Cash is king. Or at least it has been for the last few centuries. But as countless industry analysts have been promising all for years, the future is a cashless economy.
Plenty of advantages come with permanently doing away with cash in favor of digital payment systems, from crippling organized crime to simply being able to leave your house without carrying a wallet. Cash, though, has remained a stubborn presence throughout commerce for decades even as developments like credit and debit cards have started to offer alternatives.
So why is this crop of predictions about the new cashless economy getting more attention this time around? Because it's already happening. Although cash might remain a very real part of our economy, there are plenty of real-world examples in use right now that provide an idea of what the future might look like.
Ever found yourself stuck in the checkout line behind that savvy consumer digging through his coin purse to find exact change?
Well, consumers and vendors alike want to speed up the pace of checkout, and that's rapidly becoming a reality with near-field communication devices. A customer simply waves his smartphone past the payment portal and has his payment app automatically exchange all the necessary information with the store, making checkout as easy as a flick of the wrist. The most popular options for NFCs include Apple Pay, Mastercard PayPass and Google Pay.
Of course, if you're still hung up on checkout lines, you might already be dangerously 20th century in your thinking.
The Amazon Go store in Seattle has given a glimpse into the future as shoppers can simply browse the aisles, take what they want and just walk out. The store, in combination with a smartphone app, can detect what you're grabbing and what you walk out with, and automatically charge your Amazon account for everything. It's one of the many ways Amazon is making it easier for you to spend money.
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Mobile Payment Systems
Paying without cash has been significantly more difficult for vendors operating without a stable location, like food trucks, street vendors or booths at an art fair. However, apps like Square allow vendors anywhere to use a Square device, or even their tablet or smartphone with the Square Stand app. By doing so, vendors get all the features of a hard-wired, high-tech cash register, making cashless payments possible anywhere you can set up shop.
There are also payment options that let you snap a picture at the register.
Advancements with quick-response codes — aka QR codes, those black-and-white checkered boxes that look and operate like bar codes — have caused payment giants like Mastercard to jump in with systems that allow customers and vendors alike to simply scan a QR code to make a payment.
The technology has already caught on in China, where WePay and Alibaba have apps that help drive the country's $5.5 trillion in mobile payments.
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Cashless Vendors and Restaurants
For years, plenty of restaurants or stores have opted to remain cash-only enterprises to avoid the fees associated with accepting credit cards.
Today, the trend may be reversing itself. An increasing number of locations are going the complete opposite direction and refusing to accept cash.
With so many easy options for cashless payments, more vendors are seeing the benefits of going digital. For example, the need to collect and store cash is no longer a necessity, and a completely cashless store reduces any security risks created by having physical cash on site. Also gone are the hours of carefully counting, recounting and logging money for cashiers and managers, as well as the regular bank runs that were required in order to make deposits.
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Online Shopping Portals
The previous examples focused on transactions that still require a person's physical presence in a store or restaurant. But the growing reality is that today's commerce is increasingly happening online.
Mega-retailer Amazon has paved the way for a new era of commerce: Purchases and payments are now as simple as a couple of mouse clicks and delivery goes straight to your door. No cash necessary.
Although online retail is nothing new, it's gaining momentum quickly. A UPS survey of online shoppers in 2016 found for the first time that consumers made the majority of their purchases online.
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As long as there's cash around, there will be traditionalists clinging to the familiar. That's part of why India took the radical step in 2016 of simply removing more than 80 percent of the country's physical currency from circulation.
The result of India's demonetization program has been a massive increase in the use of digital wallets, with leading digital wallet Paytm exploding to over 280 million users in about a year.
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Tokenized Identification Systems
Getting people to adopt cashless payment systems and online retail is contingent on cybersecurity that works. That's why tokenization is quickly replacing the traditional approach to identifying people's accounts.
