Do we still need cash? Humans have used all sorts of things as stores of value — rare metals, strings of shells, even jugs of whiskey. Over time the objects have become more ephemeral, from coins to paper to digital forms.
In the U.S., debit cards first beat out cash as the top way to pay in 2018, according to a Federal Reserve survey. As the coronavirus pandemic spread in early 2020, some merchants in Seattle and Sydney tried to
Since Roman times, people have tried out many alternatives to carrying loads of cash. Arab merchants developed bills of exchange for financing international transactions, a system that spread to Europein the late Middle Ages. The earliest known example of a modern check was written by hand and drawn on an account at Clayton and Morris, a goldsmith bank in London, on Feb. 16, 1659. The next revolution started with a forgotten wallet. In 1949, U.S. entrepreneur Frank McNamara visited the Majors Cabin Grill restaurant in New York and had an embarrassing moment before his wife paid the tab. But it gave him an idea, and months later he returned to the same restaurant, this time paying with a small cardboard card. Thus was born the credit-card industry. Shortly thereafter, banks began adopting computing systems that made it easier to keep track of money digitally. The first automated teller machine appeared in London in 1967, but debit cards only began to be issued in large numbers in the 1980s as ATM networks grew. Online banking took off in the following decade.
For governments, getting rid of cash would cut minting and distribution expenses and make it easier to crack down on tax evasion and drug trafficking. Stores could save on cash-handling costs, reduce theft and possibly earn more if faster checkouts led to more transactions per hour, as some salad chains found in a trial. (There are still card fees to consider; studies have differed on which mode ends up cheapest.) Some economists say that without cash, central banks could fight recessions more effectively because they’d have an effective way to impose
The Reference Shelf
- CGAP, a consortium of global donor agencies, reports on the digital payments revolution in China.
- “Payments are a-changin’ but cash still rules,” a report by the Bank of International Settlements, a sequel and and a bulletin on the potential impact of Covid-19.
- The San Francisco Fed looks at the impact of cashless businesses.
- The portal for the Digital India campaign.
- A talk by Duke University Professor Dan Ariely on “The Psychology of Money.”
- Sweden’s central bank explains what’s different in that country.
- A book review in an International Monetary Fund journal of Kenneth Rogoff’s book, “The Curse of Cash.”
- QuickTakes on
mobile payments, and on why central banks are getting serious about digital cash.
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First published Oct. 18, 2017
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