Toward Cashlessness?

One of my students came across a humorous blog post from February, 2012. Titled, “What your payment method reveals about you,” the author listed a series of unlikely payment actions and a line on the presumed personal characteristics of the payer. The humor appeals to… well, us, anyway, and probably you, too.

Slinging your card down: You've definitely shoved a dog's face away from you because "move."
Slinging cash down: You've consumed alcohol that's involved whipped cream in the past week.
Using your Hello Kitty-themed card: You have many other credit cards.
Handing a bag of nickels and dimes, uncounted: You are nine.

Around the same time, the United States Agency for International Development launched an initiative to replace the use of cash in aid efforts with electronic forms of value transfer:

"If you care about reducing poverty, then you must also care about reducing the reliance on physical cash. We begin a movement to do just that.  USAID Administrator Rajiv Shah is announcing a broad set of reforms [in order to] reduce the development industry’s dependence on cash.  This includes integrating new language into USAID contracts and grants to encourage the use of electronic and mobile payments and launching new programs in 10 countries designed to catalyze the scale of innovative payments platforms."

The USAID “Better Than Cash” program was the culmination of at least a year’s discussion internally and with major donor agencies over the costs of cash for the poor--the heightened risk of theft associated with physical currency, the anonymity of cash, the difficulty in transporting and storing cash for those without access to formal financial institutions. Our own work has been enlisted in this effort, yet we are a bit more circumspect: although there are  very real problems associated with cash, there are also virtues. One of these virtues is that cash is publicly issued, not privately enclosed and tolled like most electronic forms of value transfer, and almost always accepted at par value. We’ll return to this topic as we examine some mobile phone-enabled money transfer and payment systems in the developing world, and regulatory responses to them, that might provide useful models. Over the course of the week, we will look closely at cash and how the debate over cashlessness—at times downright silly—is getting more serious, as at least some major actors shift from “the evils of cash” to “the benefits of an agnostic digital payment platform.” We think this is a consequential shift.

And we’re agnostic ourselves: we find virtues in proposals for digital payment platforms, but don’t want to lose certain aspects of cash—its social and public nature.

Indeed, the cashlessness rhetoric is getting a little crazy. Shortly after the USAID announcement, David Wolman, author of a new book titled, The End of Money, appeared on numerous radio talk shows throughout the United States. Among other things, Wolman dallies with the purveyors of literally apocalyptic predictions that money itself must end for the final redemption of Man. Just last week, Maurer witnessed an Occupy protestor doing a sort of interpretative dance with a dollar bill that culminated in its being set ablaze, accompanied (naturally) by primal chanting and drumming. And in this election year, the Tea Party movement on the American right has brought critiques of currency and the Federal Reserve back into political discourse. PYMNTS.com last week produced a roundup of recent discussions on the end of cash... and its continued dominance for everyday payments; and Bloomberg posted a more sober commentary on how "the road [to a cashless society] will not be as smooth and straight as enthusiasts might suppose." We agree, and we'll be circling back to this theme during the week.

From Nigeria’s “Cashless Lagos Project” to mobile phone-enabled services that promise to help the poor go cashless or “cash-light,” new technologies—and protests from the Tea Party to Occupy—are calling cash into question. Something’s definitely up. Cash is attracting heightened scrutiny, and from a wide (really wide) cast of characters. This week, we’ll be looking at what’s going on with cash today, why so many diverse constituencies are looking for alternatives, and why we might want to pause before announcing its demise.