The use of "tokens" replaces any relevant account information transmitted online with a series of random numbers and letters specific to you and that vendor. If stolen, the token is useless to hackers because, unlike a credit card number, it can't be used anywhere else. Tokens are already being integrated on a wide variety of payment systems and digital wallets, including Apple Pay and Google Pay.
Of course, when it comes to a token that can unmistakably identify someone, your thumbprint remains one of the best options.
New stabs at using biometrics to identify users could mean that, instead of relying on a signature, driver's license or PIN number for identification and payment, you would simply take a picture of your face or hold your thumb to a scanner.
Early examples of this include Apple's Touch ID and Mastercard Identity Check. And if you're an investor, consider this: The biometric systems market is expected to grow from $10.74 billion in 2016 to $32.73 billion by 2022.
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Mobile Banking Services
Paying for stuff is just one of the ways that consumers interact with their finances. People also need to manage other aspects of their finances — like savings accounts or 401k accounts — and the rapid rise of mobile banking has meant that far fewer people are seeing the need to do so in person.
Juniper Research estimated that digital access to retail banking will increase 53 percent from 2017 levels to nearly 3 billion users by 2021. A Citi survey also revealed that 88 percent of consumers are mobile banking from their homes and that customers who accessed their mobile banking app at least once a week were more aware of their financial standing than those who didn't.
What if collecting that $20 your friend owes you was as easy as sending them a gentle reminder that they do, in fact, owe you $20?
That's exactly what you can do with the rash of payment and cash-transfer apps out there. Whether it be Venmo or PayPal, sending your friend the money for last night's dinner can be as easy as opening an app on your phone and touching their face. Or, even simpler, some of the same services, including Apple Pay as of last year, allow you to send money via iMessage, making paying friends as simple as shooting them a text.
One of the more exciting aspects of a potentially cashless society would be the potential for drastically reducing crime by, well, eliminating one of the best things to steal. If people stop carrying cash, the options for the traditional stick-up artist start to narrow pretty quickly.
Evidence of this at work already exists: One study found that low-income neighborhoods that shifted government-support programs from paper checks to electronic benefit transfer (EBT) cards saw a 9.8 percent decrease in overall crime.
And moving beyond the armed robbers of the world, there's a growing push by world leaders and economists to remove larger bills, like the $100 bill and the 500 euro note, as a way to cripple organized crime. If all transactions looking to remain anonymous to authorities have to rely solely on bills smaller than $20, multimillion dollar deals become next to impossible. Transferring $1 million in $100 bills involves a single briefcase that weighs a reasonable 22 pounds. The same amount in twenties? Four briefcases and 110 pounds.
No discussion of a cashless society would be complete without at least mentioning bitcoin.
The cryptocurrency was anonymously invented in 2009 as a way to transfer money across the world with ease. And, although bitcoin's current price volatility makes it next to impossible for practical use, one piece of the underlying technology — the "blockchain" — is proving to have a lot of applications beyond bitcoin. Payments startup Ripple, for example, has built its own blockchain and currency to facilitate major, enterprise-level payments across borders with ease.
Between venture capitalists, banks and major financial firms, the total amount of cash flowing to companies developing what might be the next big thing in fintech — that is, the popular industry term for finance and technology — is enormous. Total fintech investments hit $24.7 billion in 2016 — a staggering amount that could only be viewed as a disappointment if you knew that the same figure for the year prior was $46.7 billion.
Slowing or not, that wave of invested dollars indicates a wide variety of companies are on the verge of releasing new products into the marketplace that will continue pushing cash closer and closer to obsolescence.
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Millennials Adapting to Changes
Part of what's driving so many major finance companies and venture capitalists to invest so heavily in fintech is the increasing evidence that most millennials have already accepted a cashless future and are adopting its trappings much faster than older generations.
The Citi Mobile Banking Survey revealed that millennials used mobile banking apps more than 10 days a month compared to seven for customers overall, and the Bank of America Trends in Consumer Mobility report showed that 62 percent of millennials had adopted P2P payment transfer apps — a much higher rate than the 36 percent for the entire population.