Are we in for a cashless society? Would digital payments, and paying with “plastic” really work for everybody? Will the heightened sensitivity for cleanliness in this pandemic speed up digital payments for everything? When the virus finally does abate, is this one of the dramatic changes awaiting us?
Let’s consider whether some of the experts are right, that digital commerce is about to take over, and that a cashless economy will be a new way of living and acting that lies ahead. There’s always uncertainty in forecasts, so as we consider them, let’s be mindful of the wisdom of the baseball great, Yogi Berra: “It’s tough to make predictions, especially about the future.”
Great strides towards a cashless economy have been made in other countries. The British publication, UK Finance, reports that 90% of all transactions in the U.K. will be digital in less than 10 years, and that the pandemic there is making this happen faster than expected. Not only do the Brits find it ever so convenient, but they also embrace the cleanliness of one’s smart phone compared to handling cash and coin.
The “Interesting Engineering” website describes how Sweden, the first country to use bank notes in 1661, expects to be the world’s first cashless society by March of 2023. Think of it: an economy that is 100% digital. How? The Swedes plan to rely on credit and debit cards using Chip and Pin, and what is called “contractless technology,” called “Swish,” sponsored by their government. By then, cash will no longer be accepted. Other Northern European countries, including Finland, Norway, Denmark and Iceland, are quick to follow.
But is cashless the way to go for everybody? Does it really have to be?
Supposedly there’s a lot to like about digital buying and selling. Government really likes the idea. Law enforcement points out how counterfeiting, illegal drug sales, weapons markets, even bank robberies suffer if we get rid of cash altogether.
Fortune Magazine reports how government revenue will climb with less tax avoidance, as an underground economy rises to the surface for all to see, and regulate and tax, with a cutoff of its cash lifeline. Yet, owners of many business establishments would feel safer without visible cash.
Is there a down side to a cashless world? Let’s bring some common CENTS into this discussion.
First, as reported in Healthline, two significant studies, published in Lancet and the New England Journal of Medicine, tell us that the cotton of which paper money is made carries virus particles for around the same time or less than plastic credit or debit cards do.
In Economic Times, behavioral finance theorists confirm what those of us who have no such fancy titles have long known: the “pain of parting with money is felt more acutely when using physical cash.” This is another way of saying that we unconsciously lose more control of our spending when it morphs into a digital habit.
The Economic Times website also describes how a a cashless lifestyle means even more dependence on our Smartphone, and that it will have to always be charged and functioning. This at a time when on-line fraud is on the upswing, while also the authentication processes required by on-line retailers have eased, and relatively new, additional layers of security have started to make way for easier sales. ID theft could soar simply because the web will host so much more personal information.
Consider as well how a cashless economy presumes that everyone is well connected to a heavily bureaucratic, financial system when many are not and can’t be.
In the U.S,, where cash is still the second most-used form of payment after debit cards, cash transactions are on the decline, and this hurts the poor and many middle income, working people. Let’s note that the U.S. has used paper bills and coins that hold value since 1776.
The Federal Deposit Insurance Corporation’s 2017 national survey found that 14.1 million adults and 6.4 million children have no bank connection (“unbanked”). The FDIC reports as well that 18.7% of all households in U.S. have at least one account at an insured institution, but also depend on services outside a banking institution (“underbanked”), such as payday loans, money orders, pawnshop loans, check cashing services and other types of immediate payments, which require heavy fees.
Consider also that the physical placement of banks is rare or entirely absent from communities of color and/or limited means, a root cause of the plight of the unbanked and underbanked.
It’s actually expensive to be poor, and often too expensive to own a smart phone. And merchants in a cashless economy can exploit it with controlling who accesses their stores. Workers relying on cash tipping would suffer comsiderably. The gift-giving of cash, common to many cultures, would stop.
So if cash were to disappear, or come close to disappearing, individuals with decreasing access or means to pay for things would become second-class citizens. And according to a 2014 Gallup poll, no less than 30% of people in the U.S. don’t own credit cards.
New Jersey and Massachusetts, as well as NYC and other cities, have prohibited merchants from accepting only cards or contactless payments. And rumors are false that Walmart is about to go cashless, at least for now. In other jurisdictions, however, including Long Island, stores increasingly post signs at check-out lines that read: “Credit or debit cards only,” in a growing zeal to avoid surface contact in the pandemic. And owing to this, it’s no secret that the U.S. now suffers a coin shortage. They’re just not circulating.
So while many of us delight in the conveniences of technology, and the internet that services it, others have no real access to it at all. Many do their banking through apps such as Venmo on their phones, while others don’t have phones at all. Fewer and fewer transactions give customers the opportunity to use cash.
Whether or not a valid argument for hygiene, America’s no-contact payment craze excludes those who have no real voice, and who have no access to online credit. We may be on a path of widening disparities in our society. Could the accelerating drive for a cashless economy prove to be a great error, and if we refuse to correct it, a terrible mistake?
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