Your first encounter with cash probably took place somewhere around your fifth birthday. Uncle Bob and Aunt Sue handed you a birthday card (no present!) and you opened it up to find ... a piece of paper. This paper, meaningless to a child, represents one of the most important things in an adult’s life: money.
Where would we be without cash? People often say that before we started using cash, people lived in a barter economy and traded chickens for wheat and labor for eggs. This myth, however, has been dispelled; currency has existed in some form or another for as long as humans have been around. But, given the technological capabilities of today’s world, people keep asking why we even bother having cash anymore.
Why Cash is Great
The expression “cash is king” is still relevant today. Cash can get you upgrades at a hotel, faster service at a restaurant, and the ability to purchase goods if the electricity goes out. Cash is the most widely accepted form of payment and is generally fee-less. Think your card transactions are free? Not so much. Banks charge merchants fees to receive payments made with debit and credit cards and, since businesses have to keep their margins up, the transaction fee is passed onto the consumer either directly on the terminal or indirectly via higher prices. In some parts of the world, banking is not free, and customers must pay their banks directly for each transaction.
In a 2014 study, the Cash Product Office found that the largest demographic of cash users is people aged 18-24. Their theory of why young people are the biggest cash users highlights an important reason why cash will never be obsolete: millions of Americans are unbanked, meaning that they don’t have access to a bank account and the benefits that come with it (checks, debit cards, access to credit). For these Americans, paychecks get cashed and cash gets spent; no one is asking the plumber if he takes debit or credit. (See also, Credit Card Or Cash?)
The Downsides to Carrying Cash
There are obviously drawbacks to cash. Anti-cash folk will point to the convenience and time saving elements of paying via card or electronic transfer. Is paying by card really a time-saver? By the time you’ve swiped the card correctly, entered your PIN (or signed) and have your receipt, a good cashier could already have counted out the change from your $20. Cash is not the time-waster that people make it out to be.
Near field communication (NFC) is the technology that allows tap-and-go payments to happen. Being able to tap your phone to pay for coffee is really neat, and virtual wallets of all sorts have been clamoring for market share since the technology was developed. In Japan, NFC technology is widespread and can be used to for virtually everything, yet few people use it. One theory as to why the technology is so unpopular in Japan yet extremely prevalent in Africa is that Japan has a mature and trustworthy banking system that works. As they say, if it ain’t broke, don’t fix it. (Related: Apple Pay vs. Google Wallet.)
The Bottom Line
The idea of getting rid of cash and moving to an all electronic banking system has been discussed for awhile now. A 1998 article from a Texas newspaper argues that cash is becoming obsolete and that, by 2005, only 46% of transactions will be conducted in cash. Today, in a world with technology that was unimaginable in 1998 and many more opportunities to implement a cashless society, Americans still use cash for 40% of their transactions. Cash is not going away. Not only does it have practical uses but it also lends itself to faster transactions, is tangible and easy to maintain control over and is essential for the 7.7% of Americans who remain unbanked.