It’s 2021: Why Are We Still Using Cash?

By Jonathan Spira on 21 January 2021
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The term “filthy rich” may in fact not be a misnomer: Paper money is notoriously dirty, practically plastered with germs.  The influenza virus can live on a five-dollar bill for up to 17 days.  Yet the warnings issued by researchers at the start of the novel coronavirus pandemic with respect to how the virus could be transmitted on currency didn’t worry me a bit.

It’s not because I wasn’t concerned about the transmissibility of the virus, nor because I’m not a germophobe.  I have a healthy respect for germs and try to keep them far away from me.  Still, I have the same $20 bill in my wallet now that I had in it last March, although a $5 bill was used as a gratuity at some point.

Rather, it’s because cash had long since ceased to be something I used more than a few times a year for over half a decade at that point, if not before that.

Apple introduced Apple Pay to the world on October 20, 2014.  The touchless payment technology was a major improvement over touchless credit cards that one would tap at a terminal.  Instead, without having to remove anything from my wallet, I would wave my phone in front of the credit-card terminal, and voilà!

A few years later, in December 2017, Apple went one step further and introduced Apple Pay Cash, a person-to-person payment system that allowed all Apple iPhone users to send money to friends and family and to use the cash stored on the Apple Pay Cash card on the phone for Apple Pay purchases as well.

But the movement away from cash didn’t start there.  Mankind has long used all sorts of things as stores of value – rare metals, strings of shells, salt, and even jugs of whiskey. Why must circular pieces of metal and rectangular pieces of paper persist as a store of value after several centuries, I always wondered?

Economists have wondered this too. Indeed, there’s nothing most economists wouldn’t like more than a cashless society, the better to lower business transaction costs and fight money laundering with, not to mention eliminate the cost of printing and producing notes and coins.  On the other side of the coin, critics see an erosion in privacy.

Of course, the move away from cash didn’t start with Apple Pay.  Rather, it started in 1949 with Frank X. McNamara who, in what is most likely an apocryphal story, had left his wallet in another suit and couldn’t pay for a business dinner at the Major Cabin Grill restaurant in Manhattan with clients.    The story goes that he, along with two friends, Alfred Bloomingdale and Ralph Schneider, created the first charge card, Diner’s Club as a direct outcome of this experience, but the Major Cabin Grill became the first establishment in the world to accept Diner’s Club.  Offered to restaurants and their patrons as a convenience (my father became a Diner’s Club member in the early 1960s), the idea took off, and it was followed by numerous copy cat cards including Trip Charge, Golden Key, Gourmet Club, Esquire Club, and Carte Blanche.  In 1958, Bank of America introduced a more general-purpose card, the BankAmericard, and an industry was born.

Automated teller machines followed, as did rudimentary online banking with an offering introduced by Citibank over a decade prior to the development of a consumer-facing Internet.

In the United States, cash is no longer king, although it remains the primary method of payment in other cultures: The Federal Reserve Bank’s most recent Diary of Consumer Payment Choice report found that consumers used cash for just 26% of all payments and that cash was used heavily – 47% – for smaller purchases such as those under $10.  In addition, debit cards were the most used instrument, accounting for 30% of payments.

Just in the past few days I used Zelle, a bank-owned digital payments network, to purchase a mid-century modern piece of furniture from a private seller, used Apple Pay Cash to purchase a snack at the new Moynihan Train Hall at Penn Station, and used Apple Pay for a grocery order.

I’m in no hurry to spend the $20 bill that has enjoyed a ten-month residency in my wallet.  It’s not that I go out of my way to avoid using cash; rather, it’s more than it simply doesn’t occur to me that I should use it for a purchase.  I’m not sure how representative I am of a typical consumer, but I suspect that I am rather representative of a frequent international traveler, despite the fact that little international travel is taking place amidst the coronavirus pandemic.

As for cash in general, I see very little incentive, as using cash requires a trip to a bank, something I avoided for years prior to the pandemic.  I’ll never forget the look on my father’s face when a buyer of a building he was selling wanted to pay for it in cash.  “Cash?” he said in a questioning manner. “Whatever would I do with that much cash”

(Photo: Accura Media Group)

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