Monday, May 28, 2018
Editorials

Another voice: Is America headed toward the end of cash?

An existential question is facing modern consumers: paper or plastic?

No, not grocery bags. Money.

Okay, we know that American dollar bills are actually made of fibers, not paper. We have some.

But over the last six years, Americans have been reaching more and more for their credit and debit cards — and passing over cash. The nation stands at the tipping point, perfectly pitched to tumble after Sweden, Singapore and the Netherlands to become another cash-averse nation.

But while those in Scandinavia and Singapore have embraced their digital wallets — only 1 in 5 payments is made using cash in Sweden — many Americans still cling to currency.

In 2013, the Federal Reserve Bank of Boston found that while noncash payments have been on a slow, steady rise, cash still accounts for more than a quarter of all U.S. payments. Debit and credit card transactions are more telling for our future, though; 53 percent of payments were made using plastic.

It's not hard to see why. Digital transactions are clean, simple and accurate. There is no worry of miscounted or misplaced change. Mobile apps make it easy to check bank accounts and credit card balances, create budgets, track spending, send money to friends and family, and even pay bills.

Plus, storing, creating and processing physical money costs — you guessed it — money. Singapore made headlines recently when the head of its central bank encouraged the city-state's other banks to pass on to their customers the cost of managing cash and checks, as a way of promoting the use of digital payments.

Cold cash has another drawback: Criminals like it. Thanks to its anonymity and portability, cash is an efficient way for crooks to keep transactions off the books. In a recent op-ed in the Wall Street Journal, economics professor Kenneth Rogoff listed crimes facilitated by paper money: racketeering, extortion, money laundering, drug and human trafficking, corruption of public officials and terrorism.

In May, the European Central Bank announced that it would phase out its 500-euro banknote at the end of 2018. Europe's chief law enforcement officer, Rob Wainwright, argued that the bill made it too easy for criminals and terrorists to fund their illegal activities.

That's not to say that digital money isn't susceptible to crime. We're all familiar with credit card fraud. But cutting out cash — especially bills worth more than $20 — could hobble crime bosses.

Creating a completely cashless society wouldn't come without a few hiccups; we'd have to learn to walk that fine line between security and privacy.

According to the Federal Deposit Insurance Corp., nearly 9.6 million American households don't have bank accounts. Those households present a challenge. Some of the "unbanked," as the FDIC calls them, prefer to keep their money close, away from the prying eyes of banks. Others face some impediment to opening an account, such as job or income loss, which means they might be left behind during a digital revolution of our monetary system.

Then there are those sticky questions we haven't yet asked ourselves about going cashless: How do we give spare change to street musicians? The homeless? What happens during a natural disaster? What will grandparents send in birthday cards?

We don't want those Washingtons to disappear from our wallets — at least not yet. Small bills are essential to everyday transactions.

The way to ease us into a new era of digital denomination is to take a page from the Europeans' book: Slowly phase out higher bills. We'll find new ways to honor Ulysses S. Grant and Benjamin Franklin — other than $50 and $100 bills.

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