The folks at Grow recently asked me to examine the potential for a cashless society recently. With each new cash-like app and each store that declines cash, a cashless world seems closer. But not so fast. My conclusion: Given that billions of notes are still in circulation – and cherished by many – around the world, a fully cashless society is probably far into the future. We’ll probably have to settle for a “less cash” society for some time.
Why? Here’s a taste of my piece for Grow — but you should go read the whole piece for yourself.
If you are thirsty and want to buy a beer at Flatstick pub in Seattle, don’t whip out a $10 bill to pay. You’ll walk away thirsty. Debit or credit only. Flatstick, a hip new mini-chain in the Pacific Northwest, doesn’t take cash.
Neither does Bluestone Lane, a coffee chain with locations in New York, Philly, and Washington D.C. Patrons there must pay with plastic or an app named LevelUp. Want to grab a Sweetgreen salad for lunch with cash? No can-do at many locations.
Cashless commerce is popping up around the country, particularly in restaurants that cater to a younger crowd. That group is likely to leave home without any greenbacks, or even a wallet, and instead choose to live life with a smartphone and a few credit or debit cards attached.
Retailers who’ve gone cashless rave about the results. Bluestone says only 10 % of its transactions were cash anyway, so the transition wasn’t risky. Sweetgreen told the New York Times it can process 5-15% more transactions during busy lunch times, as workers no longer have to make change. And Flatstick owner Sam Largent told me plastic-only reduces error rates during times of complex accounting, such as calculating tips when shifts change.
Meanwhile, another main reason for cash – to settle debts with friends or split lunch bills – seems to be disappearing too. The meteoric rise of friend-to-friend payment apps like Zelle and Venmo means no more throwing $20 bills on the table after a meal.
So, is cash caput?
Not so fast. While non-cash payments are enjoying an ever-higher percentage of transaction volume, the amount of cash – literally, legal tender notes — being used around the U.S. and around the world continues to rise. One reason: Skeptical populations are hoarding cash, showing their distrust of governments and banks, and their dislike of low interest rates. Post-Brexit, the number or Brits who rely almost entirely on cash is up 500,000, to 2.7 million, the Financial Times reports.
Also, the unbanked would be shut out in a cashless society, and as of now, the U.S. has no plans for this group. (Sweetgreen says it plans to install on-the-spot gift card machines to address this issue.) Another set of consumers also like the anonymity that comes with paying cash. Financial gurus will tell you that using plastic also encourages consumers to spend more – the emotional pain of handing over dollar bills at the checkout counter acts as a tool for financial discipline.
Plenty of retailers are also skeptical of electronic transactions and their expensive fees, which can reach 3 percent. It’s still easy to find restaurants and bars in New York City that are cash only; though cash-free retailers will say that the hidden cost of handling cash is actually more expensive that paying fees to a credit card processor.
There are larger issues to consider, too. Ever been to a retailer that was having trouble with its credit card machine? What did you do? You went the backup route, and paid cash, of course. In a cash-free world, that backup wouldn’t exist. Now, imagine the real-life issue of a cyberattack. Technologists in Sweden, one of the world’s most cash-free societies, openly fret about Russian interference in their online payments system, and the havoc that might wreak.
Still, on a global scale, eliminating cash offers some intriguing possibilities. Merely the elimination of large denominations, which the EU has done, makes life much harder to large-enterprise criminals, like drug dealers. It’s far more conspicuous to carry around large piles of small bills. If all financial transactions were electronic, hiding crime would become much more difficult.
In the end, crime concerns might win the day, as they did for Largent, the owner of Flatstick. He made the switch when he opened a second pub in a rougher part of town, and realized his workplace would be much safer without cash. No late-night runs to the bank with large deposits; no cash drawer to be raided.