Q & A

No, cash is not going away in America, no more than paper has ever disappeared from the long-predicted “paperless” office.  While cash is not “going away,” there’s no question that growing numbers of businesses and individuals, in the U.S. and other developed economies, are seeing growth in digital payment methods and some reduction in cash usage levels.  However, more U.S. currency is in circulation now than at any other time in our nation’s history, and many millions of Americans rely solely upon cash as the only way they make their daily purchases. 

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While cash usage remains strong, there are those special interest groups, including the global charge-card companies, that advocate and promote the use of alternative, noncash forms of payment, because the profits of their businesses stand to grow dramatically as the number and dollar amount of cashless transactions increases.  It is estimated that the card companies now reap a trillion dollars in transaction profits, which would double if they should succeed in converting current cash transactions into electronic funds-transfer (EFT) card transactions, underscoring why they are determined to see cash go away. 

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Consumers, however, obviously value the utility of cash as a payment option, as shown by the volume now in circulation and by the way in which the pandemic and other emergencies invariably generate larger cash withdrawals by the U.S. populace, seeking a vital safety net in times of crisis. 

Opponents of cash include:
 

• Global credit card networks and big-bank issuers of credit and debit cards are the major opponents of cash.  There is also opposition to cash from certain manufacturers and developers of hardware and software used in credit and debit card services, cryptocurrency providers, and other such “cashless” transaction providers, along with the owners and operators of their supporting data processors and the financial telecommunications networks needed for all such transactions.

• Some large regional, national, and international retailers that seek perceived labor-cost savings and increased profits by eliminating cash in their operations.

• Data-mining enterprises, which acquire and then resell data embedded in digital financial transaction records.  Their business consists of compiling, organizing, and reselling to marketers, retailers, financial intermediaries, etc., detailed information about consumers’ purchasing habits and preferences.  

Because every noncash sale creates a digital record of the time, place, amount, manner of payment, and subject of the sale, and often the identities of the purchaser and the seller, every such sale also creates additional stock in trade for data-miners and thus contributes to the continued rapid growth of their industry.

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In addition to creating a wealth of new digital records for data-miners to collect and resell, eliminating cash would result in considerable benefits for other advocates of cashless commerce:

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• Card issuers, networks, and processors all receive transaction fees—which may be levied directly upon consumers, merchants, or both, and ultimately show up either way in higher prices paid by consumers for goods and services—associated with every non-cash transaction that traverses their facilities.   

• Manufacturers and developers supplying the hardware and software used in noncash transactions receive proceeds on the sale, servicing, and maintenance of their products, as well as additional sales of periodic—and often mandatory—upgrades and enhancements for those products.  The more cash transactions they displace, the more business and revenue they generate for themselves.

• The value to these companies of drastically accelerating the transition to a cashless economy is illustrated by the financial and other incentives that many of them offer to consumers through rewards programs, and to retailers—including discounts or rebates on purchase prices and fees—not just for giving their customers the option to make noncash payments, but sometimes for agreeing to stop accepting any cash payments at all and instead to make all their sales on a non-cash basis.  

In 2018, for example, Visa awarded grants of $10,000 each to 50 restaurants and other small businesses in the food-service industry that had accepted its “Visa Cashless Challenge” and agreed to eliminate cash from their operations.

• Cash is most frequently used in lower-value transactions.  According to Congressional testimony last year, a 2019 study by the Federal Reserve found that cash remains the most common form of payment for transactions under $25, while only six percent (6%) of transactions exceeding $100 were in cash.  The study found that 42 percent of payments under $25 were made in cash, increasing to 49 percent in transactions under $10.

• Sales for cash most often involve goods and services considered staples or necessities, such as meals and groceries, children’s clothing and school supplies, and personal-care products and services, such as cosmetics goods and barber shops and beauty parlors.  Surveys show that African Americans are more likely to rely on cash than Hispanics or Caucasians, and that cash is used more frequently by low-income households, people under 25 or over 65, and those living in rural areas.

Although they offer no independent studies to support their assertions, no-cash advocates say eliminating cash would improve businesses’ overall bottom lines by reducing the costs of employee time spent in handling, transporting, and counting cash and in daily reconciling of cash balances, and that risks of employee theft and of losses from burglaries or robberies would be reduced, along with reducing businesses’ security costs and potentially their insurance costs.  These advocates conveniently overlook the significant costs associated with electronic transaction/card fraud, excessive network and processing fees, increased audit requirements, and hacking fraud, as well as a host of other costs in an environment of purely digital payments.