Retail and the cashless society

Discussion
Mar 22, 2016
Matthew Stern

As smartphone-based payment options like Apple Pay catch on, the idea of the U.S. functioning as an entirely cashless society seems less and less like something out of science fiction. For some tech fanatics, it’s a no brainer. For others, it’s a terrifying prospect. A recent think-piece from Fast Company speculates that a cashless society would be one in which some — perhaps significant swaths of the population — could end up feeling the downside.

The article cites concerns about a cashless U.S. such as a lack of privacy (because it would be impossible to make a financial transaction that was not tracked) and, perhaps more disturbingly, the negative impact on the unbanked and underbanked.

A startling 17 million Americans have no bank account and an additional 51 million are underbanked, according to a Bankrate article. People become unbanked or underbanked for a number of reasons, such as severe debt, a lack of steady employment or a desire to avoid unexpected fees. Undercutting the perception that Generation Z is homogenously tech-driven, FDIC data indicates that about half of people between 18 and 24 are either unbanked or underbanked.

A cash-free society could also adversely affect retailers and grocers, especially those in low-income areas, which serve such populations.

Retailers likewise may have reasons for keeping cash around (and ones that don’t involve under-the-radar economies). While point-of-sale solutions like Square have streamlined credit card processing capabilities, removing and simplifying third-party relationships that have made processing cards difficult for SMBs in the past, they are not perfect. Some business owners have reported that there are tradeoffs when using Square: lack of support, held funds and even unexplained account cancellations.

And there seems to be acknowledgement among even major retailers that segments of the population still want and/or need cash. In 2012, Walmart implemented its “Pay with Cash” program, which allows customers to purchase from their online inventory using cash instead of a credit or debit card.

Photo: Square

DISCUSSION QUESTIONS: Will we ever see an entirely cash-free U.S.? What consequences could the retail world experience as a result of trends to remove cash from society?

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Braintrust
"Hopefully we will never see an entirely cash-free society in the U.S. Too many people are unbanked or underbanked. And what happens if the power goes out? Techies can dream, but there is no need to impose their predilections on everyone else."
"I’ve never seen any cash used on Star Trek, so eventually we will have a cashless society. But it will be a while, at least 10 years and probably more than 25. Managers are focused on things like getting the last mile solved, which if I recall from Star Trek, will ultimately be accomplished through teleporting."
"Anyone who has ever worked in a job where you depended heavily upon tips should find the prospect of a cashless society to be worrisome, at least. And for the time being, cash = privacy."

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19 Comments on "Retail and the cashless society"


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Max Goldberg
Guest
4 years 6 months ago

Hopefully we will never see an entirely cash-free society in the U.S. Too many people are unbanked or underbanked. And what happens if the power goes out? A major hurricane or earthquake or power failure necessitates cash. Techies can dream, but there is no need to impose their predilections on everyone else.

Ron Margulis
Guest
4 years 6 months ago

I’ve never seen any cash used on Star Trek, so eventually we will have a cashless society. But it will be a while, at least 10 years and probably more than 25. Several other trends will be simultaneously hitting retail and a move to a cash-free store is likely down on the list of priorities for managers. They are focused on things like getting the last mile solved, which if I recall from Star Trek will ultimately be accomplished through teleporting.

Bob Amster
Guest
4 years 6 months ago

“Ever” is a long time so the answer is definitely. In five years? Maybe not, but in 10 years? Probably. What we have to consider is that with time culture will change, mores will evolve. The path to a cashless society has been laid and it is easy. We wrote about this recently.

It may not be for the millions that are underbanked today, but they will not always be underbanked, or an inexpensive form of banking will emerge. The smartphone is the wallet of tomorrow. Could one have predicted the proliferation of the cellular phone in countries where most of the population never had a phone? It was precisely because the new technology could substitute for what third-world countries’ infrastructure could not offer, that the cellular technology leapfrogged the land-line technology.

Remember that ‘cash’ was adopted as a standard to replace beads, pieces of gold, salt and other diverse forms of payment, including barter. Well, the smartphone with its myriad payment options will be that new standard, with virtual cash underlying every transaction.

Cathy Hotka
Guest
4 years 6 months ago

This topic came up in a retail IT dinner discussion last week in Dallas. Some of our participants noted that there are significant segments of the population that remain “unbanked,” while in some other cultures, corruption and graft have instilled a sense that electronic money is foolish.

While some retailers no longer take checks, it’s a stretch to think that mass-market retail will stop taking cash in the next 10 years.

Gene Detroyer
Guest
4 years 6 months ago
Absolutely. In several African countries less than 30 percent of the population have bank accounts, and even fewer have credit cards. Yet systems have been devised to execute even (especially) the smallest, less than $1, transaction on mobile phones. The system has provided an increase in commerce for the countries and monetary freedom for the poorest people. Nigeria has established a successful template for how this works. No need to reinvent, just copy and make it even better. Let’s look at ourselves and the trend we have experienced with the amount of cash we carry in our pocket. Over the last decades it has declined drastically. Like the success of online commerce has been driven by convenience, the cashless society will also. Last year Money magazine wrote, “A plan to cut cash out of shopping could see Denmark become the first country to ditch notes and coins altogether.” The Economist wrote, “All over the world, we are seeing a relentless march toward a cashless society, and nowhere is this more true than in northern Europe.… Read more »
Mohamed Amer
Guest
Mohamed Amer
4 years 6 months ago

It’s difficult for me to imagine a cash-free world, but “ever” is a very long time.

While technologically this is possible today, socially there are many hurdles not the least of which include access and privacy. However, my inability to see a clear path to such a state does not make this prospect impossible nor desirable.

