The Biggest Problem in the War on Cash

Yves here. I hope Clive and other non-US payment systems experts will pipe up, but banks in the US have hoist themselves on their own petard with respect to trying to get rid of cash. The article notes that these efforts are discriminatory, in that lower income people are often un or under-banked. But a second issue is that the US has old payment systems infrastructure because banks and other players chose to milk what they had, and they has resisted offering products to serve the unbanked at low cost. For example, in South Africa in 1997, employers would pay low-wage workers on a chip-based stored value card. It’s a disgrace that banks have yet to offer a non-gouging version of that sort of product for lower-income households here.

By Fred Dunkley, a tech analyst, writer, and seasoned investor with years of experience covering global markets and geopolitics. Originally published at SafeHaven

Cash is cumbersome, dirty and increasingly too tangible for our digital desires. And while we’ve already given it up to a fair extent for the credit and debit card–it still means we have to wait in lines, and that’s so 1990s. In an effort to cut costs and avoid long lines in front of the cash register, a small-but-growing number of retailers have stopped accepting paper currency entirely. Over the past couple of years, some retail stores and restaurants in large cities have simply ceased cash operations.

But the problem is that while it may be safer and more convenient to pay without cash, banning the use of cash could be discriminating against low-income individuals without credit or bank accounts because of the fees and minimum balance requirements.

In fact, local and state governments are rather up in arms about the whole thing.

Earlier this month, the Philadelphia City Council passed a bill making it the first major city to ban cashless payments. New Jersey. Now New York City, Washington, San Francisco and Chicago are now all weighing similar bills.

“With a 26-percent poverty rate in Philadelphia, the mayor believes in equal opportunity for all,” city spokesman Mike Dunn said in an emailed statement to USA Today.

“It is important to recognize the fact that not everyone has access to banks or lines of credit,” the New York Times cited State Senator Nellie Pou, one of the sponsors of the bill in New Jersey, as saying.

Going cashless is inevitable, but much of the country isn’t ready for that just yet.

This was mostly expressed in Philadelphia where more than one-quarter (some 400,000 people) live below the poverty line, according to a Pew Charitable Trusts report from last year. With $19,700 a year for an adult with two children at home these families lack access to credit cards.

For New Yorkers who don’t want to wait in line anymore, it’s important to consider that despite some of our penchants for going fully digital, we are still largely a cash society.

A Federal Deposit Insurance Corporation report from 2017 shows that 6.5 percent of the U.S. households were “unbanked”; in other words, households in which no individual has a checking or savings account. Another 18.7 percent of households were categorized as “underbanked”. And while those rates are declining all the time, they are still some large hurdles to a cashless society.

It’s also worth noting that cash was the most frequently used payment instrument in 2017, accounting for 30 percent of all payments. Credit and debit cards were used in 48 percent of consumer transactions in 2017, of which 27 percent went to debit and 21 percent to credit card payments, according to the  Federal Reserve report from the fall.

Still, financial institutions are using every weapon in their arsenal to fight against cash because their customers are the ones who want to go cashless.

Visa has been offering $10,000 each to as many as 50 restaurants and food vendors to pay for their technology and marketing costs in return for a pledge to go cashless.

And e-commerce giant Amazon, for its part, came out in opposition to the New Jersey bill to ban cashless retail outlets. After all, it has five cashless and cashier-less pop-up stores and one bookstore there.

Now it’s lobbying local governments who are considering their own ban on the Amazon automated stores.

There are only a small number of Amazon Go stores in operation today, but the company was planning to open as many as 3,000 locations by 2021, according to Bloomberg. Now it might have jumped the gun as local and state governments worry about discrimination and poverty.

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  1. Lambert Strether

    Has anybody done the greenhouse gas calculation on “going cashless”? I would bet, with the requirement for servers and all the tech (often including cellphones), cash would be a clear winner. Print it, carry it, put it in a cash drawer, send it in a truck (at worse) to the bank. Not a lot of greenhouse gas emissions there….

    1. Alex V

      Asketh and thou shall receive:

      “It turns out that the total environmental impact of an average cash payments amounts 700 μPt [as global eco-index] and has a GWP [Global Warming Potential] of 5.0 gram CO2-equivalents. These results indicate that the total environmental impact of a cash payment is 1.5 times higher and that its GWP is 1.3 times higher than of a debit card payment.”

      Not sure how ideological the studies are….

      1. Clive


        The studies are card-issuers’ own. The data centre costs are for run only, not build and don’t include their embedded carbon content costs, nor those of the EPOS terminals. Nor their energy costs. These are depreciating assets with an economic life of 5 to 7 years. Manufacturing electronic components and their final assembly is not an environmentally friendly activity.

        Cash, of course, has handling and transport costs. These depend on the business concerned. Some end up cash-heavy and need to periodically send the cash to a cash management centre. Some pay out almost as much as they take in. So detailed analysis is very context-sensitive.

        1. Alex V

          Regarding the POS equipment, one could probably find that cash equipment comes out worse, since it needs to be larger in physical size. Although the product lifetime may be longer. I however highly doubt you will find many retail establishments willing to go back to non electronic registers.

          In any case, as with any life cycle analysis there is never an easy answer. Therefore I feel it’s important to avoid blanket assumptions on legacy systems being better.

          1. Clive

            A dumb cash register, even an electronic one, will have an economic life only limited by the quality of its initial manufacturing standards and quality of components. You don’t need to “patch” a cash register for security updates, nor do you find it has to be withdrawn from service because the firmware doesn’t support the mandated card network feature-set. So long as it adds up correctly when the buttons are pushed, the buttons themselves haven’t worn out, the receipt printer works and the draw opens and closes, you can get 20+ years service life out of a good quality cash register. No way will an EPOS terminal last that long.

            But as you say, it’s virtually impossible to get a definitive “it costs this” figure. Rural cash handling will be very carbon intensive, for example. Cities will be a fraction of this due to proximities and consumer density.

