As vaccines are rolled out across the country, I’m optimistic enough to say that we are at the beginning of the end of the Quarona season. The pandemic has killed businesses and financial markets across the world, but has it also killed cash?
This may come as a surprise to you, but the American economy has been shifting toward becoming cashless for a while now. Even before the pandemic, industries have been looking for ways to kick the cash and allow customers to use the convenience of financial technology.
In Las Vegas, the icon of a cash economy, casinos have launched campaigns to persuade regulators to allow digital payments on the casino floor. The Pennsylvania Turnpike laid off thousands of toll collection workers after switching to completely cashless systems. This shift is seen in every industry in every state across the country.
Now add 2020.
The coronavirus pandemic has rapidly accelerated the trend toward a cashless economy, financial experts say this was buoyed by the fear of handling money and the exponential growth of e-commerce businesses like Amazon. So what does this cashless future mean for the future of business?
Business owners would benefit from the more cost efficient and user efficient model of cashless transactions. No money in the tills means less chance of getting robbed. It also means not having to make multiple trips to deposit their cash at the bank. Running on a purely electronic system, small business owners would have access to advanced analytical data and resources that they would not have had access to.
There are some problems stopping this completely cashless process. Not all consumers have access to these electronic services. In fact 8% of Americans don’t even have a checking account. Not to mention the many pockets of society that do not even have internet access or a smartphone. For small business owners, this could isolate a large portion of their customer base.
In order to prevent members of society from being left out, New Jersey, Philadelphia, New York, San Francisco, and D.C. have passed or sponsored legislation that ban cashless businesses. Some business owners call it an overreach of government power.
18% of Americans rely on alternative banking locations like a check cashing location. How are they going to be able to purchase anything if cash is no longer currency? There is a big fear that the switch to automated convenience for all will leave a portion of society to be unable to purchase goods needed for survival.
For those fortunate enough to be a part of the cashless economy, the benefits could be life-changing. Many digital platforms allow you to cash checks, pay bills and provide many other essential services that you used to need to go to the bank for, right from your phone. Access to advanced financial data, broken down into categories will make it easier to create budgets for personal financing.
Big Banks/ Big Data
Big banks are a key driver in the race to a cashless economy. Banks have been slowly closing branches and ATMs in order to nudge their customers towards their digital platforms. This saves them on labor and real estate costs which improve their bottom line. Banks can then increase their revenues by taking their percentage from your money transfers and certain online transactions. By far the biggest win for big banks is that they will get to know you (and sell you) much much better.
Your financial data is now a valuable raw material that can be bought, sold, and refined in for profit. This is why Data Brokers exist—they build a digital profile of you and then sell you to the marketplace. This allows retailers, banks, or even governments to target you with tailored advertisements based on your spending habits. (See earlier article about how data brokers sell your social media information too).
In order for a cashless economy to work, what we really need is trust and transparency. Banks, partners, payment organizations, and governments should be extra transparent concerning use of data and data security in order to gain the trust of society. The pandemic has given us the opportunity to speed up the digital financial revolution that everyone can benefit from.
Do you think living in a cashless economy is better for society? Let us know down in the comments,
This article originally published on GREY Journal.