Li McClelland
Guest
Li McClelland
4 years 6 months ago

I had to take a quick peek at my calendar to see if it is April 1, (April Fools’ Day) and if this therefore might be a joke question to punk us.

Peter Charness
Guest
4 years 6 months ago

Unbanked people are often served with effectively a gift card,where the “cash” is deposited against a pay-as-you-go card which is recharged each payroll cycle (or when the kids run out of money at college). Add that to the equation and I think the answer is yes, we will be virtually cashless in the not-too-distant future.

Ralph Jacobson
Guest
4 years 6 months ago

Although I may be an old Baby Boomer who still fights technology adoption at every turn, I will still say my guess is that we will never get completely away from cash because the culture needs to be able to “trade” tangible instruments and goods to a degree. Electronic payment is great, and more and more people will utilize it over time. However, cash needs to be available for practical purposes, like some of those mentioned already.

Craig Sundstrom
Guest
4 years 6 months ago

No. Nor should we.

Karen McNeely
Guest
4 years 6 months ago

In Wisconsin, everyone is up in arms that requiring an ID to vote is disenfranchising lower income voters. I can’t imagine what the fallout would be for them for not accepting cash for purchases.

While the trend is definitely moving toward cashless and even toward cardless, with Apple Pay and other similar options, I think we are a long ways off from cash being eliminated completely.

Ken Morris
Guest
Ken Morris
4 years 6 months ago

I believe we are now down to about 15% cash sales in US retail today. We were at about 50% 30 years ago. Using that as a base we could be at maybe 5% in 10 years, but that last 5% is likely to take forever … just my opinion. I believe there will be a backlash to our electronic society at some point and the anonymity of cash will be back in vogue.

James Tenser
Guest
4 years 6 months ago

Anyone who has ever worked in a job where you depended heavily upon tips should find the prospect of a cashless society to be worrisome, at least.

For all of us, banked or un-banked, there may still be some perfectly legal (mostly smaller) transactions where we prefer not to generate an electronic trail. Maybe you want to keep details about what you buy in the drugstore or the local tavern to yourself….

For the time being at least, cash = privacy.

It’s also still free from transaction fees imposed by financial institutions.

Both of these realities are subject to change, of course. For consumers in the less affluent strata, using cash may be a slight advantage. For retailers who serve those shoppers, accepting cash will remain a necessity for the foreseeable future.

Jacqueline Kuehl
Guest
4 years 6 months ago

Despite all the hype regarding electronic and virtual payment options, cash is not going away any time soon. As a matter of fact, cash continues to be in circulation in increasing numbers, not decreasing. Especially during security credit card breaches, the only safe alternative is cash.

Additionally, research by the Federal Reserve cites this: Debit cards and cash continued to account for the two largest shares of consumer payments.

Frank Beurskens
Guest
4 years 6 months ago

My trainer this morning shared a story about his six year old son, addicted to video games, who apparently spent over $100 last night (dollars as in click the submit button) for value added game pieces, unbeknownst to the parents. The game store’s credit card details; consumption is just a click away.

The debate, whether books versus kindle, cash versus virtual credit, or MP4 versus Vinyl (which is making a resurgence), seems transitional — yes, we could easily see a cash free digital currency emerge, but the human need for tactile, sensory engagement is also an important aspect of consumption and pure digital does not yet provide sensory feedback for sustainable change. The six year old addicted video game player, however, may not require sensory feedback….

Lee Kent
Guest
4 years 6 months ago

Just to add to this. My sister and family lived in Greece for a number of years and cash was not accepted anywhere. It took some getting used to and learning how it all worked but in the end, it was easy and safe.

And that’s my 2 cents.

William Hogben
Guest
4 years 6 months ago

There’s a big different between cashless and less cash. A cashless transition is still a ways off because of the issues cited in the Fast Company piece, but we’re going to keep shifting in that direction. Internet access is now considered a human right — in cashless societies, access to payments will be as well.

Bill Hanifin
Guest
4 years 6 months ago

There is a more powerful movement afoot to create a cashless society that spans international borders. It is being lead by a group of European bankers who cite Sweden’s progression towards a cashless society as the model for the future.

Control and consolidation of power does not bode well for the consumer when it comes in the form of the mega-mergers, for example those we have seen this past year in airline, hospitality, and pharma. The potential damage that a consolidation of power in the payments system could wreak is frightening.

Not only do people remain “un” or underbanked for the reasons cited in this article, but there are cultural reasons as well. Studies have shown that the majority of patrons of check cashing stores are not seeking to enter into a traditional banking relationship.

I suspect there will be proponents of the cash-free US coming into focus over the near term and hope that opposing voices will loudly put forth a logical argument in return.

Tim Hazle
Guest
Tim Hazle
4 years 6 months ago

Not until security is less of a joke. Just experienced ID theft this week. After spending two days contacting Federal agencies, credit bureaus, my bank and CC companies, anyone who expects or wishes for cashless in the very short term has not had this pleasant experience. Yet. I routinely have to replace a CC for unauthorized charges, mostly from foreign countries. With all my very detailed personal information floating around doctors’, dentists’ and various other offices waiting to be used or sold, I think under the floorboards in a fireproof box may be the best bet for now.

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Braintrust
"Hopefully we will never see an entirely cash-free society in the U.S. Too many people are unbanked or underbanked. And what happens if the power goes out? Techies can dream, but there is no need to impose their predilections on everyone else."
"I’ve never seen any cash used on Star Trek, so eventually we will have a cashless society. But it will be a while, at least 10 years and probably more than 25. Managers are focused on things like getting the last mile solved, which if I recall from Star Trek, will ultimately be accomplished through teleporting."
"Anyone who has ever worked in a job where you depended heavily upon tips should find the prospect of a cashless society to be worrisome, at least. And for the time being, cash = privacy."

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