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The debate surrounding the benefits and disadvantages of a cashless economy gained momentum over the past decade. Proponents of going cashless gained new supporters since the Covid-19 pandemic began – and cybercriminals are rejoicing.

Online orders and contactless payments soared as lockdowns across the globe kept people at home. Cybercrime also reached new levels as hackers began taking advantage of increased online activity and people who are unsavvy about how to protect their information and identities.

As India’s Business Today explains,

“As the e-commerce transaction process entails multiple entities at different stages – such as marketplace, merchants, payment gateways, financial institutes, apart from the consumers – each of them can act as a vulnerability or attack point for malicious actors.”

 

Here, we take a closer look at the increased risks of criminal activity caused by growing online and electronic transactions.

Cash under attack

But first, what exactly is a cashless economy? A cashless economy or cashless society refers to a financial system that has no banknotes or coins in circulation and where all financial transactions are conducted electronically using banking cards, online transfers, electronic wallets and cryptocurrency.

Banks and financial institutions have been the greatest supporters of a cashless economy as they profit most from transaction fees paid on each electronic payment.

Brett Scott, British author of ‘The Heretic’s Guide to Global Finance: Hacking the Future of Money,’ observes that,

“A degree of ‘moral panic’ had been created by companies like Mastercard, which ran overt campaigns against cash.”

He calls this the ‘demonization’ of cash – a trend that has been exacerbated by Covid-19.

When the pandemic first hit in early 2020, the World Health Organization (WHO) hastily announced that cash could transmit the virus. Numerous studies quickly debunked that theory, and while the WHO retracted its initial statement, people made more purchases using electronic payments – despite the fact that research shows self-checkout touchscreens and PIN pads on credit card machines are more dangerous than cash. As more people, particularly those not accustomed to doing so, began making payments electronically, cybercrime also reached new levels.

The dangers of an online world

Cybercrime refers to a wide range of online criminal activities, including drug and sex trafficking, online harassment and offensive content as well as ones that access and exploit our personal data for criminal use such as identity theft, financial and credit card fraud, account takeover, phishing and malware, synthetic identity frauds and the theft of cryptocurrencies.

In cashless economies, the rise of digital transactions using credit and debit cards, digital wallets and online transfers means that consumers encounter more points of exposure when their personal information is vulnerable – even if they have no clue that they are at risk or under attack.

 

While credit card fraud and card-not-present hacks are the most common attacks, having your identity stolen is probably the most damaging. Identity theft occurs when personal information is stolen by someone who then uses it to file a tax return, pay for medical services, get a bank loan, etc. – in other words, to commit fraud. Victims spend months or even years trying to prove they did not request a loan or receive particular medical treatment. Their credit scores are destroyed until they can convince authorities that they were not responsible.

Newer, more sophisticated synthetic identity frauds have also gained traction. This method uses a “combination of legitimate, modified and false identity information” obtained from a phishing or data hack to create a new identity that can go undetected for months or years.

These are just a few ways cybercriminals exploit and profit from cashless payments. All cause major headaches and varying financial burdens to consumers, governments and companies, large and small.

Cybercrime on the rise

So, just how bad has cybercrime gotten? With 15.1 billion data records breached in 2019, stolen data has since fueled a major increase in cybercrime. According to a Nilson Report, worldwide losses from card fraud reached $28.65 billion in 2019. These were already record numbers but the Covid-19 pandemic and the surge in cashless transactions has pushed the number of cases and costs even higher.

In a year when people were forced to stay home, and cash became unfairly demonized, online payment fraud was expected to increase by at least 73% in 2020 compared to the previous year. In the first five months of 2020, almost $1.4 billion in cryptocurrency was stolen. Indeed, The World Economic Forum’s Global Risks Report 2020 ranked cyberattacks as the number one global human-caused risk, and predicts that cybercrime will cost the world $11.4 million per minute by the end of 2021.

Even more disconcerting are the new tactics used by cybercriminals to take advantage of a world reeling from a devastating pandemic.

Jürgen Stock, INTERPOL’s secretary general, observed that,

“Cybercriminals are developing and boosting their attacks at an alarming pace, exploiting the fear and uncertainty caused by the unstable social and economic situation created by Covid-19.”

Phishing scams alone increased by 667% in February and March of 2020. Fraudulent messages offering Covid-19 medical treatments and relief packages tricked people into providing passwords and other payment information that cybercriminals used to steal their money. A report from INTERPOL identified over 700 malware attacks, 48,000 malicious domains and 900,000 spam messages within the first four months of 2020 that all mentioned the Covid-19 pandemic.

Anti-cybercrime efforts can’t keep up

Advocates of a cashless economy argue that financial institutions and merchants can protect customers from fraud by implementing appropriate security measures – but hackers and cybercriminals are constantly adapting to new technology and are often one step ahead.

New security features cost companies, governments and consumers exorbitant amounts of money to develop and implement.

As Julie Fergerson, CEO of Merchant Risk Council, explains,

“Fraud is kind of like an arms race. Whatever technology is being implemented, the fraudsters will eventually figure out a workaround, so you have to constantly keep investing. And that’s the cost of business.”

 

Cash is still in our future

Online banking and contactless payments are not going away, but neither is cash. The New York Times noted that 80% of financial transactions in Europe just before the Covid-19 pandemic were conducted with bills and coins. As this preference is unlikely to change, governments must protect its citizens’ right to pay with cash.

Some will prefer the convenience and ease of electronic payments. Others may be wary about sharing personal data on potentially unsafe online platforms and running the risk of having their credit card information or identities stolen. It is important for people to have the choice.

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Judy Graham is a freelance consultant for various European organizations, particularly on digital economy issues.

 

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