Business & Tech

hiawatha bray | tech lab

If cash is king, it’s time for a revolution

FILE - This Nov. 18, 2009, file photo, shows credit and bank cards with electronic chips in Gelsenkirchen, Germany. Changes to federal law have sharply restricted students’ access to credit cards, making it harder for many to start building credit. But parents can still help their kids lay the foundation for renting apartments and taking out loans by letting them piggyback on their good credit and offering sound advice. (AP Photo/Martin Meissner, File)

Associated Press

The United States has been slow to catch on to new chip cards.

There’s a professor at Harvard University who’d like to take all your cash, and not for tuition. In a witty new book, “The Curse of Cash,” economist Kenneth Rogoff argues the human race would be better off without paper money.

He’s onto something. The US is adopting digital payment systems so universal and — in theory — so secure there will be little need for cash. But America is taking its sweet time about it.

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Those annoying new credit card readers are one disappointing example. They’re old news in the rest of the world; ours are painfully slow, not as secure as they could be and not even available in most places. The US led the way in pay-by-smartphone services like Apple Pay,Samsung Pay and Android Pay, but too few places accept them. Meanwhile in much of the world, you can buy small items by simply tapping a card against the terminal. No signature, no PIN, no nothing. Here in the US, we use a similar technology to ride the subway. But for buying most other things, forget about it.

Rose Lincoln/Harvard News Office

Kenneth Rogoff.

As a fan of all things digital, and of privacy, I’ve got mixed feelings about all this. In a fully cash-free society, government agencies could maintain constant surveillance on every dime we spend. For now, things aren’t that bad because digital payment systems aren’t that good.

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And yet, there’s no denying the efficiency and security of digital payments. I may insist on my right to stuff a mattress with paper money, but in everyday life, I hardly ever use the stuff. And I’m not alone. A recent Gallup survey found that 53 percent of Americans rarely or never use cash, up from 43 percent five years ago. And if the latest technologies live up to their promise, they could deliver the cashless society of Dr. Rogoff’s dreams.

Old-school credit cards with their insecure magnetic “swipe” strips are a poor substitute for cash, because they’re so easy to counterfeit. The new chip-based cards solve the problem with a digital code that’s almost impossible to fake. But reading the code can take twice as long as swiping. Card issuers Visa and MasterCard have begun using new processing software that’s supposed to work much faster.

America’s chip cards usually don’t require users to enter a PIN number, as we do at our debit cards. The “chip-and-PIN” approach is used in much of the world, and makes it almost impossible for thieves to use a lost or stolen card. Retailers Walmart and Home Depot are suing the card companies, to force them to adopt the chip-and-PIN standard. But for millions, it’s a moot point. A February survey from Boston Retail Partners found only 22 percent of US retailers were even taking chip cards. Upgrading all 13.9 million American payment terminals will take a while.

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These upgrades will also let retailers accept smartphone payments from Apple Pay and Android Pay. Activated by the user’s fingerprint, these systems transmit encrypted financial data through a radio chip inside the phone. But of the nation’s 3.7 million retail stores, only a million or so now let you pay this way. Besides, fewer than half of Americans have an Apple or Android phone that’s payment-capable, according to the Auriemma Consulting Group. And even those with the right kind of phone make fewer than 20 percent of their purchases with it.

The simplest of all cash alternatives, the “tap-and-go” card, is popular in many nations but virtually unknown here. These are credit cards that work like Apple Pay. You just touch it to the terminal to make a payment. They only work for small transactions of around $50 or less.

Banks tried issuing tap-and-go cards in the US a decade ago, but virtually no retailers accepted them. The new smartphone-compatible terminals can handle them, so they may at last gain traction in America. That would eliminate our last rationale for carrying a few ones and fives.

Harvard’s Rogoff has been railing against cash for decades and it looks like financial technology is catching up with him. In a few years the bugs will be worked out and we’ll have payment systems that are secure, efficient, and devoid of privacy. And to judge by current trends, more of of us will happily use them. Even me.

Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.
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