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There are some things you can only pay for with cash—or atleast there used to be. Forgot quarters for the parking meter? No worries—a growingnumber of cities now offer automated machines that take creditcards or applications allowing consumers to pay using theirsmartphones. Need a couple of dollars for a highway or bridge toll? Not with anE-Z Pass or similar electronic collection system, which deductsmoney from your prepaid account the minute you pass through thegate. Even many street vendors now have credit card readers thatattach to their smartphones or tablets. Through these and other technological innovations , it seems that the reasons consumers once had to always carryaround a few dollars are disappearing. In fact, many bankers,economists and random people trying to prove a point have shownthat they could go cashless for days. But is the United States onthe whole ready to become a cashless society? Most observers seem to think that while the technology is in placefor a life without actual currency, society has a long way to gobefore all payments are cashless. "It's not out of the realm ofpossibility. It won't happen tomorrow, but I do see the countrymoving in the direction of non-cash payments," says Shawndra Hill , a Wharton operations and information management professor. Privacy concerns over banks' or retailers' ability to obtainpurchase or personal information is one of the main reasons thatconsumers are resistant to going cashless, Hill notes. "Many people... do not want to have every move documented," she says. RonShevlin, a senior analyst the Boston-based Aite Group, adds thatdemographics are another reason cash will remain viable over thelong term. "A good number of senior citizens are not giving upcash, and a huge portion of baby boomers are not giving it upeither." Indeed , consumers of all ages are actually seeking out more cash than inpast years. According to the most recent ATM volume data from theFederal Reserve, in 2009 consumers withdrew $629 billion from ATMs,up nearly 3% from 2006. The Federal Reserve also reports thatcredit card usage is on the decline: In 2011, consumers had $803.8billion of "revolving credit," mostly in the form of credit cards,down nearly 15% from 2007. But some of the statistics could beattributed to consumers trying to tighten their belts and cut backon debt as a result of the economic downturn. While a completely cashless society may be far off, experts doforesee the use of currency decreasing in next few years. In fact,the use of cash is predicted to decline 3% a year until 2015,according to the 2010 Aite Group report, "The Less-Cash Society:Forecasting Cash Usage in the United States." The Consumer Conundrum Convenience is arguably the biggest benefit to consumers when itcomes to going cashless. No longer do they need to seek out a bankbranch or ATM before going shopping. In fact, mobile payment applications have made it possible to complete a purchase without even having acredit card on hand. And paying with a card or smartphone comeswith the convenience of having an electronic record of thetransaction. But consumers often pay the price for such advantages. For one,there is greater temptation to overspend with a credit card sinceall purchases are "buy now, pay later." Additionally, stealingcredit card or debit information is much simpler than taking cashfrom a person. "Your statement comes through every month, and youmust examine it every month because you are always at risk oflosing your credit card or someone getting your credit cardnumber," says Jack Guttentag , a Wharton professor emeritus of international banking. Going cashless has other, less immediately apparent financialliabilities. Nearly all pre-paid debit cards, for example, areembedded with activation and monthly maintenance fees. Even if youpay off your credit card every month to avoid finance charges,there is likely to be an annual fee, especially if you are part ofa "points" promotion or some other bonus plan. Debit cards come with the danger of overdraft penalties. "Currencyis free," notes Jeremy Tobacman , a Wharton professor of business and public policy. "It's a pointthat is easily forgotten, but it is not a trivial difference. Inmost forms of electronic transactions, there is some payment forthe consumer." Banks and credit card companies have a vested interest inconvincing consumers to convert to going cashless. In 2011, creditcard issuers reported $154.9 billion of revenue, according to thecredit card advisory firm R.K. Hammer. A separate study from thesame firm said that in 2011, fee income surpassed interest incomefor all issuers of cards (including credit, debit and prepaidcards). Though down from previous years due to new federal regulations , overdraft fees totaled $31.6 billion in 2011, research firm MoebServices reported. For banks, less consumer dependence on dollars and coins meansgreater potential to collect fee income, the likelihood of fewerpeople visiting bricks and mortar bank branches and a diminishedneed for staff to handle more intensive cash-based transactions."For financial institutions, these various payment innovations area source of profit," Guttentag says. "Cash is the least profitable[source of payment], and it's a lot of hassle." An added benefit to banks and retail businesses receivingelectronic payments is that priceless customer data comes with eachtransaction. Shevlin suggests that businesses that have a record ofall their customers' spending habits could then use it to theiradvantage. "Knowing how you spend your money helps marketers," henotes. How to Go Cashless The idea of a cashless society goes far beyond the borders of theUnited States. In fact, many other countries are far ahead of theU.S. when it comes to mobile payment technologies and rejection ofpaper notes. The most notable of these is Sweden, with just 3% of its economy innotes and coins, according to the Bank of InternationalSettlements. (The U.S. economy is comprised of about 7% cash.)Indeed, many businesses in Stockholm no longer accept paper notes,several churches have installed credit card swiping devices in lieuof passing the collection basket, and even some small towns areentirely cashless. While access to the latest technology and a relatively smallpopulation have helped move Sweden to near cashless-ness, Hill saysthat it will take a bigger push to convince Americans to put awaytheir dollar bills. "There would need to be taxes or some kind ofincentive to make the cost of using cash more expensive," shenotes. Thus far, there have been no direct governmental changes toencourage consumers to use electronic payments, although thefederally-mandated cap on interchange fees for debit cardpurchases, which went into effect late last year, might encouragebusinesses to promote this form of payment. Prepaid cards are also a key component in the move to a cashlesssociety, Hill adds. The cards are not typically linked to a bankaccount or detailed personal information, which may help them gainwider acceptance among those who list privacy concerns as a chiefreason for paying with cash. Indeed, prepaid cards, which were originally introduced as a way toreach low-income consumers, are taking root across alldemographics. In 2011, $57 billion was loaded onto prepaid cards,and that number is expected to grow substantially to $167 billionin 2014, according to a study from Mercator Advisory Group."[Prepaid cards are] no longer a product of the disadvantaged andlow income consumers," Shevlin notes. "It's a mainstream financialproduct now." Where's the Cash? In the meantime, the U.S. Mint will continue to print dollars and stamp coins, and Americans willuse them for all types of payments. For example, one of the largestarenas for cash, which has few official numbers to report, is theblack market and drug trade, where both parties involved do notwant any record of transactions. "I think the more interestingpoint is where currency is being used now," says Guttentag. "Thedrug industry is one of the major users of currency." Guttentag adds that much of the U.S. currency in circulation isalso being shipped out to other countries like Zimbabwe, whichswitched to the U.S. dollar when inflation caused the localcurrency to collapse. The U.S. Treasury reported $1.03 trillion incirculation in 2011, up 9.8% from the previous year, but estimatesthat about half of this amount is held outside the country. Thetotal currency printed in 2011 was $165 billion, 22% less than theprevious year. When it comes to dollars used by the average American (who is nottypically involved in illegal activity or international finance),person-to-person payments are the largest transaction segment wherecash persists. Fifty-three percent of all person-to-person paymentsare in cash (with another 27% in checks), according to Aite's "TheLess-Cash Society" report. As Shevlin points out, "How else aregoing to pay the kid to cut your grass?" SEE ALSO: Poor carpenter builds an incredible cabin in the wilds ofCanada This story was originally published by Knowledge@Wharton . The e-commerce company in China offers quality products such as usb travel charger adapter , China usb wall charger adapter, and more. For more , please visit usb car charger adapter today!
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