Will We Ever Live in a Cashless Society?
Physical currency is less popular today than it’s ever been, but will we ever live in a cashless society? Find out here.
September 22, 2021
Cash as a means of payment is rapidly declining in the United States. Customers used physical money in approximately 19% of transactions in 2020, down from around 26% in 2019. We’re increasingly opting for digital payments, even for smaller transactions that have historically been paid for with bills and coinage.
If the United States were to become an entirely cashless society, it could have significant repercussions, possibly more than you can even imagine.
Here’s what to know about the nature of a cashless society, its pros and cons and whether we’re heading for one anytime soon.
What is a cashless society?
A cashless society is one where cash payments have declined so much that regulators decide to eliminate all physical currency, including cash, checks and coinage.
Businesses would no longer accept tangible currency, the central bank would no longer produce it and citizens would have to rely entirely on the modern forms of digital payment like:
Mobile payment services
Electronic bank transfers
While there are no cashless societies yet, Sweden has announced they intend to be the first country to transition. In 2023, businesses will no longer accept any form of physical currency as payment within the country’s borders.
Benefits of a cashless society
Cashless payments are naturally becoming more popular for good reasons. Here are a few of them:
Cash theft is still a massive problem in our society. Muggings, petty theft of small businesses and even full-blown bank robberies regularly occur in the modern day United States.
There were a whopping 2,440 violations of the Federal Bank Robbery and Incidental Crime Statute in 2019, which included 2,160 robberies of commercial banks. Petty theft is even more common, with 23,954 instances of pocket picking and 15,087 instances of purse snatching.
Eliminating physical cash would reduce the incentive for thieves to target businesses, individuals and financial institutions for their money, which could make the country a safer place.
Improved transaction capabilities
Debit cards, credit cards and electronic transfers (ACH) accounted for roughly 67% of all transactions in 2020. Consumers often prefer them to cash because they’re more convenient than carrying around a handful of bills and may let people take advantage of cashback rewards.
These payment methods also benefit vendors, making transactions faster, reducing the possibility of counterfeit cash and allowing for easier recordkeeping.
Using cash has long been a way for individuals and businesses to keep questionable dealings off the books. Using a debit or credit card leaves a digital record of the transaction, but passing cash around is much harder to trace.
Unfortunately, that contributes to many activities that can be problematic for society, such as tax evasion, payment for illicit services and even fraud. Eliminating cash would improve the transparency of reporting, which could reduce many of these issues.
Dangers of a cashless society
The potential benefits of a cashless society are exciting, but let’s not assume it would be positive across the board.
There are drawbacks to eliminating physical cash we can’t necessarily overlook. Here are some of the most noteworthy:
One of the most common arguments among opponents of a cashless society is that millions of people don’t have access to traditional banking services. Eliminating all cash could leave them without the ability to participate in the economy.
Approximately 5.4% of American households (7.1 million) were unbanked in 2019, which means no one in the household had a checking or savings account at a financial institution.
These unbanked individuals wouldn’t be the only ones negatively affected by the switch. Businesses that rely on cash payments would have to upgrade their point of sale systems, which is an expense not all of them could afford.
Going cashless would require us to rely even more heavily on technology to go about our day-to-day lives. Not only would that increase our vulnerability to technological difficulties (imagine not being able to buy milk because the power is out), but it would also reduce our dwindling privacy.
There would be clear records of all transactions, which could be disturbing to those who are against too much government oversight. You wouldn’t even be able to slip $20 into your nephew’s birthday card without there being a record of it.
It would also increase our already dangerously high cybersecurity risks by further incentivizing digital crimes like identity theft and hacking.
Are we going cashless?
Physical cash usage has been steadily decreasing for years, and the pandemic served to accelerate that trend. Many storefront businesses shut down due to COVID-19, reducing the number of in-person transactions and pushing people away from cash.
In addition, many folks are understandably uncomfortable with passing around paper bills that have been handled by thousands of other people. Exchanging physical currency with someone is a surefire way to swap germs.
That said, while the future of cash and payments is uncertain, the United States government has no public plans to go cashless anytime soon. Cash still represents 19% of all transactions and 28% of in-person transactions, despite the coronavirus.
Not only would going cashless be a massive undertaking, it would also put an unprecedented level of power in the hands of banks and the government. There could be many Americans who vehemently protest against giving the government more control than it already has.
Because of the challenges and risks involved in a truly cashless society, it’s doubtful that the United States will make that transition anytime soon. So, if you have some cash stuffed under your mattress, it’s probably safe for the foreseeable future.
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