No cash, please: Should we embrace a cashless future? has been saved
No cash, please: Should we embrace a cashless future?
There are two sides to every coin (and dollar bill).
“Cashless” retailers on the rise
It’s lunch time, and I’m eager to try a new establishment that opened near our office in Midtown Manhattan. I walk to the shiny new storefront, place my order, and make my way to the register to pay. As I dig into my wallet and start to pull out some cash, the person behind the counter interrupts me. “No cash, please!” the cashier (ironically) chirps, pointing to a sign near a card reader.
I’ve become all too familiar with “cashless” retailers. In the not-so-distant past, though, I can clearly recall “cash only” signs, especially at some smaller retailers seeking to avoid paying credit card processing fees. But these days, establishments that no longer accept cash seem to have proliferated overnight (at least in Midtown, where I work).
It’s long been said that "cash is king," but the tide could be turning in the US. While cash continues to be the most common payment method among consumers, its usage is declining. The use of cash in 2017 dropped by 3 percentage points to 30 percent of all transactions in just two years, according to the Federal Reserve Bank of San Francisco’s 2018 Diary of Consumer Payment Choice.1 What’s more, because cash is most likely to be used in smaller transactions ($10 or less), it accounted for only 9 percent of total payment value in the same year.2 The combined use of credit and debit cards, at the same time, has held steady, and mobile payments have begun to grow.3
Nearly cashless societies are already a reality outside the US. In Sweden, cash comprises only 2 percent of the value of all payments,4 and total cash in circulation accounts for just 1 percent of Swedish GDP (compared with 8 percent in the US).5 China, meanwhile, leads the way in mobile payments, recording more than $15 trillion in 2017.6
But should a cashless future be embraced? As more retailers become cashless and noncash transactions grow, let’s consider the pros and cons.
Less money, fewer problems?
What are the benefits of being cashless? To start, some retailers point to a boost in customer experience. Not handling cash could allow for an increase in speed and efficiency. Workers no longer have to waste time doling out singles, counting change, or deciphering which bills might be counterfeit. Thinking back to the countless times I’ve had to grab lunch, lines at cashless establishments do indeed seem to run much more smoothly, in my opinion.
On the back end, being cashless might streamline the accounting process for many retailers, reducing the reliance on employees to balance the register (and, in turn, likely minimizing error by automating the process). It might also help retailers reduce costs in cash management by eliminating the need to transport, store, and deposit cash.7
Most notably, though, the absence of greenbacks makes it harder to steal, and thus, a decrease in physical theft is often touted as one of the most compelling benefits of eliminating cash. Besides theft, as an untraceable currency, cash has been linked to other petty and more serious crimes (like terrorism, guns, drugs, fraud), alike. Some studies assert that cash is crucial to the health of the black market8 and have even linked decreases in cash usage with the dramatic decline in illicit US crime since the 1990s,9 so a decline in cash usage could help increase safety.
“No cash” has its drawbacks
Cashless payments, however, have several downsides that shouldn’t be overlooked. While a cashless society could decrease physical crimes, we might start to see a rise in cybercrimes, and the effects could arguably be more dire, especially for consumers. For instance, let’s say a hacker virtually steals all the money in your account. A cashless society would leave you with few options in emergencies.10
The impact to personal privacy should also be considered. A digital footprint follows all noncash transactions,11 eliminating anonymity and spurring new types of data that companies or the government could use to track consumer activity and potentially derive patterns and make inferences without consent.
And those surcharge fees often tacked on when using credit and debit cards as payment? They still exist. Cash is free to use, but with every noncash payment, middlemen12 usually take a percentage of each transaction. Last year, US retailers paid an estimated $64 billion in card processing fees alone.13
Perhaps one of the biggest criticisms of cashless payments, however, is exclusion. Critics argue that cashless establishments unfairly affect those in historically disenfranchised groups who are less likely to have access to noncash payments methods—namely the un/underbanked.14 According to Pew Research, those in households earning less than $30,000 per year are more likely to use cash in a given week than those with higher incomes.15 By not accepting cash, retailers risk marginalizing a significant (and vulnerable) portion of the population: In 2017, the un/underbanked combined accounted for 25.2 percent of US households.16
Many US cities have begun to take notice and weigh in on the debate. In fact, in March, Philadelphia became the first US city to ban cashless stores.17 New Jersey passed its own bill soon after to ban cashless retailers, too.18 Similar proposals in other major cities like New York, Washington, and San Francisco are also pending.19
A cashless society, no doubt, has its advantages, but it could also bring a host of new challenges, especially depending on what side of the counter you’re on.
1 "2018 Findings from the Diary of Consumer Payment Choice." Federal Reserve Bank of San Francisco. November 15, 2018.
4 Marria, Vishal. "What A Cashless Society Could Mean For The Future." Forbes. December 21, 2018.
5 Alderman, Liz. "Sweden's Push to Get Rid of Cash Has Some Saying, 'Not So Fast'." The New York Times. November 21, 2018.
6 Xie, Stella Yifan. "China Tech Giants' Costly Wars to Go Cashless." The Wall Street Journal. June 14, 2018.
7 Pritchard, Justin. "Cashless Society Pros and Cons." The Balance. February 24, 2019.
8 Thompson, Derek. "How the Decline of Cash Makes America a Safer Country." The Atlantic. June 16, 2014.
9 Wright, Richard, Erdal Tekin, Volkan Topalli, Chandler Mcclellan, Timothy Dickinson, and Richard Rosenfeld. "Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program." The National Bureau of Economic Research 19996 (March 2014). doi:10.3386/w19996.
10 Pritchard, Justin. "Cashless Society Pros and Cons." The Balance. February 24, 2019.
11 LaPonsie, Maryalene. "Will We Say Goodbye to Cash in 2018?" U.S. News & World Report. January 4, 2018.
12 Grabar, Henry. "Cash Is a Miracle. So Why Are More Businesses Refusing It?" Slate Magazine. July 24, 2018.
13 Thaxton, Charlie. "The Hidden Price of Cashless Retail." Fortune. April 3, 2019.
14 Newcomb, Alyssa. "When Stores Go Cashless, Is It Discrimination?" NBCNews.com. February 25, 2019.
15 Perrin, Andrew. "More Americans Are Making No Weekly Purchases with Cash." Pew Research Center. December 12, 2018.
16 "Amazon Is Leading the March toward a Cashless Society. States and Cities Push Back." Los Angeles Times. April 02, 2019.
17 Calvert, Scott. "Philadelphia Is First U.S. City to Ban Cashless Stores." The Wall Street Journal. March 07, 2019.
18 Zraick, Karen. "This Legislation Could Force Stores to Take Your Cash." The New York Times. February 20, 2019.
QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.