          2. tegnost

            well they may not be “willing” to go back to pre electronic registers, but in the event of a prolonged period of no electricity they’ll certainly be willing to take cash in the mean time…

          3. The Rev Kev

            How about a cash register with a manual backup? That way, even if you used batteries for recording purposes onto an inbuilt hard-drive, you could still process transactions. In our town, when there is a power blackout in storm season, store have to shut and even the post office as well because they are unable to process payments although the items are still on the shelves and people have cash in their pockets. As for legacy systems, I bet that you could go into an antique store, find a century-old cash register, take it home and clean it up, and then it would be fully working again. Do you see any modern POS equipment that could do the same a century from now? And with changing technologies, I see them being changed again and again every coupla years. I joke with the bank staff that they should retain a working example of each type and in 20 years time donate it to some museum of technology.

            1. JBird4049

              I worked in a small charity store that scrounged about. A lot. So having used cash registers so old that they had a back up handle to actually “ring up” transactions, I can say it was doable for one time the store was caught in a long blackout. We were still using the old imprinter and carbon paper also. It was a hassle but better that than no business.

              So what will happen when California gets slammed with another serious earthquake? It will happen and could easily affect ten million people. The greater San Francisco Bay Area or all of Southern California could lose their power and possibly for days. ApplePay will not be working. So all those techies might be in for a shock.

              Using credit cards is okay so long as there is some redundancy, but I am seeing any evidence of that, and what will happen? It is crazy as we all know that whole states will lose power in a natural disaster. Is this more short-termism?

    2. Brian (another one they call)

      You can not use your real(sic) money, the dollar is the world reserve currency after all and other people need it to conduct their business.
      5Greenhouse radiation will make you forget your passwords before you die from using your phone. Why worry?
      Coins were shown to be ill advised for they had substantial amounts of precious metals within and did not disintigrate with a few months of use, thus they had to be replaced with tokens in lieu of real value. The abuse of which is legendary.
      the passing of our friends on 4 legs is painful. My sympathies to all.

  2. Clive

    Yes, what’s often either intentionally or accidentally misunderstood is that any non-cash settlement system carries inherent credit risk for the acceptor of the non-cash payment system. To simplify somewhat, if you accept payment in cash (you allow the customers hand over notes and coins) they’ve cleared their debt. But if you accept a non-cash settlement, you set into motion a long, complex and failure-prone chain of electronic transmission of value. Nowhere in the world — and the US is right at the bottom of list of maturity of systems — do you present your card and the merchant gets settlement then and there.

    Needless to say, problems are most likely occur to those who do not sit on nice well-padded cushions of wealth. A card issuer can refuse to honour transactions for a huge number of reasons (abuse of facility, failure to return a payment token when demanded, too many unverified transactions above a predefined threshold and, of course, insufficient funds). If the merchant hasn’t run an authorisation, they have to stand the loss. But what if for whatever reason (equipment failure, communications issues, operator errors) you can’t run an authorisation check? Tough luck, if you don’t take cash because you’ve signed up to be totally cashless.

    Or what’s happens if a customer only has one payment token? I’ve got a wallet full of cards so if one doesn’t work for some reason, I’ll just try another (this happens about once a month on average — not for credit declines, I can look on the host platforms at the backend system and it’s usually for a fraud and loss control tripwire such as too “many transactions” in “too short” a time or too many “card not present” transactions (“contactless” transactions are card-not-present and you usually only get to do five or six before you’re supposed to verify with a PIN transaction you’re the legitimate card holder)).

    But low income group members of society might be lucky to get given one card. Lenders are very wary of giving too many lines of credit (in case the person becomes a runaway spender and every lender finds there’s no other lender the person can borrow off to pay them).

    The war on cash is therefore financial exclusion and social cleansing by another name. Merchants signing up to “no cash, card only” are effectively saying “creditworthiness is a must here”.

    1. charles 2

      To simplify somewhat, if you accept payment in cash (you allow the customers hand over notes and coins) they’ve cleared their debt. But if you accept a non-cash settlement, you set into motion a long, complex and failure-prone chain of electronic transmission of value. Nowhere in the world — and the US is right at the bottom of list of maturity of systems — do you present your card and the merchant gets settlement then and there.

      Not really, Singapore and Malaysia pull that trick. Singapore has the “PayNow” system which offers instant bank transfers between local accounts, both for individuals and businesses. For individuals, it can be linked to the NRIC (equivalent of social security number) or to a mobile phone number. For businesses, it can linked to the UEN (equivalent of Federal tax ID). Transfer between individuals is free, transfer to a business is with a flat fee of 0.20SGD. Retailers just have to display a QR code to get paid and receive a SMS or mobile notification or email (or all three) quasi immediately, before the customer leaves the shop. It is fast enough for street food vendors.

      Eurozone is on its way to the same endpoint, with the “instantaneous SEPA” or TIPS in ECB jargon, priced at 0.20EUR. It is a little slower (guaranteed response time is 10 seconds), but it works. My bank in France already offers it. Eventually, it will be every where. Apart from the US, no country has an incentive to feed the VISA/Mastercard Duopoly.

      1. Clive

        You’re forgetting what the card networks bring to the party. Singapore and Malaysia are “high trust” countries (Yves has written at length previously about ultra high levels of social cohesion and trust in Singapore; Malaysia has a harsh criminal and civil code which, erm, tends to keep people in line although not without some civil liberties compromises, which is an understatement). This omission in comparisons allows you to forget what the card networks’ “hidden” services are — things which are unfortunately essential in our cultures which don’t do enough to dissuade too many from operating under a “screw you” mentality.

        PayNow has unlimited non recourse payment token owner liability. Your NRIC or phone gets compromised (stolen with your security details known by the thief or fraudster) — you get, potentially, cleaned out unless you notice and advise your bank. The merchant isn’t on the level, you get overcharged, you don’t get the goods or services you expect, you have a product liability issue or they simply disappear — or one or other of you simply makes a mistake? Too bad, you’ll get little or no help from PayNow, no chargeback rights unless you jump through a lot of evidential hoops. You have to take it up with the merchant directly with zero support. I’d rely, 99.5%-ish, on this working out equitably in somewhere like Singapore. What do you think my chances are in the US or the UK? 50% or less.

