Cash isn't always the most convenient way to pay for your everyday expenses. Today, options ranging from cryptocurrencies like Bitcoin to mobile payment systems like Apple Pay mean it's possible to forego cash for most transactions. However, it remains to be seen whether 2018 will be the year in which these cashless systems go mainstream.
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Options for creating a cashless society. When people talk about moving to a cashless society, there are two ways to frame the discussion. One is the use of mobile payments. These include Apple Pay and Android Pay, which let people send payments electronically from their phone, as well as digital payment systems like Venmo and PayPal. These systems can be seen as a digital extension of physical credit and debit cards and let people pay using U.S. currency. Many people appreciate the convenience these systems offer. "I like using my phone and not taking out cash," says Peter Nigro, professor and chair of the finance department at Bryant University.
Other people see cryptocurrency as the way to create a cashless society. Bitcoin is the best known cryptocurrency, but there are numerous other systems vying to become a viable alternative to government cash.
Cryptocurrencies are digital systems that don't have the backing of any government. Their value can be volatile, but that may change as they are embraced by investors and the general public. In December, Bitcoin was added for trading on the CME and Cboe Global Markets futures exchanges, marketplaces for trading contracts and options for commodities and financial instruments.
"I feel like the futures have stabilized and legitimized this coin," says David Drake, founder and chairman of private-equity firm LDJ Capital in New York City. Bitcoin's first weeks on the market were marked by significant swings in value, but Drake attributes some of that to people cashing in their coins for holiday shopping. He doesn't see any reason to be alarmed over the volatility. "The market is still very young," he says.
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Foregoing cash appeals to consumers, government. Moving to a cashless society appeals to different people for different reasons. Some people like the convenience of mobile payments, while others appreciate that they can buy and sell online anonymously using cryptocurrencies.
Edward Stringham, president of the American Institute for Economic Research, says a cashless society could benefit another group as well: the government. "There's a lot of people advocating for this from a public policy perspective," Stringham says. Cash can be used to fund black market activities or terrorism because it's not easy to trace. And some people use cash to avoid taxation of their transactions. However, leaving a digital footprint behind each transaction helps eliminate those concerns. "More technology is allowing groups to monitor our activities, whether we like it or not," Stringham says.
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Why cash won't die in 2018. Virtual currency is not a new idea. In the 1990s David Chaum created DigiCash, a way for people to pay digitally using a currency that would be untraceable by the government and third parties. DigiCash went bankrupt in 1998, but the dream of a virtual currency lives on. "Here it is 20 years later, and we're still talking about it," Nigro says.
When asked if cash will disappear anytime soon, even fans of cryptocurrencies and cashless systems say that's not likely. "No, that's not realistic for the next 50 years," Drake says. While he remains confident in the viability of cryptocurrencies, "It will never replace cash in this century," he says.
If and when consumers embrace cryptocurrencies, Nigro predicts the government will get involved. "I think eventually we'll see some sort of digital currency issued by the federal government," he says. While that probably won't happen in the next five years, Nigro thinks it could realistically occur within a decade.
Meanwhile, Drake says consumers should expect to see new products designed to make using cryptocurrencies more convenient. "The [cryptocurrency] and the mobile payment solutions will be merging," he says. For instance, the Monaco cryptocurrency already offers Visa-affiliated cards for people to easily spend their money.
However, regardless of how mainstream these systems become, some people will always feel more comfortable with cash.