Are the days of hard
currency numbered?

Digital DollarHow quaint: The other day I saw someone use cash to pay for groceries.

I’m being facetious. Despite making my living in the digital payments business, even I stoop to the occasional cash transaction. The kid who mows my lawn doesn’t accept ACH transfers. Still, I have to wonder: How much longer will coins and paper currency be a thing?

Over millennia, payment systems evolved from in-kind transactions, to clay tablets engraved with plus signs, to coins, to printed currency, to numbers in books, to ones and zeroes floating around in a metaphorical cloud. For all our progress, each of those systems remains alive and well.

Fine, but how well, and for how long? Not a few experts are predicting physical currency’s eventual demise. A recent Forbes article by Jennifer Wang leads with this comment from iPad-based point-of-sale system Revel CEO and cofounder Lisa Falzone: “At the present, cash is not dead, but [cash] will be dead soon … it’s a slower death.” Writing for IEEE Spectrum, Gleen Zorpette quotes Aite Group analysist Ron Shevlen: “There are a lot of baby boomers who aren’t dead yet, and they’re simply not going to give up cash. Cash will gradually die off as, well, they do.” (Apologies to my Boomer readers.)

Not so fast, others reply. In a 2015 BBC piece, writer Rose Eveleth observed:

In the United States, cash in circulation grew 42% between 2007 and 2012, and the amount of American money floating around in bills and coins is expected to grow by about 5% each year. The average growth globally is 7% per year, according to Eric Ziegler, President of the Security Technologies Group at Crane Currency, which manufactures notes …

There are now 1,400 supermarkets in the Netherlands with registers that don’t accept cash. As a result, card payments in the Netherlands have been growing by about 8% annually over the past few years. And yet, cash is still king. In 2012, there were 2.7 billion card payments, but an estimated 3.5 to four billion payments were made with cash …

Studies of other nations tie in with these findings. In the UK, half the transactions by consumers in 2013 were with cash, according to a report released in May by the UK Payments Council (now known as Payments UK).

There are situations where cash not only serves but may be a necessity. At the hard-to-defend end of the spectrum are under-the-table deals where the point of using cash is to avoiding traceability and detectability for the likes of drug deals, prostitution, bribery, extortion, stolen goods, tax evasion, or paying illegal workers. It is, however, naïve to think that going digital will eliminate such abuses. Those who would skirt the law tend to be inventive. At the easy-to-defend end are simple exchanges that going digital might needlessly complicate, such slipping a crisp bill into a child’s birthday card, paying the babysitter, buying a single item priced under a dollar, and more. Who wants to whip out a credit card or trouble with a digital wallet for a 50-cent candy bar? Still, as digital payments become more ubiquitous and easier to use, the day may come when making a digital payment is easier than digging out crumpled bills from your pocket.

Time will tell if digital is destined to eradicate cash. If and when that time comes, perhaps instead of loose change people will find ones and zeroes under their couch cushions.

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