Technology

America Lurches Toward a Cashless Future

Electronic payments are increasing, but a cashless economy has drawbacks.

Joseph Bailey, an associate research professor at the Robert H. Smith School of Business at the University of Maryland, discusses the pros and cons of a cashless society.

According to a recent Pew Research Center survey, nearly 30% of Americans say they make no cash purchases during a typical week. How does the use of electronic payments in the U.S. compare with other countries? The U.S. is moving quickly toward more cashless transactions, but it still lags some European countries, such as Sweden, Denmark and Norway. Sweden has reached a tipping point at which only about 2% of transactions are conducted in cash. In part, that’s because the Swedes are technologically savvy, they have a relatively small market, and the government encourages electronic payments of its currency. Chinese cities are also embracing the cashless life, with a mobile-phone system that uses encrypted codes for transactions. In India, some 255 million people are making everyday purchases using the Paytm virtual wallet system, backed by China’s Alibaba.

Will the U.S. catch up with the other countries? If you want a picture of how we’ll handle money in the future, look at how college students manage their money. And then just imagine a world in which they are the majority, and not the rest of us who grew up in a world where we carried around wallets with paper money and maybe coins in our pockets.

What are the trade-offs for consumers as we move toward more cashless transactions? Consumers give up anonymity when they don’t use cash. For example, let’s say you go grocery shopping and your payment shows whether you got a discount for using a reusable bag or paid for a plastic store bag. Marketing could be tailored to you, based on how you’re perceived to feel about the environment. Or if you use electronic payments to buy a lot of fruits and vegetables, you could be pitched a gym membership because a marketer thinks you’re getting fit. Some consumers may not be comfortable with this type of marketing because they think it’s an invasion of privacy.

Are there any other drawbacks to a cashless society? Cashless businesses could hurt low-income consumers who mostly use cash. In addition, we eventually could see a surcharge for using cash. Theft could also become a bigger problem. You may be less likely to be pickpocketed because you’re not carrying cash, but you might face a greater financial threat from a remote hacker or data thief who manages to hack into your smartphone.

Most Popular

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?
Coronavirus and Your Money

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?

The answer to this question comes down to whether your stimulus check increases your "provisional income."
March 1, 2021
Where's My Refund? How to Track Your Tax Refund Status
tax refunds

Where's My Refund? How to Track Your Tax Refund Status

If you're waiting for your tax refund, the IRS has an online tool that lets you track the status of your payment.
March 2, 2021
4 Ways You May Be Sabotaging Your Career Success
careers

4 Ways You May Be Sabotaging Your Career Success

To be a success, it’s helpful to know what NOT to do on the job. An interview with the best-selling author of “The Art of Being Indispensable at Work”…
March 1, 2021

Recommended

What to Do When One Spouse Spends Too Much in Retirement
spending

What to Do When One Spouse Spends Too Much in Retirement

If one partner takes a less conservative approach to money, it can wreak havoc on a marriage. But the problem can be addressed by agreeing on bigger f…
February 10, 2021
A Golf Course Community’s Big Variable for Retirees
Smart Buying

A Golf Course Community’s Big Variable for Retirees

Golf club memberships can often be a separate, and hefty, annual fee at golf communities. Here's some guidance before you tee up your retirement move …
December 14, 2020
Don’t Buy This: Top 20 List of Things That Aren't Worth the Money
spending

Don’t Buy This: Top 20 List of Things That Aren't Worth the Money

Buyer’s remorse is real, and if you purchase any of these 20 items, chances are you’ll get to experience it firsthand.
December 9, 2020
Retirees, Get Ready for Virtual Video Visits for the Holidays
Smart Buying

Retirees, Get Ready for Virtual Video Visits for the Holidays

Tap into virtual video software, age-friendly gadgets, video apps and accessories to make seasonal gatherings safe.
December 4, 2020