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Tap and Go: Life in a cashless society

Tap and Go: Life in a cashless society

Have you ever envisioned a future where your wallet or purse has become substantially lighter due to lack of monetary contents or perhaps a future where you don’t even need to carry a wallet at all? That future may be closer than you think. We have already become accustomed to using credit cards, debit cards and, increasingly, smartphones rather than counting out dollar bills and coins for everyday purchases. We no longer feel uncomfortable when a friend taps and runs, using her favorite app rather than her wallet to pay for lunch or access a rewards program. And headlines speak regularly about the importance of Bitcoin, a worldwide cryptocurrency and digital payment system. Together, these cashless transactions seem remarkable to anyone who grew up paying with dollar bills. But do they mean we are ready for a future without any cash?

Gil Luria, D.A. Davidson’s Institutional Research Director and a frequent commentator on Bitcoin and Blockchain transactions, said cash remains the easiest vehicle for quick, simple transactions. “Part of the reason is that for small, casual transactions — say, tipping a valet — cash is perfectly suited and convenient,” he said.

On one hand, cash offers different conveniences than cards or digital payments. Some people use currency as a self-regulating budgeting mechanism: Shopping with $500 in bills lets you easily see when it’s spent, as an example. Cash offers anonymity for merchants and consumers, allowing for that spa treatment or any other guilty pleasure that you prefer to keep confidential. And using cash is still a good way to teach children about the value of money—a cashless society would be the end of the piggy bank as we know it.

Still, credit cards and mobile payments offer enough benefits that consumers enjoy using both increasingly. After all, who wants to be weighed down with bills and coins when a card or phone will suffice? It is certainly faster than counting out change, and we all know the numerous rewards you can receive from paying via credit card. Digital payments allow merchants to collect valuable information about buyer preferences and about consumers themselves. If a card is stolen, the loss is usually reimbursed, while a theft of cash usually means the funds are simply gone.

An alternative to credit or debit cards, Bitcoin and other cryptocurrency (digital currency) networks are slowly working their way into our lives. Cryptocurrency is sometimes associated with illegal activities because it is tracked via technology, allowing users to make secure payments and store money anonymously, without going through a bank or central authority, and with lower fees. The transactions are publically recorded and cannot be faked or reversed. However, as with any form of money, they are not without flaws, Luria said.

“Consumers should be aware of the fact that every form of payment carries its own unique set of risks,” Luria said. “Cash can be lost, payment cards can be copied, apps can be hacked and cryptocurrencies can lose value. Consumers would be wise to be vigilant in whom they pay and how they pay them, and to keep track of expenses to make sure funds are not being stolen.”

So what does this mean for the future and the rest of the world?

In Sweden, only 2% of transactions involve cash, and some businesses no longer accept paper currency.1 China has been cited as another country that’s becoming more cash-free. According to the Tencent Research Institute,2 Chinese consumer used mobile platforms to spend $5.5 trillion in 2016 — about 50 times more than their American counterparts.

Even as experts speculate on whether the world will stop using cash, it is a ubiquitous part of American society. Cash is still widely used in consumer spending, even when other payment forms are available.3 It could be that visions of a cashless society are much like the Utopian visions of offices going paperless — an ideal that may not come to fruition. Only time will tell.

China Tech Insights by Tencent Research Institute
2015 Diary of Consumer Payment Choice, a project of the Federal Reserve

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