Would you be surprised to learn that, collectively, analysts estimate that the world will move away from physical money within the next seven years? Yup. Not only that… it’s already happening right under our noses. According to a recent study from the Pew Research Center, already, 41% of Americans don’t use physical money. That number was at only 29% just four years ago, and it’s accelerating. Could we soon be going cashless?
First, let’s cover exactly what cashless means, because there seems to always be rumors and misinformation swirling all around about this subject. At its core, cashless simply means exactly that: not using physical money. It’s not some nefarious organization making everyone switch to a single currency and maniacally laughing as they control the supply. It’s simply when a society decides to use digital currency rather than carrying around pennies, dimes, dollars, rupees, or pounds, regardless of what digital currency is standing in place of the physical money.
Who’s On First?
But who’s going to go first, and when, if ever, will America switch to digital rather than physical money? Well, there are quite a few places where pioneering the cashless society seems to be coming to fruition, and one of those places is Canada. Advocates for a cashless system in Canada are raring to go, citing the perfect conditions for it to happen, especially pointing to Canada’s cashless-ready infrastructure.
For every Canadian, you’ll find an average of four contactless payment terminals, more than 1.2 million in the country are already involved with cryptocurrencies, over 80% of the population owns a smart phone, and internet penetration is almost 100%. And… the country was recently named the most likely to banish physical money. Other countries high up on the list to go cashless sooner rather than later include Norway, Hong Kong, Singapore, and New Zealand.
While some places are making the switch more slowly, and some are just in the discussion phases, some are using a strategy that is a bit more aggressive, they are banning cash in some manner. One such place is Israel, which recently announced a ban on certain cash payments. As of August 1st, personal transactions over $4,400 and business transactions over $1,760 became disallowed, with steep fees of between 15% and 30% imposed for violations.
Officials have stated that the ban has an important purpose, which isn’t simply to push digital payments, but to move away from cash as an avenue for criminals. Also, it’s important to know that this is not brand-new, as there has been a ban that was set in 2019 that restricted personal transactions to no more than $14,660 and $3,220 for business transactions. So, this newest move is simply progress along those lines, with new limits being smaller.
When discussing digital money and a cashless society, it’s important that we look past the typical arguments about whether digital money is a personal preference or not, because that’s an incredibly micro view of the situation… and it fails to tell the whole story. No country operates in a bubble, and money is evolving. If the United States, and the dollar, want to keep up and stay competitive within the world market, we must figure out our plans for digital money.
Over the last few years, countries like the UK and China have successfully implemented instant transactions, which have helped boost global economic output by $78 billion a year according to some estimates. In the US… not so much. By contrast, our automated clearinghouse system, which processes a huge chunk of our payments, only works in batches… during weekday business hours.
As you can see, this isn’t just about what we individually want, this is about the US continuing to thrive as a financial powerhouse through being able to compete through offering digital currency that doesn’t take forever to clear, in batches, because we’re stuck on our outdated systems. It would be a recipe for disaster for us on the world stage if we fail at converting our currency and our infrastructure.
What We Do About It
So, will we move toward a cashless America, keep up with the times and stay competitive? Some signs point to yes, as it appears that cash is truly no longer king for America. Americans are using cash less and less, and the pandemic has only accelerated the trend. And now, businesses are getting on board and are building as cashless entities from the ground up.
But even with what we know about keeping up with being cashless, we need to dig deeper to further understand how this is being driven at the ground level. And the primary concern for businesses owners right now is that their patrons feel safe to patron at their establishments. And even though the pandemic is over, our mindsets are forever changed… and cleanliness is forever burned into our brains. When entrepreneurs are building, they are thinking about that, and going cashless.
Another factor, theft. Over the last few years, we’ve seen coordinated robberies, riots, protests, and even violence that has resulted in losses to businesses owners. One more way to curtail this is by not having cash on the premises. No cash means there’s no way to rob the cashier, there’s no cash to take from safe… in reality, there’s far less risk to a brick-and-mortar site when there’s no cash anywhere to be found.
Couple these factors with people who have less patience and time to stand in line and count coins, and you have a perfect recipe for a cashless movement. Now, while we fully understand there are possible drawbacks and issues that must be addressed, we also understand that progress won’t stand still… and neither will we. Come back next week, we’ll have more research and insight from the rapidly changing world of cryptocurrencies.