Visa is doing its part to kickstart the cashless revolution. It recently announced their Cashless Challenge. Small business restaurants, cafes or food truck owners are asked to describe what cashless means for them, their employees and customers. Visa will award up to $500,000 to 50 eligible U.S.-based small business food service owners who commit to going 100% cashless.
Visa is looking down the road. In a prepared statement Jack Forestall, head of global merchant solutions for Visa, pointed out that by 2020, more than 5 billion, or 70% of the world will be connected via mobile devices, making the case for going cashless. They’ve done their homework. Visa’s recent study found that if businesses in 100 cities transitioned from cash to digital, their cities stand to reap net benefits of $312 billion per year.
What’s the appeal of cashless?
Convenience for one thing. “One of the biggest pros of going cashless is that it can help simplify the way we pay for things. Now you can already use Apple or Samsung Pay straight from your phone in some cases,” says Alex Reichmann, CEO of iTestCash, a provider of counterfeit detectors and other products.
It doesn’t take much to see why Visa’s pushing the switch – profits. “Of course, Visa wants to see a cashless society . . . that way they get a bite at the 70% consumer spending portion of the entire $14.62 trillion-dollar US GNP (2011 figure), shucks, that's only $10.23 trillion dollars,” says mortgage broker Mike Arman.
How might this affect me?
Stephen Lesavich, PhD, JD, and co-author of The Plastic Effect: How Urban Legends Influence the Use and Misuse of Credit Cards, has a cousin in Sweden, which is moving toward cashless. “He is a person in his 70's and is very comfortable with everything being cashless. One reason why the Swedes are so comfortable, is that the banks and card issuers have not charged large fees for making electronic payments. One problem he saw the last time I spoke with him, was that some Swedish banks were charging to accept cash for deposits in saving accounts and utilities were charging additional fees for paying bills with cash. He did not think it was appropriate for a bank or utilities to charge fees for accepting the national currency of the country printed by the government. With respect to Visa, think about it, if they are willing to give businesses $10K to become cashless, how much money are they going to make over time charging all their fees?”
There are plenty of concerns about cashless. “There will be a complete loss of privacy - banks, card issuers and government will know exactly what you do and when you do it,” says Lesavich.
Arman envisions the possibilities, “It would be utterly trivial to use credit card information to ‘report’ transactions. I buy a box of .22 caliber rounds to go plinking at the range, BATF gets a notice that I am a gun nut because I have bought ammunition (50 whole rounds of it!!). I buy a Playboy magazine (for the articles, right?), I get reported to a potential sex offender database. I buy a bottle of anti-acids at the pharmacy, I get reported to my insurance company that I MIGHT have acid reflux, and now it is on record that this is a pre-existing condition, hence no coverage. Governments are sometimes not as stable and/or benign (or as honest or as competent) as they might want you to think, and I am by no means a conspiracy theorist of any kind. Cash always works, it is never "down", it is good anywhere, it is private, convenient.”
Security is another issue. “Hackers, data breaches and other security issues could easily disrupt large number of user accounts and remove funds, he adds,” says Lesavich.
Reichmann worries about what happens if you lose your phone. “What if someone hacks into your digital payment account? It's hard to compare the safety of having a big pile of cash vs. all of it being in your bank or digital account.”
Technology is grand when it works. Any broken links in a cashless society could be disastrous if people can’t make purchases, particularly in an emergency situation.
A big question, not so much on the radar, is what about the unbanked? Says Lesavich, “If they don’t qualify for credit, a bank account or the money to buy an electronic device, what do they do? Or what about those who will find themselves potentially trapped in an endless cycle of debt because of high interest rates, late fees and any other fees they can dream up for being cashless?”
So, while Visa is pushing cashless, others will pull, resist. Says Raeshal Solomon, author of My Little Banker, “I’m not saying that there will never be a cashless US. I'm saying to expect some push back from consumers. If the banking industry is serious about a cashless society, they will need to offer some great rewards or benefits to get everyone on board.”