        With TIPS you’re confusing money transmission with the payment factor, If you can find me a TIPS payment card or a TIPS token I can load into Apple Pay (not that I would ever use it, but just as an illustration) please show me where I can get one. The customer (you or I) and the merchant would use TIPS, potentially, to get the funds remitted from Bank A to Bank B. But the customer authentication, verification, cleared for value check, fraud and loss control, currency conversions, dispute resolution and bells and whistles like Stand in Processing are not in the TIPS feature set. You need a card network for those. Hence your TIPS transaction will be fronted by Mastercard, VISA, Europay, JCB or whoever. TIPS is providing the flow-of-funds backhaul, not the Point of Sale facilities.

        I’d like, well, love, someone to come along and effectively challenge what has in essence become a duopoly between Mastercard and VISA. But unless and until they replicate all the elements of the card networks to the same standards in terms of cardholder protections and reliability they provide, I can’t see any viable alternative. Certainly not PayNow and TIPS. If we lived in higher trust societies, things would be a lot simpler and nicer, certainly in terms of how we could do away with a lot of the bloat which the card networks create — and the skimming that enables. But we are where we are, so the things the card networks do are a necessary evil. Cutting them out the loop is, consequently, no way near as simply done as you describe.

    2. lyman alpha blob

      But if you accept a non-cash settlement, you set into motion a long, complex and failure-prone chain of electronic transmission of value.

      Indeed. And even if the transaction has been authorized and settled, it still isn’t over since the cardholder can simply institute a chargeback and the banks quite often side with the cardholder over the merchant and yank the money out of the merchant’s account on the cardholder’s say so alone, and then require the merchant to put in a lot of time and effort to attempt to recover the funds. This can happen weeks or months after the transaction was settled.

      At a company I once worked for, we had a very sketchy order for $10K and called AMEX to see if the card number provided had been stolen and were told it was not. A week or so later it was reported stolen and we were on the hook for the loss as the product had already been shipped. Not only did AMEX not give a rip, I believe they may have actually profited off the transaction that they knew to be fraudulent since they took $10K from our account but never refunded the fees they deducted from the original charge. I will admit the possibility that the fees were refunded and not noticed, as the average credit card statement for a company of any size is often so deliberately arcane as to be nearly incomprehensible.

      If what I described is actually the case, I would think that would open up the banks to all kind of liability. Profiting from fraudulent transaction ought to be a big no-no.

    3. Bill Wald

      A credit union is available to most everyone who has an address and a SS number. If the statistics were controlled for people without SS numbers. . . .

  3. divadab

    “Going cashless is inevitable, but much of the country isn’t ready for that just yet”

    Nope. Cash is a form of freedom – freedom from having your transactions tracked. This is why the financial overlords want to eliminate it. I say they can go to H-ll.

    I use a credit card when it is to my benefit – I.e. paying a corporate grocery store or Amazon. Hard to argue with a 5% or 4% rebate.

    But for private transactions, cash is the only way to keep them private. (Or barter, but the difficulties of barter is why cash exists, largely). Note that some banks are starting to charge for taking cash deposits – which seems stupid to me, but I suppose their logic is that they don’t want any part of illegal transactions and assume cash businesses are risky for illegality. Anyway, we’ll see how many business accounts they lose over this approach – I certainly won;t be dealing with any bank that charges for taking a cash deposit.

    1. Ataraxite

      I’m always fascinated by the way Americans (as it’s uniquely an American phenomenon, I’ve never seen cash-back on credit cards either in Europe or Australia, where I’ve lived) think that these “cashback” rebates are somehow free money.

      I have news for you: your bank is not giving you free money.

      You’re either paying for it through your annual fees for the card, the (hidden from you) costs the retailer pays for the credit card, the interest you pay, or – and far worse, because this is deeply regressive – other people’s interest. The last is the worst because it ends up being a transfer of wealth from wealthier people who can afford to pay their credit card off every month from poorer people who can’t.

      There is no free lunch.

      1. Harry

        If I dont take the cashback card, then I am still paying those ridiculous transactions costs increased prices, cos the card companies often require the store owners not to discriminate against cards. But I do take your point. This type of usury is considered illegitimate in most holy books – referring to Michael Hudson again.

    2. skippy

      “But for private transactions, cash is the only way to keep them private. (Or barter, but the difficulties of barter is why cash exists, largely).”

      Recommend you watch – Randall Wray presents a history of MMT as an introduction to the German version of his book “Understanding Modern Money”.

      You might not know it but your reinforcing a orthodox perspective which has been shown to be incorrect – too be polite.

    3. Jim A

      Jim A.
      I tend to have a preference for cash out of security concerns. I have never been contacted by the bank to get my cash reissued because there has been a data breach. Every time you use a credit card, you have added another company whose IT infrastructure you are relying upon to protect you from fraud.

          1. Wukchumni

            Of all the countries in the world I dealt with doing foreign exchange on a retail/wholesale basis in the 1980’s and 90’s (this was mostly 1st world countries), I found Mexico’s currency to be the dirtiest overall, for what it’s worth. Filthy McNasty.

          2. Arizona Slim

            Not only is cash deplorable, it’s backward!

            Oh, it also needs to Pokemon Go to the polls.

    4. charles 2

      But for private transactions,cash is the only way to keep them private

      No, it is theoretically and technically feasible to have anonymous electronic transfers on the buyer’s side, which is what most honest people mean. See a possible implementation of such a system van be seen at
      Now there may be a political resistance to such a system by the banking system, because money in such electronic wallets could be central M0 money, not banking M1 money, and central banks have been
      1) captured by the private banks they are supposed to regulate
      2) afraid of how easy it would be to “run to the bank” with such a system.

      One should not hide the political obstacle behind the alleged – and false – technical impossibility argument.

      Personally, I think that such a system will never be created by banks, but a committed government could do it.

      1. grumbles

        > Now there may be a political resistance

        That’s putting it mildly. A substantial portion of the push to go cashless is about the data, for marketing, intelligence and enforcement use.

