In our steady march toward an all-digital world, an ever-growing array of tangible forms of communication and culture—from printed books and newspapers to handwritten letters (imagine!) to DVDs—are being relegated to history’s dustbin. And now we’re on the cusp of arguably the biggest transition yet: ditching cold, hard cash for a future in which all money is digital.

Actually, it might seem we’re already a good ways along. Just look at our exploding use of credit and debit cards: In 1990 debit cards in the U.S. were used for 300 million purchases; today the total exceeds 40 billion. Swipe technologies like Apple Pay are taking off, as are person-to-person apps such as Venmo and Zelle. Other technologies, involving things like microchip implants, finger­print scans, and facial recognition, are even eliminating the need for phones and smartwatches. In some places using cash is beginning to feel as outmoded as mailing a check to pay your electric bill.

Lee Chiun

Printed money didn’t come into widespread use until the 17th century, when it was adopted by Europeans, who could exchange their notes for actual gold. In 1933, when the connection between the U.S. dollar and gold was effectively severed, cash truly became just a paper construct. If the paper is no longer needed, logic would suggest, why not just get rid of it?

And yet, as we start to get a sense of what a society without cash might actually look like, that imagined utopia of commerce—where everything is clean, quick, efficient—is running into some resistance. Many of us are stubbornly clinging to our paper money habits. Maybe, just maybe, we’ll miss cash more than we realize.

“Money’s destiny is to become digital,” declared the Organization for Economic Cooperation and Development back in 2002. And, indeed, in many developed countries today, cash is clearly in decline. In South Korea just 20 percent of consumer transactions involve cash or checks. In Canada the figure is 29 percent. In Singapore and the Netherlands it’s around 40 percent. In the U.S. it’s roughly half. A December 2017 report from the Bank of International Settlements found that the number of cashless transactions around the globe has “at least doubled over the last 10 years across all countries.”



Nowhere is the cashless movement further along than in Sweden. After a decade during which the country’s financial sector made a concerted effort to get people to adopt electronic payment methods—by doing things like keeping no cash on hand at most bank branches and refusing to accept cash deposits—only 15 percent of financial transactions are now done with physical money.

Lee Chiun

Many stores, along with buses and the Stockholm metro, no longer take cash. Most person-to-person payments are made via a mobile app called Swish, which lets you send money instantaneously from one bank account to another with a phone number. Even street vendors have adopted Swish, and contrary to what you might assume, there isn’t a large generational divide; at least half of Swedes over 60 use Swish. It’s so popular, in fact, that the verb “to swish” has entered the nation’s lexicon.

While the drive to eliminate cash is fueled partly by capitalism’s impulse to wring waste out of the system, it is also propelled by consumers’ desire to make their lives easier. In Sweden more than 4,000 people have had microchips implanted under their skin, which makes it possible for them to pay with the wave of a hand; it also brings us closer to a Minority Report future in which we’re greeted with personalized ads and buying options as we walk down the street.

That may sound extreme, but it’s really just a logical extension of the contactless technologies most of us will be using soon, if we aren’t already. Apple Pay and Samsung Pay now let you settle up via your smartphone, and last year Samsung rolled out the first trial of its Contactless Companion Platform, which is a chip that can be inserted into an array of objects—watches, key fobs, bracelets—turning them into payment devices.

Amazon is testing a digital payment system that would enable customers to make purchases without ever taking out a wallet or device. An app checks you in as soon as you enter a store, and any items you leave with are recorded by 3-D scanners at the door and automatically billed to your credit card. No clerks, no checkout counters, no lines.

The London supermarket Costcutter, meanwhile, introduced a system in 2017 that allows customers to pay with a fingertip scan. And Mastercard has announced that by April card users will be able to make payments using fingertip and facial recognition technology that employs scanners similar to the ones found on recent iPhones.



Financial institutions have a very big stake in this future, obviously, as individuals must be linked to a bank account or credit card (or, at the very least, possess a prepaid debit card) to go cashless. In an effort to get a leg up, last summer Visa launched Cashless Challenge, which awarded small businesses $10,000 to upgrade their point-of-sale systems to be totally cashless. Companies that applied had to explain what the move would mean for them and their customers.

Whether a cashless consumer experience is your idea of heaven or a dystopian nightmare, a case against paper money is easy to make. For starters, cash is dirty. A 2017 study found that dollar bills from New York banks were covered with hundreds of species of microorganisms, including ones that cause acne. Also, cash can be lost and accidentally destroyed. And, of course, it can be stolen.

Physical currency requires a vast infrastructure to produce, distribute, and protect it. The U.S. spent almost $900 million in 2018 printing new bills. For banks, transporting money from their vaults to ATMs and branches, sending and storing paper checks, and employing tellers to handle deposits and withdrawals is even more expensive. A recent Morgan Stanley study, for instance, found that Bank of America spends $5 billion a year processing checks and cash. There is also the inefficiency of the cash transaction itself. All that careful counting and pawing through the register for change is slow.



One study by research firm IHL Group found that if you factor in the time it takes to make change, count bills and coins at the end of the day, and take the money to the bank, cash trans­actions cost retailers between 5 and 15 percent of sales. By contrast, digital transactions requiring a simple card swipe or wave of a smart device are typically fast and efficient. And they make it easier, in principle, for people to track their spending, since there’s a digital record.

Governments benefit too. For one thing, digital transactions are harder to hide and thus easier to collect taxes on. Plus, eliminating cash can make it more difficult for certain types of illicit businesses to operate. The U.S., for instance, has driven some offshore betting companies out of business by cutting off their ability to process credit card payments. Though criminals can now turn to cryptocurrencies like Bitcoin, those are also easier to track than cash, since every cryptocurrency transaction is recorded digitally.

