Will the U.S. Go Cashless?

Over the years, more and more U.S. consumers have started using cashless digital payments than ever before. When data was tabulated in 2016, for example, 53% of purchases made in the U.S. were made digitally; just 25% were made in cash.

In some countries, cash seems to be on the way out as a form of payment. In Sweden, for example, just 20% of purchases are made in cash.

Globally, though, technology news indicates that 80% of financial transactions are still done in cash.

Will the U.S. consumer ever go fully cashless? There are business strategies arguments both pro and con.

Unlocking Value…

Perhaps the most persuasive pro-cashless argument is the sheer amount of money spent making cash available and getting it. From the standpoint of banks and governments, they must transport, stock, print, and make available cash for consumers to have it. The U.S. government alone spends an estimated $200 billion per year to make cash available.

From the standpoint of consumers, it takes a lot of time and effort. Going to a grocery store or ATM to receive cash, storing it and so forth takes more time than using plastic.

Researchers estimate that governments could reap considerable savings by going cashless. Those that could unlock the value the most are estimated to be, in order, the U.S., Netherlands, Japan, Germany, France, Belgium, Spain, Czech Republic, China and Brazil.

Almost all establishments accept cashless payment.

…Versus Cost and Availability

But for many consumers, a cashless society is out of reach simply because they’re unbanked or not digital. After all, consumers need both to have a bank account and some form of digital payment set up in order not to use cash.

Even in the U.S., 8% of adults are unbanked, meaning they don’t have bank accounts. Most of these use cash methods, such as direct cash payment or money order, to pay bills. In many cases, people are unbanked because they find bank accounts too expensive. Cash is essentially a low-cost alternative.

While smartphones aren’t essential for cashless payment, they do serve as a useful proxy for mobile payments. While 87% of consumers in developed countries have smartphones, just 54% of consumers in developing countries do.

A Third Way?

Some countries have started phasing out the higher denominations of bills, arguing that they are seldom used. Even consumers who prefer to pay for goods by cash seldom use higher denominations.

Some observers believe that the existence of higher denominations means they are used by organized crime, and argue that phasing out the bills will make it harder for criminals to use cash.

Others argue, of course, that the increasing use of cashless methods presents its own security risks, with hacking of credit card and other identifiers important to the cashless economy on the rise.

Cash is also a form of instant payment. Paying via digital methods may be faster than checks, but it is not instantaneous. Many people like to keep at least some cash on hand, if only to purchase small items such as a coffee or soda.

All in all, the move to a cashless society looks likely to continue. But it is unlikely that the U.S., or any other country, will go entirely cashless.