The genesis of a cashless society has already begun.
The genesis of a cashless society has already begun.
How Often Do You Use Cash?
Approximately 19% of all transactions were made with cash in 2021. This is down from 26% in 2019. Are we headed to a cashless society? With the use of debit cards, the dreaded credit cards, and such other methods like Apple Pay and Venmo, and other peer-to-peer payment systems, we may say that we are well on our way to a cashless society. Do you think it will happen or is cash still king? Let’s explore the pros and cons.
Pros of a Cashless Society
Crime reduction. Street crime would disappear. Bank robberies and armed car thefts would go away. Tax evasion would disappear. Money laundering would no longer exist.
Cost savings. Businesses have additional expenses to handle cash. They must count it, deposit it, take it to the bank and insure against being robbed. They get change from the bank. Then, there is the cost to make money. A penny cost 2.1 cents to make in 2021. Five and $10 bills cost 10.8 cents to print. No wonder there has been a coin shortage.
Transactions are easier and more convenient. What could be easier than pulling out a piece of plastic or using your smartphone? No need to make change, all payments are exact.
International travel is simplified. No need to exchange currencies.
All your money is now available to you.
Finally, paper money is dirty and riddled with germs. It has been said that this is could be a way germs are spread and people could get ill.
Cons of a Cashless Society
Danger of overspending. With the simplicity of purchasing with just a click or a swipe, one can easily lose track of what they have spent. Accounts can become overdrawn and more fees added on. The pain of purchase is removed and you could buy stuff you don’t need. You could run up the credit cards and find yourself in debt.
Lack of security, cyber-attacks. With everything accessible via the internet, your information is available to would-be hackers. Should your account be hacked, a hacker could empty your account quickly. There would be no guarantees that you would get any of your money back. See this article: Cyber Attacks: Is your 401k safe? https://thebiweeklyadvisor.com/cyber-attacks-is-your-401k-safe/
EMP attack (Electro-Magnetic Pulse). EMP is produced when a nuclear detonation occurs in the upper atmosphere. This explosion causes ionization of molecules, which causes a powerful electromagnetic field. This burst of energy has the potential to damage or destroy electronic devices over widespread areas. The electric power grid would also be at risk. https://doh.wa.gov/sites/default/files/legacy/Documents/Pubs//320-090_elecpuls_fs.pdf )
Some say this would never happen, but I’ve heard that before. It is a possibility and therefore is a risk.
Loss of privacy. Now all your activities can be tracked. Some believe that that is already the case, but if you pay cash then who knows what you spent your money on? Banks could track your purchases they could sell your information to third parties and then you will begin to get advertisements to purchase products. Very annoying.
Government surveillance. The government, working in conjunction with banks or other entities, could access your information. If they did not like what you were buying, they could shut off your ability to buy and sell. Or, worse yet, they could restrict your ability to support certain organizations. Many believe this is the one big reason folks will resist a cashless system.
Rise of black markets. If folks do not want to be tracked or prefer to pay cash, a black market will likely become a reality. An underground currency could arise or folks could resort to barter. How many chickens for my goods and services. Or maybe you prefer pigs.
How Long Until We Have a Cashless Society?
The genesis of a cashless society has already begun. The real question is how far will it go and how will people react to some of the pros and cons?
In a recent survey conducted by the FDIC (Federal Deposit Insurance Corp.), 6.5% of American Households do not have a bank account. Another 18.7% have a checking or savings account but use systems outside the banking system. About 25% of households would be unable to participate in a cashless society.
With a percent that large, a cashless society appears to not be imminent.
Cash is Still King
Financial expert Dave Ramsey says that paying cash for things triggers something in the brain and makes it painful to part with your hard-earned money. He says this keeps you from overspending. Ramsey’s system requires you to budget every expense and put the cash in an envelope. When the envelope is empty, you have used up the amount budgeted.
Eighty-five percent of businesses say they will never stop taking cash for purchases.
While it appears we are headed in the direction of a cashless society, it also seems unlikely that we will be there in the short term. Many of the cons discussed will continue to be obstacles. The control by the government is the most likely one to keep people away.
However, as time passes and folks become more acclimated to a digital society, a cashless society becomes more possible.
What do you think?
You work hard for your money. Make sure it stays your money!
Thanks for reading; hope you found this helpful. QCBN
By Steven Calabrese
Steven Calabrese, CPA, is the CFO of Polara Health. He also is the owner/operator of a website known as thebiweeklyadvisor.com, where topics such as budgeting, investing, paying off debt and goal setting are discussed.