Whether it’s using smartphone payment apps or implantable chips, in the near future Americans won’t make cash transactions. It’s not a question of if: it’s a question of when. Center director Jeffrey Cole explains.

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By Jeffrey Cole

Since I was very young, there have been visions of what life in the 21st century would be like. Flying cars (out of The Jetsons, Back to the Future, and other science-fiction) would easily transport us above roads and traffic. Robots would answer our front doors, do our household chores, and make our lives much easier. And, in this vision of the future, cash would go away.

In 2019, we are much closer to a cashless society than to flying cars and full-household robots.

While the infrastructure is fully in place to enable the elimination of cash, Americans seem particularly resistant — even in the midst of the digital age — to give up cash.

America is a backward country where cashless payment is concerned. Only in the past few years have we caught up to much of the rest of the world in putting chips in our credit cards. The rest of the world also gave their consumers PIN codes to use with their chips, providing a much higher level of security.

When I travel overseas and hand a waiter my card, I have to add, “It’s a signature card.” They look back in astonishment and say, “You must be an American.” The U.S. moved to a state-of-the-art card payment system (with the chip), but then disabled its most powerful security feature.

At self-service ticket machines–whether on a Stockholm train to the airport or a Melbourne tram–I cannot buy a ticket because I do not have a PIN. I need to seek out a booth with human cashiers, sometimes waiting in a long line (if the booth is even open).

Further evidence of how far behind America is in the digital payment world is our stubborn (obsessive for some) refusal to retire the penny. We not only are resisting the loss of cash in our lives, we are demanding that the most insignificant and useless form of cash be preserved. There is nothing you can buy with a penny. Most other countries gave them up long ago (including Canada whose coin system is very similar to ours). Since we can’t buy anything with them, we just save them up in jars. Then, when the jars are full, we find more jars since most banks won’t take pennies.

The only beneficiary of loose change and pennies have been baristas and other cashiers when we throw the change in tip jars. Some tip as much to get rid of change as to show appreciation for good service.

Yet, 66% of Americans oppose (some strongly) getting rid of the penny.

The Swedish example

Sweden is close to becoming cashless. Debit cards are so universal and convenient that many Swedes report they haven’t used cash in the previous weeks or months. In a bid to accelerate the move away from cash, Sweden has removed most minimum purchase amounts to use a debit and even credit cards. Cards can be used to buy a $3 coffee or a tiny purchase in a store.

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Fifty-four percent of Americans feel the end of cash would make it easier to keep records of every purchase, especially when it comes time to file taxes. An even larger portion, two-thirds, would like to keep some of their purchases completely private by using cash. It makes me wonder whether what they are concealing is criminal activity (prostitution, drug purchases, money laundering, buying stolen goods) or just personal activities they would like to keep private. _________________________________________________________________________________________________

About 75% of America have credit cards; the number goes higher when you add debit cards. Because of that high percentage, the amount of cash the average person carries on them has dropped from $103 twenty-years ago to $19 today. We are on the road to a cashless society. Even while we still have cash, it is difficult to do many things without a credit card. Try renting a car or a hotel room without a card. Those places will not accept your business and if they do, require several thousand dollars in cash as a deposit

What may really propel the disappearance of cash are payment apps on our smartphones. The convenience of passing your phone over a sensor–or just having your phone on you and entering a PIN (finally)–is irresistible. Our phones are always with us.

More than 10 years ago, in our annual “Surveying the Digital Future” study, the Center showed that if people discovered they left home without their phone they would have to be more than 30 minutes away to not go back for it. The odds of getting 30 minutes away from your phone without noticing that it’s gone are slim. When we move from place to place, one of the first things we do is pat our pockets or check our purses for our phones.

Our wallet photos have moved to the smartphone. In five states, digital driver’s licenses residing on smartphones can replace actual cards. So, too, will all credit, debit and loyalty cards end up on the phone. Wallets will disappear because there will no longer be anything to put in them.

The credit card may not permanently reside on the smartphone. If the practice of “getting chipped” continues to catch on, our fingers may contain our keys, IDs, passwords, boarding passes, as well as credit and debit cards.

Americans still love cash

Despite the fact that we are at the point where cash can almost be eliminated, Americans still have a strong emotional attachment to cash. It is part of our memories and collective culture. When we think back fondly on our allowances in cash given by our parents, finding a dollar (or more) on the street, or the dozens of movies and songs that have cash (or nicknames like “Dead Presidents”) in the titles, we realize the important place cash has held in our lives.

In our recent “Future of Money and Banking’ project at the Center, 52% of Americans say they oppose the elimination of cash. Older people are more resistant.

Some fascinating beliefs and some inconsistencies arise when we probe people’s attitudes toward the end of cash in their lives.

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America is a backward country where cashless payment is concerned. Only in the past few years have we caught up to much of the rest of the world in putting chips in our credit cards. The rest of the world also gave their consumers PIN codes to use with their chips, providing a much higher level of security.

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Fifty-four percent of Americans feel the end of cash would make it easier to keep records of every purchase, especially when it comes time to file taxes. An even larger portion, two-thirds, would like to keep some of their purchases completely private by using cash. It makes me wonder whether what they are concealing is criminal activity (prostitution, drug purchases, money laundering, buying stolen goods) or just personal activities they would like to keep private. If it is criminal activity, that’s hardly a ringing endorsement to keep cash.

On the positive side, most people say the absence of cash would mean fewer trips to the bank. Surprisingly, most did not feel the lack of cash would make them safer.

The negative concerns about a cashless society were greater than the positive. People report a fear that prices will go up, that it will give even more control to the banks (a battle that was lost a long time ago), and that it will be difficult to make gifts to the homeless or anyone we tip who is not behind a counter (hotel maids, bell service, and others). Interestingly, taxi drivers long fought the use of credit cards. In New York, when credit cards finally came, they found their tips went up significantly, and now would happily move to no cash.

Cashless is coming, although slower in America than much of the rest of the world. New problems will have to be solved, starting with what happens when someone loses their phone or it breaks (another argument for chipping).

In 25 years, many teenagers will look at the efficiency of mobile payment in their phones and fingers and ask why we ever fought the move from cash.

They will also ask, “What’s a cash register?”
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Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.

 

See all columns from the center.

May 8, 2019