Will Cashless, Less Cash, or Something Else Be the Future of Payments?

by Ben Jackson 0

Should the United States get rid of all cash, most of its cash, or just keep going as it is? This is the question explored in an article in the ABA Banking Journal. Plenty of people quoted in the article offer reasons for getting rid of all or at least most of the country’s cash, despite the fact that cash use seems to be increasing.

Of course, all of this remains conjectural and contingent on one big thing: cash use actually falling. Chris J. Waller, an economist at the Federal Reserve Bank of St. Louis, argues that, despite what one sees at a Starbucks line, that isn’t really happening—at least not yet. Citing Federal Reserve data, Waller says that the amount of U.S. currency in the economy is actually still increasing—in fact, cash’s growth is tracking pretty closely to broader income gains in the U.S. economy.

The article demonstrates that for banks and governments, reducing or eliminating cash has tangible benefits. The pro-cash arguments in the article largely center around soft benefits for individuals, who have concerns about things like privacy and disaster recovery.

Elaine Ou, an engineer at a San Francisco technology company, meanwhile, has called the cashless society a “creepy fantasy.” In a recent Bloomberg View column, she raised another objection to phasing out paper notes: “Banks, being private institutions, have the right to refuse transactions at their discretion. We can’t expect every payment to be given due process. This means that politically unpopular organizations could easily be deprived of economic access. Past attempts to curb money laundering have already inadvertently cut off financial services for legitimate individuals, businesses, and charities. The removal of paper currency would undoubtedly leave similar collateral damage.”

The debate around a cashless society will continue, but as this article demonstrates, where one stands on this issue often is determined by where one sits.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

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