When will we stop using cash?

Commercial and Agricultural Bank of Texas $3.00 (three dollars) private scrip

When will we stop using paper money (and coins)? Doesn’t it strike you as wasteful and risky? I love the idea of virtual wallets which you can use to pay anyone for anything but we seem to be quite a way away from that. One of my pet hates is the ubiquitous parking paypoint we see in shopping malls and almost any other place parking is managed by someone else.

I just read an interesting article titled “The disappearing paper: Why cash is a dying payment method” which touches on this question and raises a couple really interesting points about cash money. To begin with:

The arguments for ditching notes and coins are numerous, and quite convincing. In the US, a study by Tufts University concluded that the cost of using cash amounts to around $200 billion per year – about $637 per person.

This is primarily the costs associated with collecting, sorting and transporting all that money, but also includes trivial expenses like ATM fees. Incidentally, the study also found that the average American wastes five and a half hours per year withdrawing cash from ATMs; just one of the many inconvenient aspects of hard currency.

Cash is expensive, inconvenient, wasteful and unhealthy – it’s time to call it quits with physical currencies.

The one challenge to the proposition that paper money and coins be replaced with some sort of digital equivalent is that lower income groups and small businesses often rely on cash quite heavily but there are a couple digital wallet/payment options which are being developed which are designed specifically for these consumers and business owners. At least one of the more interesting ones I have seen uses USSD which works on every mobile phone.

An interesting consideration that I haven’t come across before is that cash keeps us relatively honest. Dan Ariely, author of Predictably Irrational, conducted a study on this:

Even more worryingly, a study by Dan Ariely, a Professor of Psychology and Behavioural Economics, found that transacting without cash makes us less honest.

Subjects in Ariely’s study had to report – honestly – how many maths questions they were able to solve from a test sheet, receiving a reward per correct answer. Those rewarded with tokens (which could be exchanged for cash) were twice as likely to lie about the number of questions they answered than those rewarded with hard currency.

Ariely concluded that although the tokens had an equal monetary value to the cash, subjects perceived a lesser value – and so were more likely to lie – because it was not actual money.

I really don’t see cash being around for very long. The cost benefits and convenience of using digital wallets and payment options must prevail over what will probably amount to legacy attachments to cash at some point. Well, hopefully.





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