In my latest book, The End of Money, I take a look at the history of currency and explore the cost and chaos associated with cash. I also look to a cashless future and investigate the trend of consumers using mobile phones in lieu of paper or coin currency. Here are some of the questions I'm most often asked, and my answers to them, about what the end of cash might look like -- and when this much-discussed next generation of payments might become a reality.
If you had to write an obituary for cash, what would it say?
Cash was one of history's greatest technologies. For millennia, cash turbo-boosted commerce and enabled trade between people and cultures across the globe. But in the 20th century, cash's relevance began to diminish, due to the arrival of digital money and electronic payment methods that are faster, safer and cheaper. Cash proved resilient, though, at least in the early decades of the 21st century, digging its heels in certain geographies and corners of the economy, most notably small-value purchases and the underworld. But the digital money revolution continued as innovators rolled out ever more ways to transact, further marginalizing cash. In the year 2026, in the wake of a particularly revelatory study by the Federal Reserve about the wider costs and consequences of maintaining banknotes and coinage in circulation, the U.S. Treasury followed the lead of most other developed economies by eliminating denominations of physical currency, with the exception of the $5, $10, and $20 bills. (Citizens had until 2030 to turn in notes and coins slated for demonetization and receive the corresponding electronic value.) Twelve years later, on June 28, 2041 -- David Wolman's 67th birthday --production of U.S. dollars in physical form ended for good.
Will we ever be a cashless society? How could a cashless society benefit consumers and merchants?
The benefits are staggering. Reduced cash-management costs are really just the beginning. One must consider the broad spectrum of socio-economic gains -- things like reduced criminal activity of nearly every stripe and the promotion of financial inclusion. Whether we will ever do away with it completely remains uncertain, and in many ways is less critical than the developments that are pushing it toward obsolescence, because those are what really change the way we live. That is true for consumers, merchants, and especially those who for too long have been denied the benefits of money in electronic form. And for what it's worth, if we never become a cashless society, it will be because of political and psychological reasons, not economic or technological ones.
What do you see payments looking like in 2020? 2050?
The future of monetary transactions will come down to the apps and tools, and we're all eager to see the ones that make it seem like there is no app -- when the transaction seems truly seamless. In the shorter term, increased interest in and enthusiasm for peer-to-peer payments will rise. The concept still has to be made clear to people who aren't the early adopters, but it will happen. It's a bit like the history of the credit card: gradual adoption at first, followed later by a big boom. As for 2050, the phone (or the tool formerly known as the phone) will be the linchpin of our lives in payment (to say nothing of banking, health, language translators, poetry instruction, and everything else). But a date like 2050 is so far out there. We're kidding ourselves if we think we can know what will or won't be possible almost 40 years from now. We don't know what payments will look like then, although they will have a lot less friction than payments today.
Does the technology exist today (security, mobile, wireless) to be a cashless society? Who will help lead the charge?
In those corners of the economy where cash has dug in its heels, its speed and universal acceptability remain tough, but not impossible, to beat. Think about tipping at a restaurant or giving a street performer a few dollars. The transaction may technically be doable, but if that technology doesn't provide users with a clear advantage(s) over cash, that is essentially no different than saying the technology doesn't yet exist. Mobile operators pioneering mobile money and mobile banking services deserve a lot of credit, especially in the developing world. The major players in payments today will play a big role, unless new technologies somehow enable a complete end-around existing network infrastructure.
Will the future of payments make global commerce easier? How does this benefit consumers and businesses?
If the future of payments means reduced financial friction for businesses and the general public, then we can safely say that global commerce will be easier. But the far more important question is: Will the future of payments make global commerce easier for more people? Because if the future of digital money is all about making commerce easier for the people who are already well off -- what's the point? The mission should be finding ways to use novel payment tools and digital technologies to lift all boats.
If you had to speak at cash's funeral, what would you say? How long do you forecast it sticking around in our routine lives? Be sure to voice your opinion and leave your answers in the comments section below.