Even in circumstances as dark as those imposed by COVID-19, there are always the optimists who can find silver linings to every dark cloud. For example, some experts are big proponents of the benefits of a cashless society.
Just this year, we’ve seen a coin shortage, clerks not wanting to handle potentially virus-carrying bills, the growing acceptance of crypto currency, and the huge surge in eCommerce. These factors combined create unique circumstances that seem ideal for doing away with cash once and for all. The use of physical money has been declining for years, and there are some industry leaders feel that the ongoing pandemic is THE thing that will push us over the edge.
They’re wrong, of course.
Many in the US would see a move to eliminate cash as an unconstitutional attack on basic freedoms. If anything, our current situation shows how deeply ingrained that idealism runs. Americans have demonstrated they’re neither willing nor ready to accept this kind of massive upheaval … at least not yet.
Cash is Still #1
According to the US Federal Reserve, cash remains the most popular payment method for US citizens. 30% of all payment transactions in 2017 were made with physical money. That said, the dollar value of those transactions tends to be much lower (typically $10 or less). And of course, these are pre-pandemic numbers; back in 2017, people didn’t worry much that currency could be physically dangerous.
It’s certainly not invalid to suggest that the COVID-19 crisis highlights some of the downsides of commodity money (coins, bills, or other physical items that hold an agreed-upon value). Proponents of strictly-digital transactions boast that avoiding cash is faster. It’s also cheaper, more convenient, and more secure.
Unfortunately, at first glance, those points appear to most directly benefit banks, commerce, and the government, rather than the man on the street. In fact, many of the so-called “pros” of a cashless system lead some to oppose the idea.
For example, a totally digital system that used block chain would be almost entirely secure, because every transaction would be traceable. Add extras like end-to-end encryption and biometrics, and fraud would theoretically be next to impossible. If you make a transaction, there will be no doubt that YOU made the transaction. For some, that’s a problem.
Who’s Got the Money?
There is close to $2 trillion worth of US currency in circulation. We can, by one estimate, account for about 15% of that money at any given time. The other 85% is…well, somewhere else.
Some of our cash could be tied up in criminal dealings. More than half of it is being held by foreign governments as an investment. But there is also a not-insignificant amount being hoarded by US citizens who either don’t trust banks or fear an economic collapse.
Obviously, some people don’t WANT their transactions being traced. They don’t want the world to know how much cash they have on hand. Whether or not we agree with the legitimacy of their reasons, many parties simply aren’t interested in giving up their Ben Franklins.
Pre-pandemic thinking was that those hold-outs could be convinced, if they believed going cashless was in the majority’s best interest. That’s been a much harder sell than anticipated.
It’s difficult to push changes based on the idea that digital payments can save us from a threat. This is especially true if it’s a threat which some still believe doesn’t exist, or at least has been blown out of proportion. Citizens who outwardly rebel against the simple concept of wearing a mask in public aren’t about to comply when the government says we have to hand over our cash.
The backlash against masks isn’t totally unprecedented, but the size and vehemence of the protest surprised people. It’s not hard, however, to extrapolate from that backlash the kind of response going cashless could provoke. Remember, there have been multiple attempts to eliminate the penny, but it’s still around.
Impact on the Disadvantaged
There is another group that would likely protest a cashless system, because the weight of that system wouldn’t be evenly distributed across all citizens. Lower-income folks, in particular, would likely be hit hard. According to a 2017 survey by the FDIC, 25% of US households fall into the category of unbanked or underbanked. That is to say, they largely pay by cash.
Over half of the unbanked respondents said they don’t have enough money to bother keeping in an account. As for the households which are underbanked, they may have an account with a financial institution, but they also rely on outside parties such as payday loan providers or cash-checking services.
Almost by definition, a cashless society would be a burden to these people. It would also be a tremendous blow to gig workers who might prefer to be paid in cash, or service providers that receive tips in cash: cash can go unreported, and therefore untaxed. Forcing these transactions through a monitored system would be like forcing a huge pay cut on some people. The resistance here might come from a minority, but it would likely be fierce.
Right or Wrong Isn’t the Issue
Of course, some voices in the government would say traceability is a good argument for digital currency. They may have a point, but I’m not really trying to judge anyone’s ethics here. In fact, I’m not even trying to build a case for or against a cashless society.
The truth is, there are solid arguments on both sides. Certain groups will either be hurt or will benefit from the move, depending on how it is—or isn’t—implemented. It will be interesting to watch, if and when it does happen.
My point is simply that it’s not going to happen any time soon. America as a whole is not ready. There would be a huge backlash from some parties, but I don’t feel like the idea would be popular with the general population, either. COVID-19 concerns may have made us a little more leery of cash, but the shutdowns, quarantines, and mandates are driving a desire for normalcy and consistency.
I agree that it will take a significant event to convince the bulk of Americans that cashless is better. Despite its best efforts, however, 2020 hasn’t produced that event yet.
