Cyber attacks expose flaws in cashless ambitions
Cyber attacks expose flaws in cashless ambitions
Norway, Sweden, and now Israel confront the risks of over-reliance on digital systems.
In the past two months, two cyberattacks targeting clearing and payment systems in Israel disrupted the use of credit cards and other electronic payment methods. The first attack targeted the Payments Arena (Shva), while the second affected the clearing company Hyp, a sister company of the Max credit card company, with the Bit app also experiencing disruptions. Headlines initially focused on the immediate impact: thousands of businesses across the country and numerous users were unable to conduct transactions, both large and small. For a brief moment, albeit limited in scope, commercial activity came to a halt.
In the aftermath, attention shifted to the underlying cause—cyberattacks—and the subsequent questions of who was responsible, why the attacks occurred, and how to prevent future incidents. These discussions are hardly surprising, given Israel's status as a global cyber power and the multidimensional, multi-sectoral conflict it has been engaged in for over a year. However, while cyberattacks were the proximate cause, the scale of disruption and the panic that ensued highlight broader vulnerabilities in Israel's payment infrastructure, exacerbated by its drive toward a "cashless world."
Israel has been racing to reduce cash usage in everyday life. Regulatory measures have made large cash transactions increasingly difficult, citing concerns over money laundering and other crimes. Simultaneously, the country has aggressively promoted digital payment services such as PayPal, Apple Pay, Bit, and cryptocurrency platforms.
These efforts have been complemented by public relations campaigns—primarily led by financial institutions and tech companies—branding cash as "old money" and digital payments as the modern, efficient alternative. This narrative gained traction during the pandemic when cash was unfairly stigmatized as a potential carrier of disease. Although this claim lacked substantive evidence, the campaign successfully cemented the perception that digital payments were safer and more practical.
Lessons from global trends
Countries that have led the push toward cashless economies are now reconsidering their strategies.
In Finland, a survey by the Finnish Central Bank found that 70% of consumers prefer digital payments, with the country projected to become cashless by 2029. However, officials have expressed concerns over the lack of resilience in a digital-only payment system.
In Norway, where only 3% of in-store purchases involve cash, legislation is being introduced to protect citizens' rights to use cash.
In Sweden, the near-total abandonment of cash has heightened the country’s vulnerability to crime, prompting calls from the central bank to strengthen cash’s role in the economy.
In The Netherlands, the removal of most ATMs has led to significant disruptions during recent payment outages. Dutch officials have even advised citizens to keep cash reserves at home for emergencies.
These developments underscore an important lesson: over-reliance on technology often leads to moments of disillusionment when its limitations are exposed.
The risks of over-reliance
Israel recently faced its own reckoning on October 7, when heavy reliance on technological barriers and intelligence systems contributed to significant lapses in threat detection and response. Similar patterns are evident across various domains:
Streaming Services: Platforms like Netflix and Amazon Prime, initially lauded as alternatives to cable TV, have reverted to models that include advertisements and bundled subscriptions—ironically resembling the very systems they disrupted.
Transportation: Companies like Uber, Tesla, and Elon Musk’s Boring Company, once positioned as disruptors, have returned to more traditional solutions such as shuttles, taxis, and subways.
While innovation drives progress, an overemphasis on new technologies often neglects the value of existing systems. Contactless payments, for example, offer undeniable convenience but fail to provide the resilience inherent in cash-based transactions.
The path forward requires balance: embracing innovation while preserving the strengths of proven systems. As the technology sector matures, it must move beyond a culture of "reinventing the wheel" and focus on complementing existing solutions, not replacing them outright. This approach ensures resilience, efficiency, and adaptability in an increasingly complex world.
