Why cash won't leave the U.S. payments system anytime soon

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Many in the payments industry insist that cash is becoming less important — but that doesn't mean it will ever go away.

With stories in the past couple of years about regulators in India seeking an end to cash, and a 2018 U.K. study revealing that debit cards finally dethroned cash as the preferred payment method in that country, it would seem it is only a matter of time before many countries could call themselves cashless societies. Some travelers to the U.S. even consider cash a last resort.

Despite these attitudes, cash has plenty of reasons behind its longevity, such as its immediacy and safety from cyber crooks. It's a version of real-time payments without the fraud and privacy concerns that come with digital payments.

"A third of Americans still use cash, on a typical weekly basis," said Bruce Renard, executive director of the National ATM Council, citing recent Pew research. "Also, 8.4 million households were unbanked in 2017 and those folks would be purely on a cash situation."

It would be dangerous if society simply let cash go away, Renard said at the recent Mobile Payments Conference in Chicago.

"People who live on a cash basis would be in trouble," he said. "I think ultimately, there can be technological solutions to come to the fore to replace cash, but it will be a pretty rough transition in totally doing away with cash."

That, in part, has been the impetus for lawmakers in some cities and states to consider or pass laws that prohibit brick-and-mortar retailers from barring cash, Renard added.

"In the U.S., we love cash still," he said. "There is more cash [available] than ever before, but it is clear that many transactions are moving from a cash basis to a digital basis, but I don't see it as a significant trend to displace cash at this time."

As for the ATM, Renard said the device that has long supplied consumers with needed cash will continue to "morph into something more than just a cash box."

In other countries, ATMs have been used for other services. In the future, Renard said, it could be common to obtain virtual gift cards at an ATM and maybe even do so through biometric authorization, a signal that the machines will become more software-driven than hardware-driven in the future.

If there is a transition period unfolding to make digital payments and mobile wallets ubiquitous in the U.S., cash can't be the only old-school payment method to be targeted.

"I think we have to stop writing checks first, and people are still writing checks," said Katherine McClure, partner development manager at PPRO. "When I was in Germany, a young female colleague asked if I still wrote checks, because she had seen them used in movies, but had never seen a check in real life."

Indeed, if any legitimate move to displace cash in the U.S. were to take hold, it would have a foundation in a younger generation that increasingly turns to debit cards and mobile devices to make payments.

While holding up his phone, Elliott Goldenberg, vice president of digital products and innovation for Mastercard, said, "If younger people can't do something on this, they won't do it."

The demographics on payment types "will really spike" when younger generations enter the economy and start initiating more transactions the only way they know how — through their mobile devices, Goldenberg said.

If cash is going to hold a position as a favored payment method, it will likely ride on the coattails of what merchants and payment providers in mobile commerce have been saying all along — they want consumers to have a choice of how they want to pay. Initially, that credo may not have had cash in mind, but cash has been stubborn about leaving its spot as a viable and trusted choice.

"Choice is really important to Mastercard and I think it is important to everyone," Goldenberg said. "It is all about using the appropriate technology in the appropriate sectors and markets and to do it in a safe and secure way."

Cash remains part of that choice currently, but in the not-too-distant future various cryptocurrencies could start to see their way into the mainstream as well — and potentially put a dent in the use of other payment methods.

"Every year we keep asking if mobile pay has become ubiquitous yet, and it is really gaining steam, but it has to have many more value-adds for the consumer," said Tony Diaz, senior product manager at NCR.

Because a mobile transaction is essentially a credit-based transaction in a digital form, there is no reason that cryptocurrency could not elevate itself to a place where it replaces credit on the back end of a mobile transaction, Diaz said.

The nearly 80 million millennials in the U.S. represent about 30% of the retail market and spend trillions of dollars annually, Diaz noted.

"Seventy percent of those use mobile phones to make payments, and 40% use universal mobile payment apps," he added. "Crypto could easily streak in and become part of that equation."

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