Is Cash Going Extinct?
In today’s digital economy, it’s hard to see how cash can continue to survive. Many Americans, especially younger generations are carrying less cash every day. With the growing availability with mobile payments, many people prefer to stick to the digital side of things. So the question arises, are we witnessing the death of cash?
Digital is Expanding
The current adversary to cash isn’t digital payments via cards, it is mobile payments. China has moved away from cash in its urban areas very rapidly, in as little as three years. Their change isn’t focused on delivery and taxis either, even street musicians have adapted to the change and accept mobile payments as tips.
The main advantage in this change of behavior is efficiency, no longer do you have to stop and count bills, or worse, coins. The accessibility that mobile payments provide is also a huge boom. For example, people with low-incomes who spend most of their time working may not have time to get cash. Mobile payments reduces the amount of time they spend accessing their money, giving them more financial freedom.
Will we see this same shift happen in the US? Things are already heading that way organically, but they could get a push from legislation. If the Federal Reserve were to mandate the acceptance of mobile payments, that process could accelerate greatly. Currently, the technology is for early adopters and citizens in urban cities, but the ability to surpass those borders is what makes mobile payments so empowering.
Support from Business
Earlier in 2018, Amazon debuted its brick and mortar concept. While paying with your phone is quicker than finding cash, Amazon went one step further. Anything you take with you out of the store is automatically paid for via an app.
Businesses taking these steps away from cash to not only adopt mobile payments but to innovate those systems is key to the adoption. Right now there are a number of retailers accepting mobile payments, but because it isn’t all retailers, it is hard to fully rely on mobile payments. However, the fall back to these options isn’t cash, it is digital payments with cards.
The Case for Cash
Although Americans are using less cash, Millennials are still hanging on to cash. For a generation that is juggling lots of debt, many are shy to adopt credit cards, opting to use cash instead. The key to motivating Millennials into the mobile payments space and away from cash will rely on the ability to avoid building up debt and making the mobile systems affordable.
Many companies offer deals and rewards for the use of their mobile payments, but the lasting effect may still vary. Just as many people take advantage of HBO’s free trial account, the same people turn the account off at the end of the trial. The adoption of mobile payments and any new service hinges for many on the bottom line costs. Simply put, if they have to pay for the convenience of the service, they may stick with what they know, and save their hard-earned cash. Many businesses still require cash, citing the cost of processing digital payments as the reason. Places like farmers markets are still largely cash based, many people still give gifts of cash, and places like the DMV sometimes charge extra fees to use digital payments.
The Bottom Line
For many, it boils down to one thing, convenience. If we can avoid it, we don’t want to stop and count cash, type in a PIN, or sign a receipt. We just want to pay quickly and leave. We as users will move to the system that makes our lives easiest and fulfills our needs. A barrier to convenience for many are the fees that go along with digital payments, whether the business or the user pays them. For mobile payments to take over the systems have to meet all of those needs; cash won’t be disappearing until there is no longer a need it can fulfill that mobile cannot.