In Cash We Trust: The Perks of Payment Choice
Ensuring everyone has equal economic access means keeping choice in payments is paramount. Recognising this, America’s Federal Reserve supports cash alongside digital alternatives. American Public Media website marketplace.org recently explored the advantages of this approach and how everyone can benefit from the option to use cash.
Firstly, banknotes and coins are available to everyone and can be used by anyone. By contrast, ‘all non-cash payments require having a bank account or a connection to a formal financial institution’. While many people are fortunate enough to have these, some 5.9 million U.S. households were unbanked as of 2021—around 4.5 percent across the nation—meaning they are shut out of the digital and mobile economy. For everyone else, there are likely to be occasions when they’re cut off from their accounts (e.g., due to a lack of cellphone signal or a card being cancelled) and cash will save them from the embarrassment and inconvenience of not being able to cover everyday expenses.
Secondly, cash helps keep both personal finances and wider economies resilient. Even in countries that strongly favour cashless payments, such as Sweden and the Netherlands, the advice from central banks and financial institutions is to keep some cash in a secure place for use in emergencies. For the hopefully rare occasions when electrical or internet infrastructures fail, banknotes and coins will allow people to continue transacting—paying for essential goods and services—until connectivity and cashless options are restored.
Thirdly, there are compelling reasons to choose cash over digital either on a daily basis, or for particular purchases. Bill Maurer, an anthropology professor at the University of California, Irvine, notes that cash offers considerable benefits over digital in terms of privacy: an increasingly rare commodity in today’s world.
When I hand you a $20 bill, there is no data captured by anybody from that transaction… It’s a relatively anonymous, private thing, whereas all digital forms of payment generate data trails.
In the best cases, data trails created by digital payments can be used for targeted marketing, and monetised via sales to third parties. They also leave personal data vulnerable to data leaks and cyberattacks. In worst-case scenarios, Maurer says ‘governments could use digital trails to surveil a population and prevent them from using mobile or digital services if they disapprove of their financial activity.’
Another reason people—especially younger generations—are choosing cash is that many find its tangible nature helps them budget, with cash-stuffing now among the most popular ‘budgeting hacks’. For those who prefer to transact using both cash and cashless, banknotes and coins are a good choice when buying non-essential items thanks to the well-researched ‘pain of payment’. This discourages frivolous spending as people are less willing to part with their hard-earned cash when they physically have to hand it over to another person, making them think more carefully about whether or not they really want something.
These benefits and more mean cash continues to be in demand, and thus supported by the Federal Reserve. ‘As long as someone wants paper money, we will always have it,’ says Maurer. Alongside this, new currency designs will continue to celebrate the cultures from which they are issued, and new technologies will be implemented to make cash even easier and more secure to use. Marketplace concludes that: ‘cash is its own form of technology’.
Cash always works. It’s a really magical technology for value transfer. All I have to do is give it to you, and then I have transferred value to you.