The End of Cash?

During lunchtime in New York City, the line at salad chain Sweetgreen stretches out the door. It moves quickly, though. Instead of opening up their wallets, counting out their money, and waiting for change, customers just swipe an app on their phones. They can’t pay with cash even if they want to because Sweetgreen no longer accepts it.

“It took some getting used to, but I don’t mind now,” says Lori McGuire, a 22-year-old student. “The line moves much faster, and I’m in and out quicker.”

Cash is rapidly going the way of the horse-drawn carriage and the typewriter, as people and companies turn to apps and other digital types of payment to conduct business. That Uber you take home after soccer practice? No wallet necessary. Amazon’s new bookstores? Apps or plastic only, please. Even Walmart, the world’s largest retailer, is trying to push its customers to embrace digital payments at its stores. And there are entire countries moving toward going cashless—an idea that would have seemed unthinkable 10 years ago. But the trend is sparking debate among economists and privacy advocates.

“The conversion to [a cashless] economy will take time, and it’s not going to be simple,” says Bhaskar Chakravorti, an economist at Tufts University in Massachusetts.

During lunchtime in New York City, the line at salad chain Sweetgreen stretches out the door. But it moves quickly. No one is opening up their wallets, counting out their money, or waiting for change. Instead, customers just swipe an app on their phones. They can’t pay with cash even if they want to because Sweetgreen no longer accepts it.

“It took some getting used to, but I don’t mind now,” says Lori McGuire, a 22-year-old student. “The line moves much faster, and I’m in and out quicker.”

Cash is rapidly going the way of the horse-drawn carriage and the typewriter. More people and companies are using apps and other digital types of payment to conduct business. That Uber you take home after soccer practice? No wallet necessary. Amazon’s new bookstores? Apps or plastic only, please. Even Walmart, the world’s largest retailer, is trying to push its customers to embrace digital payments at its stores. And there are entire countries moving toward going cashless. This idea would have seemed unthinkable 10 years ago. But the trend is sparking debate among economists and privacy advocates.

“The conversion to [a cashless] economy will take time, and it’s not going to be simple,” says Bhaskar Chakravorti, an economist at Tufts University in Massachusetts.

Alternatives to cash are nothing new. In the 1920s, oil companies, hotel chains, and department stores began issuing credit cards to customers for purchases made at their outlets. In the 1950s, Diners Club became the first of many credit cards that could be used at most businesses. Today, the rise of debit cards, mobile apps like Venmo, Apple Pay, e-commerce, and digital-only currencies such as Bitcoin is accelerating the move away from cash. (To understand how Bitcoin works, watch our video.) According to a Federal Reserve Bank study, cash payments now make up only one-quarter of all transactions in the U.S.—down from 36 percent five years ago.

Alternatives to cash are nothing new. In the 1920s, oil companies, hotel chains, and department stores began giving credit cards to customers for purchases made at their outlets. In the 1950s, Diners Club became the first of many credit cards that could be used at most businesses. Today, the rise of debit cards, mobile apps like Venmo, Apple Pay, e-commerce, and digital-only currencies like Bitcoin is accelerating the move away from cash. (To understand how Bitcoin works, watch our video.) Cash payments now make up only one-quarter of all transactions in the U.S., according to a Federal Reserve Bank study. That’s down from 36 percent five years ago.

Going cashless has some obvious benefits. It’s more convenient to swipe an app to pay for something than to go to your bank, withdraw cash, use it at a store, then go back to your bank for more cash. Electronic payments also create an instant record in case there’s a dispute, and it’s safer to carry around a password-protected phone than a wad of cash.

Governments like electronic payments because they discourage cheating on taxes: If everyone’s spending and earnings were recorded to the penny, the I.R.S. (Internal Revenue Service) could collect hundreds of millions of dollars more per year in taxes, according to a recent U.S. government estimate.

Businesses also see the advantages of using less cash. For starters, people tend to spend more freely when paying digitally. A 2014 study by Lund University in Sweden showed that students given a $100 gift card spent an average of 16 percent more than those given $100 cash. And after Sweetgreen began phasing out cash in 2016, it discovered another benefit. 

Going cashless has some obvious benefits. Typically, you have to go to your bank, withdraw cash, use it at a store, then go back to your bank for more cash. But it’s more convenient to swipe an app to pay for something. Electronic payments also create an instant record in case there’s a dispute. And it’s safer to carry around a password-protected phone than a wad of cash.

Governments like electronic payments because they discourage cheating on taxes. If everyone’s spending and earnings were recorded to the penny, the I.R.S. (Internal Revenue Service) could collect hundreds of millions of dollars more per year in taxes, according to a recent U.S. government estimate.

Businesses also see the advantages of using less cash. For starters, people tend to spend more freely when paying digitally. A 2014 study by Lund University in Sweden showed that students given a $100 gift card spent an average of 16 percent more than those given $100 cash. And after Sweetgreen began phasing out cash in 2016, it discovered another benefit. 

