For starters, cash is not going obsolete. Despite all the airtime and column inches dedicated to the exciting new ways we have to transact without cash, physical money still has an incontrovertible place in our society. Perhaps the more interesting question isn’t whether cash still matters, but to whom cash matters and why. Let us begin with what’s new.
Throughout 2019, high-profile examples of the cashless society came in the form of cashless stores like Amazon Go. Also, in new mobile payment systems like Facebook Pay that continue to be heavily promoted, promising to be the next big thing. On the face of it, it’s not hard to see why becoming cash-free is so attractive.
From the business perspective, going cashless can increase operational efficiency, cut wait times for customers, remove the need for cash security, reduce errors in cash-handling, and create a safer work environment by reducing the risk of robbery or theft. For individuals, there is the convenience of not carrying bulky wallets, never running out of cash, losing cash, needing an ATM, and of course the reduced likelihood of being targeted for a crime.
For many of these reasons, cash today no longer forms the majority of how we transact. According to the FDIC, cash represents just 30% of all payments1. Most are in petty amounts, often for sums under $102, such as for tips, payments for small goods and services, and casual donations to Salvation Army red kettles. Larger amounts tend to be transacted through online banking with some still relying on checks. That’s why economists like Kenneth Rogoff have suggested we even phase out large bills, like how Sweden did away with their 100-kronor and 500-kronor notes3.
But the need for making small payments is where we start to see the cashless pushback. Organizations, businesses in rural areas, small businesses, and individuals (like doormen and waitresses) that deal in petty payments will be negatively affected if society went cashless. Third-party research commissioned by Square, the mobile payment company, shows that 51% of small business owners are against going cashless and 83% of them never plan to go cashless. 73% even believe we will never be a fully cashless society4. They are not the only ones.