Lee Chiun

Given that going cashless would seem to be a win-win for most of us, how much longer do we have to wait until the revolution is complete? Maybe longer than you’d think. Interestingly, while people are using cash less frequently, the actual amount of cash in circulation has increased. There are more physical dollars (and most other paper currencies) in the world today than ever before. According to the Federal Reserve, 65 percent of Americans regularly carry cash, perhaps because, as one recent consumer survey found, not having money in our wallets makes most of us anxious. Especially for small trans­actions, cash remains many people’s payment method of choice.



Why is that? Partly it’s about psychological and cultural factors, including our attachment to what’s familiar and not wanting to have our options limited. We might speak of cold, hard cash, but studies have shown that we actually have an emotional attachment to physical money. Participants in a well-known 2011 study cited feeling “a sadness that once you have handed it over, it’s gone.” Another study found that people who did nothing more than touch money before putting their hands into a pot of hot water were able to endure pain better and longer than people who had handled blank paper instead.

The visceral sense of security we associate with physical money stands in stark contrast to the increased exposure and eroded privacy that would inevitably accompany a cashless economy, in which, theoretically, every transaction is recorded. While that may be good for tracking your own spending habits, it also makes it easy for companies—and potentially governments—to track them too. Historically, consumers have been willing to give up a certain amount of privacy for convenience, but that bargain has soured in recent years as our every move on the internet is tracked, analyzed, and sometimes resold for profit. In that light, cash—and the anonymity it provides—can be appealing.

There are also technological impediments to the cashless takeover. Particularly in the U.S., businesses have been slow to adopt cashless systems (which is why companies like Visa are paying them to do it). Some are understandably anxious about vulnerability to hacking and cyberattacks, power grid failures, and outages in banking networks—like the one that hit Visa’s payment systems in Europe last June.

The company’s network suffered widespread disruptions for close to 10 hours, which rendered vast numbers of businesses unable to process transactions and provoked a run on ATMs, sending shockwaves through the continent’s economy. Another reminder of the limitations of going cashless was Puerto Rico’s experience after Hurricane Maria knocked out more than 80 percent of the island’s power lines for months, which prevented many residents from accessing their money and made electronic trans­actions impossible.

Lee Chiun

The fact is a lot of economic activity around the globe is still conducted using cash, and not only in less developed regions. Wealthy Americans may not use cash to buy much (according to a McKinsey study, once you get into the upper middle class, cash accounts for just 2 percent of all point-of-sale transactions), but many of the workers the wealthy employ—nannies, gardeners, housekeepers—are paid in cash. Such off-the-books transactions would be impossible in a fully cashless economy. Ditto tips for hotel housekeepers, doormen, valets, baristas, and the like. Workers in the tourism industry, for instance, would likely see their incomes decline in a cashless world. And those who don’t have checking or savings accounts—close to 7 percent of Americans (mostly non-white)—would be at risk of being shut out of the system completely.

Another aspect of going cashless is the impact it would have on our spending habits. Precisely because cash gives us a feeling of security, handing it over is painful in a way that swiping a card or waving a phone is not. What economists call “the price of paying” is simply higher with cash. As one consumer put it, “I really see the cash going out of my pocket when I spend.”

Thus, when we use cash we tend to value those purchases more. In one experiment, subjects had to buy a mug. Some used cash, others a debit card. Then the researchers offered to buy the mugs back. The people who had paid cash demanded, on average, almost twice as much for their mugs—­suggesting that they valued them more highly. The essential idea here is that when we use cash, we are connected to—and are arguably more in control of—our spending.

Lee Chiun

When we use cards or other electronic forms of payment, we suffer from what is sometimes called the decoupling effect: We’re less connected to the money we’re spending, which makes it easier to spend freely. Studies have found that the presence of the American Express logo on a shopping catalog makes people buy more. One famous experiment conducted by the economist Drazen Prelec involved a silent auction for tickets to sold-out NBA games. Half the bidders were told they could pay only with cash (or a check), and half could pay only with a credit card.

On average the credit card buyers bid more than twice as much as the cash buyers. Not surprisingly, there appears to be a correlation between a country’s electronic transactions and its level of household debt, with Canada, South Korea, the Netherlands, and, yes, Sweden ranking high in both categories.

The willingness to be more profligate when using digital money isn’t only about buying on credit. People shopping with gift cards also spend more than their cash-­paying counterparts. (Even more weirdly, people using a photocopier card make more copies than people who pay for their copies with cash.) When McDonald’s began experimenting with touchscreen order kiosks, it saw a pickup in sales in stores that had them; in one outlet the average touchscreen order was 30 percent higher than those placed at the counter.

Although it’s impossible to say when total cashlessness will come to pass, we can surmise that when it does we’ll spend more freely and take on more debt. Our kids will grow up without ceramic piggy banks, gifts from the Tooth Fairy, and birthday cards from Grandma with a few bills slipped in. But they will adapt. A cashless society will not be a utopia—it will involve complicated trade-offs.

Privacy and control will be sacrificed for convenience and ease. We will have a more efficient economy, but in some ways a more regulated one, with fewer ways to bend the rules. And we’ll undoubtedly have a more distant, impersonal relationship to money. Our feeling that cash is more intimate, more real, than electronic money is an illusion. It’s just a very hard one to shake.

This story appears in the February 2019 issue of Town & Country. SUBSCRIBE

James Surowiecki Surowiecki is the author of The Wisdom of Crowds , and has written about business and finance for, among others, Slate and The New Yorker.

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