Lately, I’ve had an uptick in the number of customers who ask my opinion about the US becoming a cashless society. The question is always some form of, “Are we becoming a cashless society?” or “Are you ready for the digital dollar?” This question has been asked for a long time, but it really ramped up back in 2020 when businesses started running out of cash and posting signs on their windows and people started to panic about us going cashless. Conspiracy theorists went to town saying that the shortage was intentional and designed to plunge us into the digital dollar. I posted a response to that issue in 2020 where I outlined why the cash shortage happened and why you don’t need to freak out about it. That post was shared more times than any post I had made up to that point. It’s clearly something people think about. So, let’s dive into this question.
First, what is a cashless society? Simply put, it means ALL physical money is replaced with a digital currency. If you want to pay your babysitter, there’s no cash to give. If you want to buy gas, no cash. No birthday card cash. No cash or coin anywhere. Everything would be done digitally in the form of digital transfers. If you’ve ever paid someone with Cash App, PayPal, or other similar services, then you have an idea of what I’m talking about. Everything involving money would be done that way.
Second, why is this a hot topic? There has certainly been an increase in online or digital transactions over the years, and it has led some to assume that cash is on its way out the door for good. This wasn’t helped in 2020 when signs at businesses started going up about a national cash shortage. Add to that how many places, such as concerts, no longer accept cash as a form of payment. Cryptocurrency is a popular topic and it’s a form of digital currency. I gave a presentation on this topic at my Rotary club and the next day a major restaurant chain announced they were going full cashless at their locations. Going cashless seems inevitable, right?
Not so fast. I’ll mention some official responses to the cashless question and then I’ll discuss my professional industry perspective on what I’ve experienced at my job at the bank.
First, for a cashless society to work, we must have a government-backed digital currency that is legal, also called a central bank digital currency, or CBDC. The implications of this are enormous. Every single transaction would be traceable by our government. How many of you like that thought? Zero privacy. Not only that, how likely would it be that your digital currency could be hacked? How’d you like to save your whole life and then have nothing at all later in life because of a hacker? It’s gone, just like that. That’s always a risk that can never be fully eliminated. A group of hackers could crash our entire economy with a few clicks. Also, not everybody is able to go digital. How many poor or elderly people or other groups would completely be left out in that scenario?
Small Business owners also would suffer. If you shop at a local business and pay with cash, the owner doesn’t have to pay a fee to accept the cash. If you pay with a credit or debit card, the owner gets hit with a fee to accept that form of payment, usually between 1-5% plus other monthly fees. So, if the business owner decides to not charge extra for using plastic, it eats into their profit. Large corporations can afford this hit, but what about mom and pop stores? They still make up the bulk of businesses in the US. If you ever see a sign right by the cash register that says, “There will be a 5% surcharge added to card transactions,” this is why. These fees are charged, and the owner must decide whether to eat that cost or pass it onto you. If there is no cash, they would have to either eat the difference or pass the difference onto you. My guess is that they would all choose to pass all the extras onto you, making everything more expensive.
Now I’ll give you my personal perspective based on my job in the banking industry. I’ve managed 3 different branches for 3 different banks, and even temporarily filled the manager slot in multiple branches throughout my career. EVERY branch I’ve ever managed had multiple people, daily, who were unbanked and had no choice but to cash their checks. This includes construction workers, paint crews, farm crews, installation crews, house sitters, all types of people. Tens of thousands of dollars would exchange hands daily in each of these branches. Now, this was just me, in one branch, looking at this daily. Take that and multiply it by the number of banks in my city. Then think about all the cities in your state and then the US. That’s a LOT of money that is paid out in cash to people who deal no other way.
Think about your situation: you probably get paid by direct deposit. You have several bills you pay online through auto-debit. You swipe your debit card everywhere you g. Do you ever touch cash during a given week? Why even bother with cash if that’s how everyone operates? Truth is, not everyone operates that way. MILLIONS of people DON’T. If the government tried to force everyone to go cashless, then all of these people have a vote. Their vote would scare any politician out of going through with it. Even if the unelected Federal Reserve imposes it, any candidate could run on the campaign of “I won’t let this happen” and get votes from all these people and that want to stop it. You would be shocked if you knew how many people depend on cash to function everyday. Not just the types of workers that I mentioned, but it also includes people who are unbankable because of a prior charged off account. What I mean is that if a person’s checking account goes to a negative balance for long enough, the bank will charge it off and a debt will be owed. That information goes to a database that’s accessible by any bank that wants it. So, if this person tries to open an account at another institution, they will likely be turned down. I see this constantly. Not everyone can get a bank account even if they want one. But not everybody wants one. A central bank digital currency would force this on millions of people who don’t want it or simply can’t function like that. I don’t mean forcing them to open a bank account; I mean forcing them to operate in a way that they simply won’t be able to operate.
Do you remember when President George W. Bush wanted to tackle Social Security a few years ago? Do you remember the fallout that occurred as a result? Social Security is a long-time established program and many people, especially the elderly, pay extra special attention to it. They don’t want anything touching their Social Security. In much the same way, I believe any politician who attempted to force the digital dollar on everyone would be met with a level of outrage never seen before. The older population is especially tuned into this idea, and they would voice their opposition.
So, are we using less cash than we used to? Yes. Are we becoming a cashless society? Absolutely not. There are far too many challenges that can’t be addressed. It’s another one of those ideas that sounds good on paper(pun intended) but in reality would never play out. My best guess is that even if the highly unlikely scenario we DID become cashless at some point in the future, it would do more harm than good and would be quickly reversed. Hopefully that scenario never happens because it would create more problems than it solves.
Bottom line, as a current professional banker, I have zero reason to believe we will ever become a cashless society. Stop panicking and go read my other pages to learn about how to take care of the hard-earned money that you can put your hands on.
Long form video
"I can't carry cash for you, but I can carry you!"