If you type “money” into a Google image search, you get pictures of metal coins and paper notes. People fixate upon this physical currency, but while we still use such transferable tokens for many small transactions, large ones are inevitably electronic. When Rolls-Royce acquires metal to produce jet engines, it doesn’t hand over a bundle of pound notes. It makes an electronic transfer from its bank account to the metal dealer’s account.

Increasingly, though, we use electronic transfer in small-scale transactions too. Rather than handing over physical tokens, you might tap a contactless payment terminal at the supermarket. This sends a message via an electronic communication system – the Visa or Mastercard system, for example – that instructs two banks to edit account databases that keep score of the buyer and seller’s money. The money “moves” owing to third-party payment intermediaries changing your records in their data-centre hard drives.

The technology that enables this is becoming ubiquitous, and with it comes the possibility to do away with coins and notes altogether. Electronic micro-transactions can replace 10p coins. London bus drivers have stopped accepting cash. They will accept your contactless card though. This is the emergent “cashless society”.

While the payments industry heralds this as a great leap forward out of the grimy world of physical cash and into the clean, electronic crispness of efficient, near-instantaneous electronic transactions, this glosses over the politics of a cashless society.

Surveillance state

Coins and notes are a flexible and anonymous medium for quick small transactions that don’t involve an intermediary. In a world where all transactions are electronic, though, the only means of paying is via a bank account, meaning anyone without a bank account cannot buy anything. If you are a refugee with no permanent address and bank account, good luck.

This increases the power of private banks relative to individuals. We will require banks even for buying a bottle of milk.

With this comes the spectre of bank surveillance, where every transaction you ever partake in is authorised and recorded by a privately run commercial bank, giving it a transaction-by-transaction history of your entire commercial life. If such a bank does not like an enterprise – such as Wikileaks –it can just freeze it out.

Some might argue that this should not matter if you have nothing to hide. The same argument, though, might be used to install a government or corporate surveillance camera in your living room. The desire not to be watched does not mean you have something to hide – just that you like to be alone. So it is with money. Sometimes we like to feel like our transactions belong to us alone.

Visa could conceivably build a bird's-eye view of every transaction in an economy

Power or mass panic?

Micro-surveillance aside, massive payment intermediaries such as Mastercard and Visa could conceivably build a bird’s-eye view of every transaction in an economy, a big data economic macro-surveillance system. If they can secure access to such data, government statisticians might welcome this. It will give policymakers a much better picture of the state of economic activity, allowing economic policy to be fine tuned in real time.

There is another – hidden – agenda though. If the only means of holding money is in the form of electronic bank deposits, a central bank can do something it cannot do with cash. It can set negative interest rates to erode people’s money in times of recession, making it costly to hoard it, and thereby theoretically stimulating economic activity. Bank of England chief economist Andy Haldane recently said as much.

A tricky conundrum emerges. Cash is, in fact, the only direct way we can hold government money. This is why people convert their commercial bank deposits into cash when they lose confidence in a bank, causing a bank run. In a world with no access to cash, bank runs would look very different. If you cannot get government money from the ATM, you can only transfer commercial bank money from one bank to another. If the entire banking system looks shaky, this could cause mass panic.

Bitcoins and other alternatives

These make people concerned. One reason to value cryptocurrencies such as Bitcoin is that they are the only way to do electronic transactions without commercial banks acting as intermediaries. In a future cashless society they could provide a counterpower to the hegemony of banks and card companies.

A cashless society is not a moneyless society. It will, however, change our mental image of money. It will erode the archaic idea that money is a “thing” and replace it with the realisation that it’s a scoring system – a credit system recording obligations between people.

Such an idea repulses some economic reactionaries, who yearn for a return to the hard reassuring physicality of gold. Realising that money is merely an accounting system between people brings with it a potential for seeing money as unreal. But it also opens up the possibility for interesting moneyless alternatives to emerge.

One possibility is the rise of moneyless economic matching engines. The ancient age of barter may largely be a myth, but there could be a future age of high-tech barter. Imagine a construction company that needs supplies from a cement company, that needs gas from an energy company that needs construction work done. Algorithmic systems might match their needs without recourse to monetary exchange.

Such a system would be moneyless but would still depend on explicitly measuring value, to come to agreements on fair exchange. However, others might imagine the rise of a gift economy in which people do not keep score at all, but manage communal abundance through open sharing. It is a vision that veers into the realm of new age utopianism, but we are used to this practice already between family and friends . It is not beyond possibility to scale it up.

Whether we end up with a global financial surveillance state or a liberating infrastructure of democratic exchange, really depends on who gets involved and how hard they fight.