“By reducing cash, we’re able to serve customers a lot faster,” says co-founder Jonathan Neman, who added that employees can perform up to 15 percent more transactions per hour when no cash is involved.

Economists expect other businesses to follow suit. Walmart recently added a payment option to its mobile app and is rolling out cashless express checkout lanes at its 4,700 stores this fall—an effort, experts say, to get customers used to leaving their cash at home. (Hiring fewer cashiers also saves Walmart money.)

But there are problems with eliminating cash. Security experts worry, for example, that hackers could wipe out entire savings with a few clicks. And privacy advocates fear that a cashless society will be one in which the government will be able to track every purchase you make and businesses will know everything about you, reminding some of George Orwell’s Big Brother.

“People have the right to not reveal their transactions to others, including the government,” says William Luther, an economist at the Cato Institute, a think tank in Washington, D.C., that promotes individual freedom.

And then there are the 7 percent of Americans—about 24 million people, most of them poor—who are “unbanked,” meaning they don’t have bank accounts to be linked to digital forms of payment. How will they survive in a digital economy?

“By reducing cash, we’re able to serve customers a lot faster,” says co-founder Jonathan Neman. Up to 15 percent more transactions per hour can be performed when no cash is involved, he adds.

Economists expect other businesses to follow suit. Walmart recently added a payment option to its mobile app. It’s also rolling out cashless express checkout lanes at its 4,700 stores this fall. Experts say these moves are part of an effort to get customers used to leaving their cash at home. Hiring fewer cashiers also saves Walmart money.

But there are problems with eliminating cash. Security experts worry, for example, that hackers could wipe out entire savings with a few clicks. And privacy advocates fear that a cashless society will be one in which the government will be able to track everything you buy and businesses will know everything about you. It’s a future that reminds some of George Orwell’s Big Brother.

“People have the right to not reveal their transactions to others, including the government,” says William Luther, an economist at the Cato Institute, a think tank in Washington, D.C., that promotes individual freedom.

And then there are the 7 percent of Americans who are “unbanked.” That means they don’t have bank accounts to be linked to digital forms of payment. Most of those 24 million people are poor. How will they survive in a digital economy?

Despite these concerns, some countries are moving toward eliminating cash. In China, which invented paper money more than 1,000 years ago, at least 70 percent of people no longer carry cash in their wallets, preferring digital payments, according to a recent Reuters report. In Sweden, five of the six biggest banks don’t use paper money at all. And 90 percent of all purchases in the country are made electronically.

“It’s safer this way and it saves us money,” Bengt Nilervall, of the Swedish Federation of Trade, told The Guardian. “Handling money and transporting cash is costly.”

Despite these concerns, some countries are moving toward eliminating cash. China invented paper money more than 1,000 years ago. Now, at least 70 percent of people in China no longer carry cash in their wallets. They prefer digital payments, according to a recent Reuters report. In Sweden, five of the six biggest banks don’t use paper money at all. And 90 percent of all purchases in the country are made electronically.

“It’s safer this way and it saves us money,” Bengt Nilervall, of the Swedish Federation of Trade, told The Guardian. “Handling money and transporting cash is costly.”

Some say it’s inevitable that the U.S. won’t be far behind.

“Within 10 years, cash will seem old-fashioned,” says Susan Crawford, an expert in technology and innovation at Harvard University. “Every advanced society on earth is exiting cash, so we in the U.S. need to catch up.”

Others are advocating a go-slow approach to moving toward an all-digital economy. Harvard economist Kenneth Rogoff thinks the U.S. government should phase out $100 bills, then $50 bills, then $20 bills, leaving smaller bills in circulation for the foreseeable future. Doing so, he argues, would stimulate spending and increase tax revenue, while allowing Americans some privacy for smaller purchases they prefer to keep private.

“I want to have a less-cash society, not a cashless society,” Rogoff says.

Others predict there will always be a place for paper money in the U.S.

“[Cash] is tried, trusted, and true,” economist Ian Bright told Business Insider. “It is a technology that works.”

Some say it’s inevitable that the U.S. won’t be far behind.

“Within 10 years, cash will seem old-fashioned,” says Susan Crawford, an expert in technology and innovation at Harvard University. “Every advanced society on earth is exiting cash, so we in the U.S. need to catch up.”

Others are advocating a go-slow approach to moving toward an all-digital economy. Harvard economist Kenneth Rogoff thinks the U.S. government should phase out $100 bills, then $50 bills, then $20 bills. He supports leaving smaller bills in circulation for the foreseeable future. Doing so, he argues, would stimulate spending and increase tax revenue. But it’ll also allow Americans some privacy for smaller purchases they prefer to keep private. 

“I want to have a less-cash society, not a cashless society,” Rogoff says.

Others predict there will always be a place for paper money in the U.S.

“[Cash] is tried, trusted, and true,” economist Ian Bright told Business Insider. “It is a technology that works.”