        Bluntly, cash is a privacy screen on a portion the fishtank you live in, and a lot of voyeurs don’t like that.

  4. ambrit

    This article has several inconsistencies in it.
    First, the stand alone sentence that states baldly; “Going cashless is inevitable….” Why, pray tell, is that statement deserving of belief? It is a bald assertion that sets the parameters of the ‘conversation’ to support one point of view at the expense of the other, possibly competing points of view. The ‘Overton’s Window’ is not only moved; it is nailed shut as well.
    Second, the ‘dirty little secret’ about debit and credit cards, as opposed to cash, is that the cards are stealth loan ‘originators.’ When the cash in your pocket runs out, you cannot buy any more goods. With cards, you can obtain ‘excess’ goods by running into debt. This ‘running into debt’ can happen quite suddenly and without warning with cards. This phenomenon also disproportionately affects the poor for several reasons. The burden of overdraft fees as a percentage of gross income is higher for the poor. The poor appear to be generally less sophisticated about managing credit flows at the personal level. The “Debt Trap” is also much harder to extricate yourself from when you are poor. A cascade of adverse effects results from the initial ‘mistake.’ This dynamic is built into the “Wealth Card” system. This is a major source of revenue for banks; overdraft fees.
    Third, the basic insecurity of card systems is a built in lure to crooks, both legal and illegal. Credit card fraud is the ultimate “faceless crime.” It will bring one to his or her knees in frustration. The anger engendered is frustration squared, for there is usually no ‘face’ to put to the crime. At the least, when a street thug holds you up, you have a ‘face’ to focus your anger on. This is the essence of ‘Transactionalism.’
    Fourth is the Panopticon aspect of this form of human interaction. With cards, every transaction can be logged and analyzed. A flow chart of one’s individual life can be worked up and then that information can be used to predict one’s future activities. Then, deviations from the “Personal Template” can be flagged, with scrutiny from the ‘authorities,’ human or electronic, following. Thus, card use makes us “cogs in the machine.” To carry the analogy further, cogs in machines are interchangeable, and thus disposable. Apply this to people and we have the ultimate “Soulless Instrumentality.” References to Nazi Germany are perhaps “over the top,” but the underlying correspondence is valid. The Reich used outright violence to solve it’s “Deplorables Issues.” The ‘modern’ Panoptical state does not need to do so. all it need do is the sit back and do nothing. The “problems” will die off “naturally,” through starvation, disease, physical stress, or any of a number of “natural” causes.
    Oh my. Time to self medicate. Where’s my “Oxycontin VISA Card?”

  5. Paul O

    I have been slowly switching back to use cash at every opportunity. Not always with larger purchases from corps but I am actively scaling those back as far as possible also.

    There is an interesting system in nearby Bristol which several friends are increasingly using. I believe Bristol is still the only city in the UK which accepts the local currency for tax and business rates payment. Though, also interestingly, the Bristol system also accepts electronic payments.

  6. The Rev Kev

    I suppose that if Venezuelan had gone cashless, we would have an example of what happens to an economy when it is not possible to make ordinary, everyday transactions. I would hazard a guess and say that there would be no economy at all if this happens. We have seen from articles on Venezuela here how their net almost disappeared during the power blackouts so what would have happened if they had no power blackouts but no telecommunications instead and gone cashless? That would have meant no transactions period. So, if there was no cash, how is any business possible? Is there an insurance company game enough to pick up the tab for this eventuality, nay, statistical certainty? How is a country suppose to process foreign transactions? How about that country’s stock exchange? Going cashless is literally putting all your eggs in one basket on top of a very wobbly digital stool. And if it falls over, there is literally nothing to save you and you will be on your own.

    1. Shonde

      I was living in San Diego County when the 2011 Southwest Blackout occurred. Believe me when I say everything blacked out including all cell towers. The only thing in my house that still worked was my old land line. The only reason we were able to buy ice to keep our refrigerated items was because we had cash. That blackout taught me a big lesson on the non-resiliency of our electrical and hence our digital system. However, this blackout totality is seldom if ever discussed since it definitely shows that what we call progress can put us in jeopardy.

  7. Thuto

    Thank you Yves. I guess it’s a blessing of sorts that banks here in SA have (far) less of a “turn your nose up” attitude to low income earners compared to their US counterparts. This results in inclusive product innovation where the impoverished masses aren’t locked out of accessing basic banking services. Circa 2016 low income earners no longer required a bank account to get paid, employers send money to what is colloquially known as an “ewallet” linked to a cellphone number, the recipient can then withdraw all or a portion of those funds at an ATM just like they would with an actual bank account (including, in some cases, performing other traditional functions like electronically paying bills or checking ewallet account balances). Best of all, it’s a truly no fee product for the recipient as the cost of the transaction is borne by the employer, many of whom are now integrating it into their payroll systems. The product works because the recipients can withdraw the funds as cash and go about spending it as required by their circumstances but if cash was in the crosshairs of TPTB to the same extent it is in other markets, it’s hard to imagine such a product would have come to market. This obsession with eliminating cash stifles inclusive innovation in a very real and impactful way (some will say it’s a feature not a bug).

    1. notabanker

      Talking to a number of CIO’s and CISO’s in SA, Africa also has the most advanced and sophisticated mobile phone hacking and fraud industry. Every “innovation” they make is almost immediately countered with a reactionary “innovation” from the fraudsters. “Industry” was their word, not mine. It’s very analogous to the Iphone jailbreak software. It’s not a question of if they are going to break it, but how quickly they will be able to figure it out.

      There’s also the problem of the networked phone oligopolies trying to get in on the grift. I had a large Asian network provider pitch me on their 10’s of millions of unbanked customers. They weren’t going to provide that access for free.

