The pros and cons of ditching cash for electronic currency
David Wolman can envision a time when we won’t need to use cash. In his cashless society, people can text money.
But I’m not buying it. Didn’t we learn something from the Great Recession, when an over-reliance on all things not cash nearly took down our economy?
Nonetheless, I was quite intrigued by the mobile money world Wolman advocates in his book “The End of Money: Counterfeiters, Preachers, Techies, Dreamers — and the Coming Cashless Society.”
I’ve selected “The End of Money” for this month’s Color of Money Book Club — not because I agree with Wolman that we ought to ditch our dollar bills and coins but because he presents a fascinating and engaging thesis.
Wolman, a contributing editor at Wired magazine, writes: “Although predictions about the end of cash are as old as credit cards, a number of developments are ganging up on paper and metal money like never before: mistrust of national currencies, novel payment tools, anxiety about government debt, the triumph of mobile phones, the rise of virtual and alternative currencies, environmental concerns, and a wave of evidence showing that physical money is the most harmful to the billions of people who have so little of it.”
Wolman provides a crucial look at the role of cash starting with the Yuan Dynasty in 13th-century China, when coins were replaced with paper money. He introduces a Georgia pastor who believes the end of cash will signal the beginning of Armageddon.
From the start, Wolman knows it’s going to be tough to get people to part with their cash. But, he writes, “The challenge of convincing people that a technology is trustworthy is nothing new. . . . Luckily, humanity has a solid track record of warming to innovations, including money-related ones.”
I’ll concede that point. It was only recently that I felt comfortable depositing checks at an ATM.
Wolman describes meeting electronic experts in Japan who are developing biometric technology to make our easy plastic payments even easier. “One of these technologies uses the unique three-dimensional pattern of veins within every person’s fingertip. Touch your finger to a register, vending machine or subway turnstile and you can instantly settle up without having to break your stride. . . . I have a hard time seeing this kind of technology as negative,” he says.
Yet, the technophobe that I am, I see so many negatives.
I have faith in my cash. I see the value in using it over electronic means such as credit and debit cards. Studies show that using plastic influences people to overspend. Paying with plastic doesn’t register in people’s brains the same way as when they use cash.
I don’t trust that the minds behind electronic money will not manipulate people into spending more than they can afford. With cash, you have limitations. If you go to a store and have only $100 on you and no other form of payment, you can only spend up to that amount. Cash is a stopgap.
Wolman shares my concern about credit and how it can be a catalyst for personal debt. But don’t use the problems with plastic to dismiss the argument that we should get rid of cash, he says. He wants to see someone build an app that will “simulate the pain in spending currently only associated with cash.”
What about the people who rely on cash for tips, you might ask?
Perhaps soon you will be able to tip by aiming your electronic device at the tip receiver’s smartphone, Wolman says.
The most compelling argument for getting rid of cash comes when Wolman talks about the poor, whose lives are financially marginalized because they don’t have easy and affordable access to basic banking services. He visits Kenya and India to look at ways some are helping the poor transact without cash by using cellphones.
“When your only option is cash, your assets are stuck in the material world,” he writes. “The poorer you are, the more crushing the costs and risks of cash become. . . . A fire or natural disaster can obliterate your meager savings.”
Wolman is probably right that someday we will transition from physical money to electronic currency. I’m not ready to embrace his futuristic digital world, but he did come closer to convincing me that we are coming to an end of money.
I’ll be hosting a live online discussion about “The End of Money” on April 5 at 1 p.m. at washingtonpost.com/conversations. Wolman will join me to talk about his hope for a cashless society. For a chance to win a copy of this month’s book club selection, send an e-mail to firstname.lastname@example.org with your name and address.
Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071, or email@example.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to postbusiness.com.