If you’ve been shopping in a big box store or grocery store lately, perhaps you’ve heard the news over the loudspeakers: there is a coin shortage in the United States, leading many to speculate on whether or not we might be headed toward a cashless society.
“As businesses shut down, coins stopped flowing through the economy,” Bloomberg states in an August 4 video report.
The U.S. Mint is asking consumers to spend their spare change as much as possible to add to the number of coins in circulation, and laundromats everywhere are suffering, reports say. Walmart and Kroger are reportedly asking customers to pay only in exact change, as stores are having a harder time giving it back to customers who do pay in cash.
Meanwhile, the Federal Reserve has formed a task force to help fix the problem.
Still, the coin shortage has led to much speculation as to whether or not the situation is exposing a flaw in our current monetary system, and whether it could portend a cashless society in the near future, based around digital payments, increased surveillance, bull markets in the cryptocurrency arena and several other new developments to keep an eye on.
Big Cities Fight Back Against a Cashless Society
While the idea of a cashless society has gained momentum in recent months, big cities such as Philadelphia, San Francisco and New York have already passed laws in recent months banning merchants from accepting only card and contactless payments, according to a report from Fortune Magazine.
In 2019, New Jersey passed a similar bill at the state level, and cashless merchants have been banned in Massachusetts since 1978, the article added.
Cash is still the second most widely-used form of payment behind debit cards, and while cryptocurrency continues to disrupt these forms of payment, there’s no question that cash remains popular, especially considering that people tend to spend a lot more money when they use cards first and foremost, since their hard earned cash is reduced to mere numbers behind a computer screen.
In 2001, MIT researchers Drazen Prelec and Duncan Simester published the results of their studies in Marketing Letters. The duo found that shoppers spend up to 100% more when using their credit cards to pay instead of cash.
That’s good for the bottom lines of retailers and businesses everywhere, but it may just be part of the reason why the U.S. remains buried in a heaping mound of debt.
Unbanked U.S. Residents Number 14.1 Million People
Aside from the opposition against a cashless society at the city and state level, there is also the issue of “the unbanked” residents that make up the fabric of American society.
As many as 14.1 million U.S. residents remain “unbanked,” meaning they live in a household with no accounts tied to formal, insured financial institutions.
“Any move to cashlessness is, by definition, exclusionary to those groups,” Christina Tetreault, senior policy counsel at Consumer Reports, said.
Cash also helps to preserve anonymity and freedom from surveillance for people who are aware of each bank’s ability to sell customer financial data to just about anyone they choose under the Gramm-Leach-Bliley Act of 1999, adding to its appeal among millions who see it is an integral part of a free society.
All of these factors add to the likelihood that we won’t see a cashless society anytime soon, at least not without a major pushback from U.S. citizens at-large.
“The decline of cash is overstated,” said one expert, Christina Tetreault, senior policy counsel at Consumer Reports, to Fortune Magazine.
While the coronavirus situation may change the landscape of payments, she believes the reports of the “end of cash” are greatly exaggerated.
“There’s been a talk of the death of cash for many years, and it is true that many people make more electronic payments now, but I think cash is still king,” she said.