      1. Thuto

        Your point about the hacking and fraud “industry” being a highly sophisticated one is valid. That said, much of the “sophistication” is enabled by consumers still being tricked to hand over personal data like passwords/pins via archaic methods like phishing emails or bogus links which when followed open a banking UI that mimicks that of the legitimate bank. And it must also be said that a lot of the fraud affects the “banked” with actual bank accounts (after they’re tricked into handing over their data), i’m yet to hear of a scheme successfully targeting ewallet transactions. The larger point from my original post though is that, sophisticated fraud schemes notwithstanding, the poor here aren’t being left out in the proverbial cold when banks chart their product innovation roadmaps as they seem to be in the US. This is a big deal for the “unbanked” as it removes not having a bank account as an impediment to finding work with employers averse to paying wages in physical cash (which most employers are).

        Re: mobile network operators wanting a piece of the action. I speak for SA here so it might be different in other African markets but here they’re no-commission intermediaries and the only way they make money from this is by selling bulk sms packages to banks (the recipient is notified of the transaction via sms) as they take no cut in the actual funds being sent to the cellphone number. If ZAR 500 is sent to my mobile number, ZAR 500 is what I withdraw at the atm, no “small percentage” goes to the mobile network operator.

  8. cnchal

    > Cash is cumbersome, dirty and increasingly too tangible for our digital desires.

    With cash, you can see the boogers, with digital keyboards and ordering screens you can’t. They are smeared into the edges of the keys and as we learned recently, McDonalds ordering screens could hospitalize you with all the feces smeared on them. I find it totally gross to have to use the same stuff where the previous user might not have washed their hands after having a crap.

    >Still, financial institutions are using every weapon in their arsenal to fight against cash because their customers are the ones who want to go cashless.

    Never forget, any financial institution’s purpose is to serve itself. Customers should consider themselves victims, so that statement is total horsecrap.

    As for Visa, bribing businesses to not accept cash is the hallmark of a criminal enterprise. Why anyone would use a credit card to pay for groceries or restaurant meals is beyond my comprehension. Do you really want the finance criminals to know about every calorie you shove in your mouth? Same goes for Amazon. If Bezos knows you like candy, that’s info he can sell to your insurance company so you can be up charged for whatever reason they like.

    Using plastic for payment is like cutting your financial throat, one ragged gouge at a time.

    1. CanCyn

      It is those cash back and points systems, the idea of getting things for free that has many folks using credit cards to pay for things like groceries. Some folks do pay their balance every month. Convinced that they’re good personal finance managers, no interest paid and using their statement as a budgeting record. Not a lot of thought about how all that cash back and points for free goods is actually paid for … the idea of ‘too good to be true’ is never considered.
      OTH, those who have less income but still enough to have a credit card, use their credit cards to spread their expenses by carrying a balance and making minimum monthly payments thus allowing them to ‘afford’ more stuff, or in many cases ‘afford’ their monthly needs – it all stays afloat as long as they remain employed.

      1. cnchal

        Cash back = bribery to use a particular seller of credit. I view it as criminal because the merchant has to raise their price on everyone else that doesn’t fall for the bribery. In other words cash customers subsidize credit card users. It should be illegal to do that, but the finance phuckers bribe the politicians with money stolen from us, which is the root of the problem.

        1. Shonde

          cnchal, I started using cash back credit cards for purchases back in the 90’s once I learned that every business that was willing to take a credit card had already raised their prices to reflect the % the business was being charged by the credit card companies. Before that it was cash. To this day, if I find a business that will discount for cash, I will pay cash but such businesses are rare.

  9. Matt

    Still, financial institutions are using every weapon in their arsenal to fight against cash because their customers are the ones who want to go cashless.

    That doesn’t make any sense. If the customers want to go cashless they are at liberty to pay by card, there’s no reason to oblige the merchant to make all the other customers use cards too. So I suspect the banks have other reasons – beyond customer “want” – to promote cashless operations.

    1. tegnost

      Did I read it wrong, or are the customers being referred to the banks vs. visa mastercard, not the consumers who stand between them, or is it that visa et al are the customers of the banks. That’s a confusing passage…Clive?

    2. Michael Fiorillo

      And since “consumer choice” is often heaved around to justify corporate behavior, it’s ironic (in a sinister way) that we are being denied the “choice” to use cash.

      Pointless and futile though it might be, I automatically boycott any business that won’t accept cash.

  10. human

    I don’t see the complaint of “long lines” except as having to wait behind someone digging through looking for their payment card, then using the payment terminal all the while pressing buttons, answering questions, awaiting responses and trying to read the damn things. I just wait patiently with my cash in hand for what will amount to a few seconds transaction.

    1. rd

      I can’t recall the last time a clerk had to press the blinking light to call a manager over for a cash transaction.

    2. JCC

      I agree, the sentence

      In an effort to cut costs and avoid long lines in front of the cash register, a small-but-growing number of retailers have stopped accepting paper currency entirely.

      was pure, unadulterated BS!

      Using cash means much faster transaction in my (consistent) experience.

      I don’t have a debit card, and as my work area (a Navy Base) moves towards cashless food service I’ve made it a point to order food in the local shops and then, as I watch them start the prep, played dumb as I explained all I have is cash.

      Small satisfaction and directed at the wrong people (and it only works once), but it’s the only way I have of protesting.

      And, as Matt says above, what is wrong with choice? Most customers do not care either way. Only the banks care. They want a piece of the action

      1. Wukchumni

        Nice fiat accompli!

        They sell uncut sheets of FRN’s and 100x 32 note Dollar bill sheets showed up in LA after being used in Beverly Hills Cop 3, and the studio prop guy only wanted face value for them, so you couldn’t go wrong really, and I took a few sheets into a casino in Tahoe with my handy little Swiss army knife with cute scissors, and would cut out individual notes as I needed them in order to feed my wagers on the blackjack table, and to be honest, my handiwork was a little less than straight when it came to cutting.

        This got the pit boss a little more than mad at me, and he demanded to know where I got the sheets from, and I sheepishly told him “…the government…”

  11. Mel

    Private transactions don’t have to be mysterious. When go to the weekly Seniors’ Club for cards and bowling, $5 a year for membership, $1 a week to pay for the hall, $.25 and $2 for a couple of lucky draws for the excitement. Cash. The Club doesn’t have to rent a (quite expensive) card terminal; being an informal, volunteer outfit they probably couldn’t get one. We don’t have to bother or depend on a bank.
    A colleague of mine from China was describing how you couldn’t even start a jogging club without formal continuing contact with the Communist Party of China. Cashless commerce would be, in its way, the same thing.

