Bitcoin, credit cards, and the rise of a cashless economy

The world is moving on. It’s time we embrace change.

Ryan Todd

I’m ready to get rid of my money. By money, I mean cash. It’s a dusty holdover from another age, like VCR tape in a streaming world. For me and many others, cash has gone from being an everyday necessity to emergency backup — a financial flashlight we keep handy in case the power fails.

You might think the old-school, low-tech form of currency would be gaining favor following the monster data breach at Target stores during the holidays. Up to 110 million customer accounts were exposed, allowing cyber-crooks to burrow into a mountain of personal information, including account numbers and encrypted PINs.

In the aftermath of that credit debacle, some jittery consumers said they had sworn off plastic in favor of cash. I didn’t buy it then, and the nonstop card swiping in the checkout lanes of my local Target on a recent Saturday confirmed those doubts. Even the tiniest purchases, including a pack of Tic Tacs, were being paid for electronically. Any worries about compromising privacy were apparently swept aside by convenience and habit.


That’s how it is with me. One afternoon last month, I used a Visa Rewards card to fill my Honda’s gas tank, charged 30 pounds of ice melt to a Citi Dividend card, scanned my Starbucks iPhone app to grab a venti vanilla latte, ordered three bags of dog chews from Amazon, and authorized an outrageous sum of money to go to Verizon through Bank of America Bill Pay. Everything I needed to accomplish was done without cash — not even a penny for my thoughts.

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That night, I opened a personal finance app called Mint to review my spending. Mint allocated each purchase to monthly budgets set up for categories like restaurants and pet supplies. With cash, I probably would have been asking, “Where did it all go?”

I’m not ready to take a sharp turn toward a system as radical as bitcoin (please don’t expect an explanation of the erratic digital currency here), but I’m beyond needing money in hand to appreciate its power.

This shift to a so-called cashless society — there’s even a rockabilly band by that name — is happening worldwide, at least in affluent countries. A MasterCard study of 33 major economies, released late last year, showed non-cash payments accounted for $42 trillion worth of consumer spending in 2011, about 66 percent of the total. In the United States, 80 percent of consumer spending didn’t involve cash, and in Belgium and France, the figure topped 90 percent. In making the case for electronic commerce, the study’s authors cited the amount of time it takes to get cash, the risks of carrying a wallet filled with bills, and the cost of dealing with paper money — up to 1.5 percent of gross domestic product. Yes, this comes from a company with a vested interest in collecting interest payments and late fees, but research conducted through The Fletcher School at Tufts University also came to the conclusion that cash is expensive. It calculated that the fees, time, theft, and lack of tax accountability associated with cash add up to at least $200 billion annually in the United States.

The next phase of our cashless evolution will involve mainstream acceptance of mobile-payment apps, which essentially turn electronic devices into banks and registers. They make swiping a credit card seem cumbersome by comparison. For example, with Square, you can buy a cup of coffee by speaking your name. The San Francisco-based company is now testing Pickup, an app for ordering and buying restaurant food without human interaction. Anyone left holding a bag of General Tso’s chicken when they asked for pad Thai knows this is a breakthrough in takeout technology.


Cash does offer some advantages. Most notably, transactions are anonymous and secure. Social Security numbers aren’t sent to the Cloud, and marketers can’t spam-bomb in-boxes. But that anonymity also appeals to people who want to hide income from the IRS, or just hide — Whitey Bulger paid his Santa Monica rent in cash.

There is also an argument to be made that low-income consumers, already saddled with a disproportionate share of debt, stand to lose more in a cashless economy. For starters, participation requires being able to afford a smartphone and Internet access.

And it’s worth considering whether an absence of cash will cause people to spend recklessly. In a blog post for The Guardian last year, Oliver Burkeman considered the “frictionlessness” of going cashless — it’s easier to buy goods and services without thinking. “Frictionless spending is why my Kindle is loaded with quarter-read books on topics that interested me for 30 minutes once,” he said.

Such concerns are to be expected. Our relationship with money is a serious, lifelong commitment. It may take time to adjust to waving a phone instead of flashing a 20. But this deep into the 21st century, wouldn’t you rather grapple with real change than fumble for loose change?



The annual cost to each US household for dealing with a cash economy, according to a 2013 Tufts study


Mark Pothier is the Globe’s business editor. E-mail him at and follow him on Twitter @markpothier.