Why should Americans carry cash when roughly 30% of people carry none at all?1 Seventy-six percent of shoppers who do carry cash keep less than $50 in their wallets, with nearly half having less than $20.
Paper money is no longer necessary since credit and debit cards exist. All it takes to make a purchase is a quick swipe, dip, or tap of your card. This is the reason why cash money is declining while card-based transactions continue to soar.
Billfolds and money clips are no longer necessary for American shoppers thanks to the growth of mobile payments. Despite a difficult beginning for near field communication (NFC) technology, the introduction of Apple Pay® completely changed the way people shop in stores.
As technology advances and digital payment methods become increasingly prevalent, the question of whether paper money will eventually become obsolete has gained significant traction. While the future of cash remains uncertain experts believe that it will likely continue to play a role in our financial system for the foreseeable future albeit in a diminished capacity.
The Rise of Digital Payments and the Decline of Cash Usage
The widespread adoption of digital payment methods, such as credit cards, debit cards, and mobile wallets, has significantly reduced the reliance on cash for everyday transactions. The convenience, security, and speed of these digital alternatives have made them increasingly attractive to consumers and businesses alike.
According to a 2022 Federal Reserve study, the use of cash for in-person transactions in the United States has declined from 40% in 2017 to 26% in 2021. This trend is expected to continue as digital payment infrastructure expands and consumer preferences shift further towards cashless options.
The Enduring Value of Cash
Despite the decline in its usage, cash still holds several advantages that make it a valuable component of the financial system. These include:
- Accessibility: Cash is universally accepted and does not require access to technology or the internet, making it accessible to all segments of the population, including those who are unbanked or underbanked.
- Privacy: Cash transactions offer a high degree of privacy, as they do not leave a digital footprint that can be traced. This is particularly important for individuals who value anonymity or who may be concerned about data security.
- Resilience: Cash is a physical asset that is not dependent on technology or infrastructure. This makes it a valuable backup option in the event of power outages, natural disasters, or other disruptions that could affect electronic payment systems.
- Emergency preparedness: Cash is essential for emergency preparedness, as it can be used to purchase essential goods and services even when electronic payment systems are unavailable.
The Future of Cash: Coexistence with Digital Payments
While the use of cash is likely to continue to decline, it is unlikely to disappear entirely. Instead, cash is expected to coexist alongside digital payments, each serving different purposes and catering to different segments of the population.
The future of cash will likely be shaped by a number of factors, including:
- Technological advancements: The development of new technologies, such as central bank digital currencies (CBDCs), could further reduce the need for physical cash.
- Government policies: Governments may implement policies to encourage or discourage the use of cash, such as by setting limits on cash transactions or promoting the adoption of digital payment systems.
- Consumer preferences: Ultimately, the future of cash will depend on consumer preferences. If individuals continue to find value in using cash, it will likely remain a viable payment method for years to come.
Implications for Savers and Investors
For individuals who are saving money, the decline of cash usage may have implications for how they manage their finances. While cash savings may become less convenient in the future, there are still a number of ways to save money securely and earn a return on your investments.
- High-yield savings accounts: These accounts offer higher interest rates than traditional savings accounts, allowing you to earn more on your money.
- Certificates of deposit (CDs): CDs offer a fixed interest rate for a set period of time, providing a safe and predictable way to grow your savings.
- Money market funds: Money market funds invest in short-term debt securities, offering a relatively low-risk way to earn interest on your money.
- Stocks and bonds: Investing in stocks and bonds can provide the potential for higher returns over the long term, but also carries more risk.
It is important to diversify your savings across different asset classes to mitigate risk and achieve your financial goals.
While the future of cash remains uncertain, it is unlikely to become completely obsolete in the foreseeable future. Cash will likely continue to coexist with digital payments, each serving different purposes and catering to different segments of the population. For individuals who are saving money, the decline of cash usage may have implications for how they manage their finances, but there are still a number of ways to save money securely and earn a return on your investments.
Still think the days of cash are numbered?
Even if everyone started using mobile payments or if fraud completely disappeared, cash would always be used.
Not convinced? Keep in mind the following:
- VHS technology has been replaced many times over (e. g. DVDs, streaming). However, 17% of American homes still have a VCR2, and nostalgia is driving people to resurrect outdated technology like VHS tapes, record players, and video game consoles. 3.
- People still send telegrams. Even with the development of email, text messaging, and postal services 4.
When will cash and wallets go extinct permanently?
Even though they are losing traction, paper money will probably continue to exist for some time to come. Like with many outdated technologies, dollars and cents may become more difficult to use, but there are still enough users to guarantee that demand doesn’t entirely vanish. Even though mobile payment options are becoming more and more popular, cash might be the preferred method of payment for:
- Older consumers who might not like to use credit or debit cards because they are less tech aware than other generations
- Low-income shoppers who may not have smartphones or bank accounts
- Shoppers who don’t trust mobile payment options
- Criminals, terrorists, and black market shoppers who prefer anonymity
Wallets are also likely to endure for some time, even if they are empty of cash. This is so that IDs, loyalty cards, and family pictures can be conveniently kept in wallets. These fundamental features can be replicated by the majority of contemporary smartphones, but it will take some time for this practice to become completely widespread.
OFFICIAL: Your Cash Will Soon Be Worthless… 2023 US Digital Dollar Society
FAQ
How close are we to a cashless society?
Should we keep paper money?
Will America ever be a cashless society?
Will money be useless in the future?
Are Americans ready to make paper money worthless?
Despite popular belief, the government has no plan to make paper money worthless and the majority of Americans aren’t ready to make cash a thing of the past either — with 56% of Gallup respondents revealing they like to have cash with them at all times when they leave the house.
What if paper money goes away?
Those who are unbanked are shut out of the digital or mobile economy, Maurer said, noting that we live in a country with high levels of inequality. “If paper money goes away, those people are stuck with no way to pay,” Maurer said.
Is paper money on its way to obsolescence?
Digital apps like Venmo and Apple Pay along with digital assets like cryptocurrency have gained steam over the past decade (although crypto had a highly publicized implosion last year). As people move toward more electronic or digital forms of payment, it might seem like paper money is on its way toward obsolescence.
Why do people keep paper money?
Even the world’s most cashless societies, including Sweden and the Netherlands, have recommended people keep paper money in case of emergencies, he added. Weather-related disasters, like hurricanes, have caused power outages that prevent people from using ATMs or making electronic transactions.