  12. Tom Doak

    All of these concerns are valid, but pale in comparison to the possibility that the banks or the government might decide to erase your wealth someday. Asset seizure is one thing when the cops take what they can find, but if we become cashless, they will be able to take everything in one click.

      1. JBird4049

        It’s funny how one of the criteria used by many law enforcement agencies for being suspected of criminal activity is the carrying of cash. Let’s say that again. One of the criteria for being suspected of criminal is the carrying of cash.

        Since very small businesses, poor people, and even just travelers are the most likely to be using, saving, and carrying cash they are the most likely to be labeled as a possible criminal and have all of their money taken.

        So a nice bit of circular reasoning to justify stealing from the poor.

  13. Thomas

    The movement towards cashless payments, to me, highlights a useful policy tool for central banks in a future zero-growth world: negative interest rates. Cash, of course, pays zero interest and thus is a strong defense against banks taking your wealth if you choose not to spend it. But in a cashless world, such a regime becomes an appealing possibility to stimulate economic activity–which continues to increasingly be the purview of central banks rather than legislatures, unfortunately.

  14. Wukchumni

    I’ve mentioned it many times before, and aside from getting the paper right-which is the trickiest part, counterfeiting paper* money in this age of easy digital transfer isn’t all that hard for any government with bad intentions, and more difficult for individuals, not that they aren’t trying.

    Whenever I do a cash transaction and the cashier at a retail store puts the counterfeit detector pen to it, that’s my opening to ask how often counterfeit/altered currency is proffered to them, and i’ve never in around 100x had a cashier tell me “No, i’ve never had any”, just the opposite, some will tell you it’s an occurrence that happens 2-3x a week, that sort of thing. It never gets reported in the media.

    * why haven’t we gone to plastic ‘paper’ money, common throughout much of the world?

    1. rd

      I believe it is the $100 bills that get counterfeited the most. So if you are just carrying 10s and 20s around in your pocket, the odds are low they would pick up counterfeits.

      1. JBird4049

        It does happen especially as a cashier is less vigilant small bills. It is also too time consuming to go through a small wad when very busy. Having people yell at you for being slow is not fun. Just stick with the 100s.

  15. rd

    Hmmm….I just picked up my $36 worth of dry cleaning and tailoring repairs at my local place that does not accept credit or debit cards. Cash only. I think it is the 5% or so fees charged by the card companies that makes them go cash free.

    Apparently, they have not heard of the desirability of the cashless society yet.

    1. maxi

      a few years ago in Baltimore both the barber shop i went to and a vegan bakery were cash only.

  16. rd

    If you go into a restaurant in Canada, they come to your table with a little wireless card reader device that you stick your chip card into, select your tip, and then put in your PIN number without the restaurant staff ever touching your card. Most American cards are a pain because most don’t use PINs yet, so they have to print out the receipts from the little machine and then you have to sign them. Canada has been doing this reader and PIN technology for 10-15 years but the US decided that it cost money and so has elected to stay with the old technologies.

    1. Cal2

      And the tip is then figured into the hourly wage of the server, subtracted from what they pay them, and is fully taxed?
      No thanks, if (infrequently) paying with a credit card, I always tip in cash.

      Family run small businesses get the entire bill paid in cash. That way you are not handing 2-6% of the sales price to the CC company, which is often the profit margin in places like grocery stores.

      The War on Cash is a war on privacy, freedom and democracy. Punks like convenience. People who prefer convenience to privacy don’t deserve democracy.

      1. Cashless

        I’m a little surprised at how many comments there are that do not mention the word “privacy”.

        In a cashless society someone has access to precisely what you do. All of it. They may not know precisely what each transaction means, but they will sure try to infer things from it, and you can bet that law enforcement will become heavily invested in this, using things like AI to “find the criminals”.

        Let’s say that you’re a single woman who watches or walks dogs in your neighborhood. Don’t be surprised if you get flagged and investigated as a prostitute – after all, you have a lot of random people paying you $50 per day.

        Let’s say that you want to skirt the law a little bit and buy some illicit substances from someone, maybe a little LSD. Well, now you’re on record as having done so, so when they get busted, you get busted too.

        Or maybe you’re in financial trouble and you go begging among your friends for a little help with the rent money. You manage to get your $750 from your friends, but don’t be surprised when the IRS taps you on the shoulder because you didn’t pay your taxes on that “income”.

        Maybe the credit cards continue to sell your purchase history to anyone and everyone who wants it. It’s happening now, but you can avoid it to a degree. In a cashless world maybe a future employer will get your purchasing profile and use that to decide if you are a worthy employee.

  17. John

    Don’t worry, Mother Nature will sort all this out. When the electric grid is functioning only a few hours a day at best, it really won’t matter what the settlement system for the chip in the card is. There are places on the planet like this. Lambert’s William Gibson quote, “The future is already here, just not evenly distributed”.

  18. flora

    For New Yorkers who don’t want to wait in line anymore, it’s important to consider that despite some of our penchants for going fully digital, we are still largely a cash society.

    I really don’t understand this line. CC and debt card transactions take longer at the register than cash transactions, at least that’s true at the grocery stores where I shop.

    1. Rhondda

      Perhaps there’s a conflation between actual cash and checks.

      I was checking out at Costco the other day and I was rather shocked at how nasty the clerk was to an older lady in front of me in line who not only had the poor grace (/s) to be slow because of a bad hip but also the gall (/s) to pay via (gasp!) check. The clerk was tapping her fingernails exaggeratedly, rolling her eyes and grimacing. I just tried to keep my RBF down to a minimum — with a nice layer of archaic smile on top– as the clerk performed her schtick.

      Writing checks does take longer but it’s such a minor inconvenience, IMO. I’ll agree with the Disney heiress recently in Links– such minor inconveniences as waiting patiently and making accommodations for old folks and the like keep us human.

