Law in the Internet Society

Preserving the Global Use of Cash

Problem of declining cash use

With the rise of electronic payment systems, there has been a simultaneous decline in the use of cash. According to,

Without a link?

there are some who even believe that card payments will overtake cash in the next decade, as the number of transactions using cash is expected to decline from $21 billion in 2012 to $14 billion in 2012. Some even predict that we are less than a decade away from a “cashless” society.

Are these US numbers? What is their source? They appear grotesquely small for an economy the size of the US. Wouldn't the existence of legal tender law in the US be a relevant matter to discuss in deciding whether a cashless society is in our future?

Many cite rising ancillary costs, i.e. trips to the bank, cash counting, need for increased security, employee theft, etc, as a root of the issue and believe soon these costs will outweigh the advantages of receiving cash. While the decline of cash may be occurring more rapidly in the developed countries, for several reasons, the death of cash may not be as close as expected.

Many who predict the end of cash often point to the “benefits” of e-payments are accelerating the demise of cash; the most significant of these being transaction efficiency, convenience, and mobility. However, these alleged “advantages” of e-payments must be examined in light of the drawbacks that accompany them. E-payments come along with a lack of authentication and repudiation of charges, credit card fraud, and privacy concerns, mainly the tracking/monitoring of consumer spending.

The ability to track consumer spending is the most significant of the aforementioned disadvantages, as it brings into question the issue of anonymity. Consumer monitoring is such a high priority for many retailers, that some companies have summarily dismissed the use of certain forms of e-payment. For instance, Apple has promoted a one-touch payment application “Apple Pay”. This program utilizes a system known as tokenization, in which a unique code is generated, used for one transaction, and is then “discarded”; measures aimed at reducing the value of data to potential thieves. For retail chains like Wal-Mart or Target, this creates a problem because it diminishes their ability to track consumer behavior. When applied in the government context and taken to the extreme, if the world were to move to a completely electronic system of payments, individuals would only be allowed to purchase what the government “allows” them to, ultimately compromising consumer autonomy. There lies the greatest benefit of using cash, the power of autonomy. It is much more difficult to leave a “paper trail” that the government or powers of capitalism can track when using paper.

Why cash may still be king

Besides autonomy, the other benefits and prevalence of cash use are generally underestimated. Consumers continue to choose to use cash more frequently than any other payment instrument, including debit or credit cards. Cash plays a dominant role for small-value transactions, is the leading payment instrument for many types of purchases, and stands as the key alternative when other options are not available. In certain cases, including that of mostly lower-income consumers who lack access to alternative payment options or find them too costly or difficult to obtain, cash is also used for relatively larger-value transactions according to the Federal Reserve of San Francisco.

Finally, cash is the most transparent form of payment. It is the form of payment that connects us most directly to the fact that we are parting with our earnings. This last point speaks to what some scholars have called the “pain of paying”, and argue that consumers feel differently about paying for items when there is a gap between the time the product is bought or experienced and when it is paid for. Thus, many forms of e-payment alter the point at which the “pain” happens, making it tempting to enjoy goods or services immediately only to realize the full cost of the purchase at a later time. By altering this point individuals lose some of their autonomy through capitalist manipulation aimed at increasing consumer spending. If one of the goals of capitalism is to keep people poor, scared, and desiring more material items, than e-payments will likely increase in prevalence in the future.

What can be done?

To counter this, changing global economic forces will encourage the greater use of cash. In times of increased risk and uncertainty people tend to hold on to cash to reduce their risk profile. As markets become more and more vulnerable to negative news flows on global macroeconomic indicators, money supplies continue to be used to counter sluggish or falling economic growth since cash still acts as a defense against uncertainty. One step that can be taken towards protecting paper transactions is to continue investing in developing countries and improving the lives of the poor. Developing countries are working to improve their labor pools and are experimenting with using cash incentives, as these countries tending to be less open to using electronic payment systems. For example, many countries have developed Conditional Cash Transfer Programs (CCT Programs) that provide money to poor families conditioned on investment in human capital such as sending children to school or bringing them to health care centers.

In some cases, these initiatives have been highly successful. If developing nations, like the BRIC countries: Brazil, Russia, India, China, rely more heavily on cash payments, this may have a ripple effect on the West. As illustrated in the conclusions from one examination of electronic payment systems development in a developing country (Nigeria), many countries still must develop well functioning infrastructural arrangements in order to create a safe and efficient electronic payment systems. Even in countries like Nigeria, where the technological payment infrastructure is modern and comparable to those in the West or more developed nations, the failure to put in place reliable and relevant market and collaborative agreements has not enabled full exploitation of the available infrastructure to sustain a widespread and viable e-form payment system. In the background of this process, what is understated is the power struggle and distrust between the players and regulators or political leaders and citizens of these countries, which hampers the creation of an environment that would sustain free market activities and effective development of payment systems.

-- WyattLittles - 04 Dec 2014

I think the argument needs clearer stating. So far as I can see, the points touched are: cash is giving way to electronic payment, there may be problems with this, but it may not happen, some countries aren't ready, and anyway governments sometimes give out cash.

That's not very helpful to me in understanding your idea. The place to begin is at the beginning. If you could start your essay with a clear statement of the idea you want the reader to take away, she could then follow its development through the series of steps you think are required, understanding from the outset where you are going and why she wants to accompany you there. Perhaps you know what that sentence or two should be, but I could not find them in this draft.

-- WyattLittles - 17 Jan 2015



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r3 - 17 Jan 2015 - 20:37:18 - WyattLittles
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