decided to help out a bit by withdrawing some of the most counterfeited notes.

Few months back, the Reserve Bank of India has clarified giving reason why pre-2005 are being removed from the system. The RBI had said, “Before 2005, the neighbouring countries had printed fake currency in large quantities”.

[From Post-2005 counterfeit notes enters Indian system before election, NIA increases surveillance : Highlights, News – India Today]

What’s my point? Well, we need to provide payment systems that deliver privacy (not anonymity) so that we can provide better alternatives to cash for people who live in the margins. They deserve better than cash.


  1. It’s not cash that hits the excluded, it’s regulation. A.k.a. exclusion. When they tried mPesa in South Africa, the banks made sure it was only for those with bank accounts. Result? It achieved minimal take-up. The greatest financial inclusion tool the world has seen in the last many decades was blocked by the selfish.

    Similar case story in Somaliland, where the regulator is complaining about mobile money denominated in USD…

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