Sweden’s often been pointed to as a harbinger of the better future. One in which parental leave is humane, the poverty rate is low, and the social safety net is robust. Sweden is now forecasting another, more complicated future: A cashless society. Should we be concerned?
Indeed, only one percent of all payments in Sweden were made using cash or coins last year, as many restaurants, shops, and other businesses are going cashless and large segments of the population, particularly the young, are following in step.
“There is definitely a sense that becoming cashless is inevitable, so it’s mostly a case of mitigating any implications,” says Dr Claire Ingram Bogusz, a postdoctoral researcher at Stockholm School of Economics, told the BBC.
In the EU and the US, seven percent of payments are made using cash or coins, the rest being made electronically and with the ever-dwindling paper check. While far higher than Sweden, that’s still a very low percentage. As it turns out, it’s perfectly legal to not accept cash in most states in the United States. And while reliable numbers on cash versus credit card and e-payment use are hard to find, as many of the studies are sponsored by credit cards and e-payment companies, the rising payments volume of apps like Venmo (which is owned by PayPal) are indicators of their widespread popularity.
“9 million US households are ‘unbanked,’ meaning no one living there has a bank account.”
This spring, Visa ran a “Cashless Challenge,” where it gave 50 small businesses $10k each to go cash-free. The upsides of the transition away from cash for Visa, a credit card company, are crystal clear.
Its challenge winners include a number of casual dining restaurants and even a food truck, San Jose’s The Waffle Roost. Truck-based businesses are vulnerable to robbery and need to run at peak efficiency because they can’t fit many staff members; taking cash out of the equation addresses both issues. A number of brick-and-mortar restaurants and stores also say eliminating cash transactions has sped up their processes.
Take, for instance, Tender Greens, a California-based chain of health food restaurants. Since going cashless in January, Tender Greens claims that their lines move approximately 10 seconds faster per customer, particularly given that customers no longer need to sign charge receipts under $25. “We’re not seeing customers become frustrated while waiting in line and leave,” the company’s president Denyelle Bruno says.
What should customers who don’t have debit or credit cards do, in that case? Its PR department suggests they buy Visa Gift cards with cash and then use those at the restaurants’ locations. And, if a customer doesn’t read the cash-only signs and has no other way to pay after they order, “we give the food to the guest for free,” Bruno told the Los Angeles Times. “Our goal is never to turn people away when they get to that point.”
While that’s ostensibly an unsustainable solution to a self-created problem, Tender Greens is unlikely to be giving away tons of free meals: the states it has locations in—California, Massachusetts, and New York—are “highly banked,” meaning that a high percentage of residents have bank accounts. Indeed, New York Times business columnist David Gelles chronicled his adventure going nearly cashless for three months and found his day-to-day life changed little. But Gelles was unable to tip service people or offer money to the homeless—which points directly to one of the primary issues with going cashless: Those who have less suffer more.
Who stands to lose?
Because while a cashless future might sound pretty convenient for those of us who get paid via check or bank transfer and have bank accounts, many people across the United States rely on cash tips or don’t have bank accounts. In 2015 the FDIC found that 9 million US households were “unbanked,” meaning no one in that household had a checking or savings account. The banking rate of each state roughly maps to how wealthy it is; the poorest state, Mississippi, is also the state with the highest “unbanked” rate, at 15 percent.
“If our accounts are compromised or hacked, then a record of every transaction can be sold to the highest bidder.”
“If you’re poor and don’t have a steady income and aren’t able to keep a high balance in a bank account, you might feel you’re saving money by not paying a monthly fee, since it might be just one fee at the check-cashing store,” Odysseas Papadimitriou, CEO of CardHub.com told CNN. Consumers who have repeatedly bounced checks or overdrawn their accounts are often unable to access credit cards.
The transition to cashlessness is currently regionally-specific in the United States, a country with a far more diverse and unequal population than Sweden; going cashless is gathering steam in wealthy northern cities like Los Angeles and New York City and far less in southern states like Mississippi and Texas. But, given the rapid pace of technological innovation and social change, a country without cash is easy enough to imagine.
Young women are members of nearly every group that will be affected. For one, security and privacy concerns will be paramount; while cash gives us the ability to navigate our life without being traced (aside from, you know, all those apps and securing cameras), credit and debit cards keep a record of every one of our transactions.
If our accounts are compromised or hacked, then a record of every transaction can be sold to the highest bidder; the negative impact of such a breach cannot be overstated, particularly if we are being stalked or abused. In our current environment, banks keep getting hacked and many of us keep our money with them regardless; that’s our choice and we make it implicitly accepting the consequence. In an increasingly cashless country, that choice will be removed.
Who else stands to suffer? The poor; those who cannot afford to bank their money or who are otherwise unable to access bank accounts. The rural; those who are unable to pick a cash card up at the bodega. The elderly; those who have spent their lives unbanked, whose movement is constrained or who do not have access to smartphones.
To a certain extent, the story of the movement away from cash is the story of technological innovation more broadly; that we gladly exchange our privacy and security for our convenience, recognizing the rawness of the deal only when it’s been brought into sharp relief.