    2. pretzelattack

      it’s a headscratcher, like the “a cashless society is inevitable” statement.

  19. Cal2

    I don’t know about you, but I like a cashless society!

    Lines move quickly, there’s no handling that funny smelly stuff that god knows who handled, the metal oxides, skin bacteria on those pesky tokens, etc.

    Best of all, I don’t have to stand in line with darkies, mexicans and white-trash riff-raff with bad teeth and poor credit, because fortunately, they can’t even open the door of our shoppe’s electronic lock without a high value card.

    I can’t wait for Chinese Co-Prosperity Social Credit Scoring to come to America, that way, the lines where highly evolved people like me shop will be even shorter and things will move more quickly, as a superior class of people get to associate with each other and cross fertilize our society with their vastly superior knowledge and ways of seeing and doing.

    Just in case someone doesn’t get it, that’s sarcasm.

    Cash is Patriotic. Cash is private. Cash is democratic. Cash supports and enables small business that keep 100% of sales without a hidden tax going to parasitic card companies.
    Cash can’t be hacked.

  20. Wukchumni

    Even though they were so large that they were often never moved, i’d have to go with Yap Stones in a war on cash. Maybe if you had a trebuchet they’d be more effective @ long range exchanges?

    I see the current term for them is Rai Stones, somebody must’ve alerted the p.c. police and had the name changed on the double!

    The monetary system of Yap relies on an oral history of ownership. Because these stones are too large to move, buying an item with one simply involves agreeing that the ownership has changed. As long as the transaction is recorded in the oral history, it will now be owned by the person to whom it is passed and no physical movement of the stone is required.

  21. pretzelattack

    we dont have to deal with doorhandles etc., alexa will open the doors for us. i can scarcely wait for our new
    perfect virtual world.

    1. pretzelattack

      i have no idea how this post wound up here, meant to be a reply to flora above.

      1. Arizona Slim

        Let me guess: The Naked Capitalism web server likes potato chips better than pretzels.

  22. justsayknow

    So a friend has a business that has checking accounts at two banks. Both banks now have a funds available policy of twenty four hours/next day for deposited checks. The only practical way to cover an account going into overdraft is with cash. Period.
    Otherwise overdraft fee. KaChing!

  23. Jeremy Grimm

    I miss the heft and textures of our older coinages. The new currency and coins seem more and more like Chucky-Cheese play currency than real money. I wish we would make more attractive coins. It would be nice to have a $5 coin and larger $1 coins. Though I am less and less fond of the money the U.S. mints and prints I view the push toward going cashless as a truly frightening trend. As several commenters have noted — when the Grid is down cash-in-hand becomes the only money. Besides this I am not comfortable with the many ‘convenient’ ways to access and move my money around through networks. I would prefer all transactions were either cash or check with hard-copy cancelled checks, and bank printed monthly statements, the way things were when I was young. Banks are not secure against cyber-crime. I view the many conveniences as that many ways to sneak into a bank and sneak out with money, possibly my money. I view the many conveniences as that many ways the bank can shift responsibility, and loss, onto my shoulders in the event of a breach.

    Might be nice if someone came up with a way to sign hard-copy checks that assured their authenticity the way signatures and chops once could.

  24. Jack Gavin

    Coincidental? Today’s news has a story about the increase in $100 bill production and the guesstimate(?) that most of it is outside the US and most of it is the result of nefarious activities.

  25. Judith

    I go to the farmer’s market every week and always pay cash. Small farmers have enough of a struggle getting by without having to pay credit card transaction fees.

    1. Judith

      And the place where I get my hair cut has started asking people to pay by check for the same reason.

  26. TG

    OK imagine that we finally go to a cashless society.

    Now imagine that the government decides to freeze your accounts. Maybe you are a criminal on the run, maybe you haven’t paid some fine, or are behind on your credit card payments, or are on some sort of watchlist…You are now completely banned from everything, worse than being excommunicated in the middle ages. You would have no options, not even to buy a bag of groceries.

    When cash goes away, this will give the central authorities control over private citizens so utterly absolute it would shock Stalin. They will be able to control what you buy, how much you buy, where you go, absolutely anything and everything. And once there are no alternatives, don’t think for one second that they won’t grab this awesome power. And of course, without an alternative, the percentage skimmed by the banks will constantly creep upwards… I guarantee that 10 years after cash is gone, the total transaction costs (on both sides) for private citizens to buy something will be higher than it currently is with cash.

    Of course, as Keynes once said, it will be impossible to outlaw money completely. Criminals at least will still find a way to exchange tokens of value. Foreign currency that is still based on cash – much as many foreign criminals use US $100 bills, perhaps in the future US criminals will use rubles or yen or who knows what. Gold or other precious metals. Maybe even bottles of whiskey.

    As the saying goes, cash is coined freedom. We will miss it when it’s gone.

  27. ChrisPacific

    New Zealand introduced the EFTPOS network in 1985, and by the 90s it was accepted virtually everywhere. Essentially you use your ATM card and PIN to make purchases and they are direct debited from your account. There are no fees and it works independently of your choice of bank. It is now by far the dominant payment method in the country, with lots of people hardly bothering to carry cash – although that can get them into trouble at times (the Christchurch earthquake was a good example).

    Similar electronic payment systems were available in the US around the same time, but they were less convenient, far less ubiquitous and (the kicker) came with hefty transaction fees. Banks seemed to see them as a rent extraction tool, and I quickly learned that the smart thing to do was stay well away from them. Most Americans that I knew felt the same way, and used credit cards for cashless transactions. Credit cards for day to day retail transactions never really took off in NZ in contrast, because the fee is significant and EFTPOS is equally convenient and so much cheaper. Retailers are legally allowed to pass the surcharge through to the customer now and many do, so buyers will typically go for the cheaper alternative.

    Sadly we have not managed to get out ahead of the game with online transactions the way we did with EFTPOS, with the result that credit cards are still commonly used there, and some dodgy alternatives like POLi have sprung up that are essentially legalized phishing.

