Thanks to the rise of debit cards and electronic payments, a lot of economists and tech writers have begun to advocate for a world without cash.
But if one writer's experience is any indication, it's going to be awhile before that happens. Seth Stevenson, a writer for Slate, is trying an experiment: seeing if it's possible to live life totally cashless. As of his last entry, it had been 44 days since he'd used cash. From the story (which I highly encourage you to check out at Slate.com/articles/business):
My worst moment came when an out-of-town friend asked me to welcome two of his pals who'd recently moved to New York. They were a young couple, and didn't seem to have a ton of dough. So after we'd downed a few drinks and appetizers, I excused myself and surreptitiously approached the waitress -- planning to take care of the whole check before the couple could offer to pay their share. "We only take cash," said the waitress. "Why??" I asked in dismay, as though it might somehow change her answer. "That's just our owner's preference," she replied (with a tone that conveyed the exact opposite of sympathy). Mortified, I returned to the table and asked these broke youngsters if they could cover my portion of the bill. They did so without a peep. But they weren't on PayPal, and I still haven't paid them back.
Isolated fiascos aside, the worst part of this stunt has been the everyday inconveniences. Say I'm in a hurry, and hope to buy a soda at a corner bodega to drink while I'm walking: There's inevitably a $5 minimum to use credit cards, so I forgo the beverage. Or, say I'm at a bar, and I order a single beer for six bucks. I'm informed there's a $10 credit card minimum, and I really don't want a second drink, so I end up tipping 67 percent to round out the bill. (I notice some commenters on my previous entry theorized that it would be easier to live cashlessly in a big city like New York. But a colleague with parents in Ohio swears that it's when he's back home that he never needs bills -- big, modern chain stores proliferate there, while New York is packed with mom-and-pop shops lacking credit card readers and hipster taverns evading their taxes.)
Stevenson hits on a big reason why the death of cash is a long way down the road. First off, there's a premium involved in taking cards that many businesses are unwilling to pay, despite whatever help they're getting from the Durbin Amendment's cap on debit processing fees. And as Stevenson notes, there are some businesses that are willing to put up with the fees they'll pay to banks, but only if you make a purchase over a certain limit.
Another barrier to a cashless existence is finding a way to make the kind of informal person-to-person payments that a lot people use cash for, e.g., paying the baby sitter or settling the dinner bill with a friend. Electronic person-to-person payment systems created by banks and third parties have attempted to solve that problem, creating smartphone apps that would allow users to transfer funds back and forth for a small fee.
The problem with many of them, besides needing a smartphone to make them really useful, has been that the person receiving the payment would have to have an account capable of accepting it. With the plethora of financial institutions and different P2P standards, the odds the person you needed to pay would have such an account were low, as the writer above found out.
There are a couple of new developments that could solve the problem. Fiserv, a financial services tech company, acquired the company that owned Popmoney and is combining it with ZashPay, its own P2P service. Together, the network will connect 1,400 financial institutions and reach 35 million customers. The ubiquitous PULSE network is also pushing into P2P, partnering with Obopay, a popular international P2P provider. The new network will allow any financial institution on the PULSE network to offer P2P payments to its customers.
Between the two, along with PayPal and the clearXchange partnership set up last year between Bank of America Chase and Wells Fargo, at some point we'll see electronic P2P payments become more common. Eventually, I'd bet every mobile banking app will have some kind of P2P offering that will be widely compatible with other mobile banking apps.
And that will be one more step toward getting rid of cash altogether.
What do you think? Will Americans ever stop using cash? Do you use P2P payments?
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