The End of Cash?

At one time, credit cards were the only alternative to cash. Today, though, shoppers have many other options, including debit cards, mobile apps like Venmo, and digital-only currencies such as Bitcoin.

According to a Federal Reserve Bank study, cash payments now make up only one-quarter of all transactions in the U.S.—down from 36 percent five years ago.

Going cashless has some obvious benefits. It’s more convenient to use an app to pay for something than to go to an ATM to withdraw money, notes Minnesota college student Alex Johnson, 20. “I don’t want to have to pay ATM fees or drive to the bank,” he says.

And when it comes to expensive purchases, a password-protected cell phone is safer to carry around than a wad of cash.

Businesses also see the upside of using less cash. For starters, experts say that people tend to spend more when paying digitally. Also, handling less cash means employees can serve customers faster.

Walmart, the world’s largest retailer, is testing an app that—once linked to a credit card or bank account—allows customers to scan and pay for items as they shop, skipping checkout lines altogether. That, experts say, is an effort to get shoppers used to leaving their cash at home. It also may eventually mean being able to hire fewer cashiers, which would save Walmart money.

At one time, credit cards were the only alternative to cash. Today, though, shoppers have many other options. These include debit cards, mobile apps like Venmo, and digital-only currencies such as Bitcoin.

According to a Federal Reserve Bank study, cash payments now make up only one-quarter of all transactions in the U.S. This is down from 36 percent five years ago.

Going cashless has some obvious benefits. It is more convenient to use an app to pay for something than to go to an ATM to take out money, notes Minnesota college student Alex Johnson, 20. “I don’t want to have to pay ATM fees or drive to the bank,” he says.

And when it comes to expensive purchases, a password-protected cell phone is safer to carry around than a wad of cash.

Businesses also see an upside to using less cash. For starters, experts say that people tend to spend more when paying digitally. Also, handling less cash means employees can serve customers faster.

Walmart is the world’s largest retailer. It is testing an app that allows customers to scan and pay for items as they shop. The app has to be linked to a credit card or bank account. Using the app to pay lets shoppers skip checkout lines altogether. Experts say this new app is an effort to get shoppers used to leaving their cash at home. It also may mean that Walmart could hire fewer cashiers in the future. That would save the company money.

But there are problems with ditching cash. Security experts worry that hackers may be able to access our bank accounts and wipe out our savings with a few clicks. Privacy advocates, meanwhile, fear that a cashless society would let businesses and governments track our every move. That’s because each digital transaction creates a record of where you are and what you’re doing.

But there are problems with ditching cash. Security experts worry that hackers may be able to get into our bank accounts and wipe out our savings with a few clicks. Privacy advocates fear that a cashless society would let businesses and governments track our every move. That is because each digital transaction creates a record of where you are and what you are doing.

Going cashless could also lead to higher prices overall, some experts say. That’s because merchants are charged fees when customers swipe a card or app instead of paying with cash. Businesses often make that money back by raising their prices.

And what about the 7 percent of Americans—about 24 million people, most of them poor—who don’t have bank accounts at all? Without accounts that can be linked to digital forms of payment, these people would have a tough time surviving in a cashless economy.

Going cashless could also lead to higher prices overall, some experts say. That is because merchants are charged fees when customers swipe a card or an app instead of paying with cash. Businesses often make that money back by raising their prices.

And what about the 7 percent of Americans who don’t have bank accounts at all? That is about 24 million people. Most of them are poor. Without accounts that can be linked to digital forms of payment, these people would have a tough time surviving in a cashless economy.

Despite such concerns, some countries are moving toward eliminating cash. In China, an estimated 70 percent of people no longer carry cash. South Korea’s national bank plans to go cashless by 2020. In Sweden, five of the six biggest banks don’t use paper money—and 90 percent of all purchases are made electronically.

But experts point out that embracing a digital economy doesn’t require an all-or-nothing approach. Harvard University economist Kenneth Rogoff thinks the U.S. should phase out $100 bills, then $50 bills, then $20 bills, leaving smaller bills in circulation. This, he says, would stimulate spending, while still giving Americans privacy for smaller purchases.

“I want to have a less-cash society,” Rogoff says, “not a cashless society.”

With reporting by Theo Kaufman and Kathy Wilmore

Despite such concerns, some countries are moving toward doing away with cash. In China, an estimated 70 percent of people no longer carry cash. South Korea’s national bank plans to go cashless by 2020. In Sweden, five of the six biggest banks do not use paper money. Ninety percent of all purchases in Sweden are made electronically.

But experts point out that embracing a digital economy does not require an all-or-nothing approach. Harvard University economist Kenneth Rogoff thinks the U.S. should phase out $100 bills, then $50 bills, then $20 bills, leaving smaller bills in circulation. He says this would stimulate spending. Yet it would still give Americans privacy for smaller purchases.

“I want to have a less-cash society,” Rogoff says, “not a cashless society.”

With reporting by Theo Kaufman and Kathy Wilmore