    1. ChrisPacific

      Tying this back to the article, ‘cashless = rent extraction’ still seems to be alive and well in the US:

      Still, financial institutions are using every weapon in their arsenal to fight against cash because their customers are the ones who want to go cashless.

      Visa has been offering $10,000 each to as many as 50 restaurants and food vendors to pay for their technology and marketing costs in return for a pledge to go cashless.

      Spot the contradiction. Customers can already go cashless if they choose. Visa wants to take away the choice. But they’re doing it all for the customers, really!

    2. WobblyTelomeres

      In the US, the big difference for many (projection) is that ATM/debit cards do not provide the same legal protection as credit cards. If you debit card gets stolen, the thief can drain your account in short order and you have little recourse but to sit in the bank lobby screaming until someone either arrests you or takes pity. With credit cards, there is a $50 limit on fraudulent charges. I’m sure Visa/Mastercard have something to do with this…

  28. Spacious

    I have already experienced the cashless future. You see, I live in an urban environment and have to use shared laundry facilities. The washing machine and the dryer require quarters to operate.

    Quarters do not grow on trees. In fact, I have visited many a bank in my search for a reliable source of this currency and have found that the banks are loathe to supply it — even if I have an account there. The washing machine and dryer are located in a section of the apartment complex where cell phone coverage cannot penetrate. Cash is the only functional currency in this environment and it is largely denied to us.

    A few years ago, a speculative internet firm decided to provide a “Quarter Roll Delivery Service.” For a fee, they would bring rolls of precious quarters to your door! I can scarcely describe how happy I was to hear of this service. Unfortunately, a hue and cry resounded when the public learned that some tech bros were charging money for currency and the concept was shelved. So, for me, the future is now every time I do the laundry. Cashless-only transactions create dead spaces where nothing functions and I end up wandering around in a haze of body odor and despair.

    1. Yves Smith Post author

      You do not want what has been imposed on me. Our basement laundry operates on chip cards.

      First, you have to pay $5 to buy the card.

      Second, if you lose the card (as I have) you are out the $5 plus the stored value.

      Third, the card seems to rip me off (charge double for the same service) more often than the coin machines.

  29. flora

    If your bank won’t exchange your $10 for a roll of quarters then find a new bank. Or, try a credit union or savings and loan.

  30. poopinator

    One of the driving factors to going digital for banks is their ability to track your transactions and sell your data to insurers, advertisers, etc. Traditional banking doesn’t feed the growth desired by institutional investors any longer, so they’re finding new ways to ‘innovate’ growth.

    I’d also bet my last digital dollar that this isn’t limited to private industry either. The government will do everything it can to increase its surveillance reach, and they sure as hell don’t care about privacy or consumer protection.

  31. Savita

    Rev Kev felllow time-zone wielder, you’ll have a take on this?
    It has been explained to me, the UK Constitution states it is illegal to refuse cash as a payment in a retail outlet.
    Australia Constitution has similar provisions – and the UK’s Commonwealth Consitution still prevails in Australia anyway.
    I have been to places in Australia where cash is not accepted, government shopfront places like drivers licence, passports, that kind of thing. I would like to protest but it doesn’t achieve anything – ‘okay, no licence for you’

    This is not the most definitive reference but it does point out how the Australia Consitution requires cash as legal tender, including Section 115 about half way down.

    Cash toll booths don’t exist on roads in Australia anymore, one pensioner received national attention
    when he refuted every single toll fine stating he had a right to pay in cash which wasn’t provided.
    What the story doesn’t state is that his fines are up to the several tens of thousands of dollars – but they won’t be claimed on, as his stance is correct.

  32. Savita

    The European countries I’ve been to it was just a given the cashier would place your Euro note under a UV light machine and/or mark it with a pen before accepting. It was the rule, although perhaps I was only using large enough denominations. In Australia this does.not.happen, not even at the bank. I wonder if its because Australia leads the world in polymer counterfeit-proof notes? We haven’t had paper notes for a very long time

    I guess you’ve all heard of the ‘superdollar’

    On a tangent, note the US currency is necessary to have on hand for travel in many developing countries. It’s the currency that will be stable when all is is unreliable.

  33. McWatt

    Your cash rebate cards have higher fees associated with them from the merchant side of things. Most small merchants get charged a 1% higher fee when the credit card is a cash back or air miles card.

    And if anyone thinks that once they get rid of cash these rates will remain static they wont. Once there is no cash they can charge the retailer any amount they want for accepting the card and then what is to prevent them from charging the customer for the purchase too? Plus with Visa/MasterCard so close to being a monopoly there is almost no where else to go.

    “I just want to wake up every morning and dip my hand in the money stream that runs outside my window.”

  34. Temporarily Sane

    Cash is cumbersome, dirty and increasingly too tangible for our digital desires.

    Our digital desires? I am really beginning to dislike the obligatory snippet of fatalistic determinism (or is it determined fatalism?) included in articles about technology. It’s a played out cliche and in this case it’s also completely nonsensical. Most people’s desires are not “digital.” It’s not 1997 any more and this stuff does not sound cool or even funny, just silly.

  35. Trutheludes

    Essentially it is a matter of controls. In a cashless economy managers are in control of your wealth. In a cash economy you retain the control.
    And foremost lesson of history is managers eventually become masters.

  36. Procopius

    I got about half way through the comments and didn’t see anybody mention legal tender. Both silver certificates and federal reserve notes used to have a little note on them, roughly saying, “This note is legal tender for all debts, public and private.” Perhaps they still do (well, I don’t think silver certificates are a thing any more) but I haven’t seen American currency for about forty years so I don’t know. Anyway, I thought there was a statute that everybody in the U.S. was compelled to accept U.S. currency in payment. A section of the U.S. Code. I am not a lawyer, so perhaps I misunderstood. If I understand correctly, though, it would seem the shops that refuse to accept cash can be sued for violation of that law.

    1. ambrit

      Postage stamps are also legal as a store of value. Thank you Ben Franklin for the “Other Benjamins.”

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