The challenges of implementing a cashless society and what it means for the hobby

A recent article by Oz Shy, senior policy adviser and economist at the Federal Reserve Bank of Atlanta, drew some interesting conclusions based upon a multitude of studies that have been conducted over the years to investigate the behaviors displayed by consumers in a variety of situations. While the concept of a cashless society has been thrust into the ether for some time, new developments in nations that have adopted these systems have once again brought this topic to the forefront of discussion. The notion of the U.S. becoming a cashless society is a controversial one and often sparks furious debate, with opinions ranging from cashless societies ushering in either a utopian future or a dystopian one. One example of this debate has coalesced around China’s implementation of WeChat and Alipay in combination with its Social Credit System, the latter of which has drawn widespread criticism from the West. Despite the adoption of cashless transaction systems by several nations abroad, the United States remains unlikely to follow in the near future, given the continued dominance of cash for use in small transaction payments and for individuals who fall on the lower spectrum of household income.

The largely data-driven article by Shy provides a detailed look into the financial behaviors of Americans as they relate to overall transaction amounts and yearly household income. The first chart in Shy’s article displays observations of in-person purchases made by 2,062 survey respondents in six merchant categories during the 2017 Survey and Diary of Consumer Payment Choice. These six categories are described as “(1) Grocery stores, convenience stores without gas stations, pharmacies, (2) gas stations, (3) sit-down restaurants and bars, (4) fast-food restaurants, coffee shops, cafeterias, food trucks, (5) general merchandise stores, department stores, other stores, and (6) general services: hairdressers, auto repair, parking lots, laundry or dry cleaning, etc.” What is interesting to note about this chart is that as the payment amount of purchases increased in dollar value, the percentage of transactions that used cash or prepaid card for payment decreased, while credit card, debit card, and check payments increased in frequency. This was inversely true for smaller payment amounts, where cash largely dominated. What can be taken away from this is that cashless payments are preferable to consumers in higher-value transactions, whereas cash is preferable in lower-value ones.

The second chart Shy uses in his article was generated from survey respondents in the same study providing their demographic information regarding their yearly household income (from $0-$120,000) and whether or not they use credit and debit cards. Data in the second chart correlates higher household income with an increased likelihood of credit card adoption, or adoption of both credit and debit cards, as well as a lower likelihood of using neither type of card. At $10,000 or less yearly household income, 21.1% of respondents said that they had neither debit nor credit cards, but the highest percentage went to those who said that they used debit only. Between $10,000-$20,000 yearly household income, about half of respondents claimed to use both cards. At the median 2017 U.S. family income of $61,372, card adoption was almost ubiquitous, with only 3% using neither credit nor debit cards.

The box plot that follows the second chard in Shy’s article combines data from the first two portions and examines two different groups regardless of yearly household income: Those who carry both credit and debit cards, and those who carry neither. For respondents that carry both credit and debit cards, they made the most payments with debit (36.1%) and the fewest with check (1.2%). However, the highest average payment value was relegated to checks ($303.75), whereas the lowest average payment value again was associated with cash ($14.12). For respondents that did not carry either credit or debit cards, most payments were made with cash (86.4%), followed by prepaid cards (12.2%) and checks (1.4%). Cash was also used for the lowest average payment value for those who do not have credit or debit cards ($29.59), while checks made up the highest average payment value ($100.16).

The third chart focuses primarily on the cash usage percentage for respondents who have both credit and debit cards, respondents with only debit cards, respondents with just credit cards, and respondents with neither. While prepaid cards and checks are still sometimes used by those who do not have credit or debit cards, findings in the 2017 Survey and Diary of Consumer Payment Choice indicate that cash still makes up the vast majority of their purchases, with checks and prepaid cards considered by the study to be outliers from the norm.

Now that we’ve digested all of this data, what does it mean for the future of cashless societies and coin collecting?

CCTV cameras. Photo by Quevaal.

In an era where privacy is largely considered a luxury instead of a right, cash offers a rare solace from the intruding eyes of others, since it ironically leaves little to no paper trail. While not mentioned in Shy’s article, the aforementioned reason, which has been extensively discussed, is possibly one explanation for why higher income individuals still use cash in certain transactions. Concern for privacy also correlates with the rise of cryptocurrency. Cash will likely continue to dominate small transactions and still forms the overall backbone of purchases made by low-income individuals, for whom it is more difficult to obtain credit cards or set up a bank account. For these individuals, Shy has constructed a theoretical model which proposes that prepaid cards are the most feasible alternative to acquiring credit or debit cards in a cashless society. Shy also mentions a study by Chen, Huynh, and Shy (2019), in which consumers’ decision to not use cash was partially influenced by the “burden” of receiving coins in their change.

Hover to zoom.

Considering the previous point that modern coins in pocket change are commonly considered a burden by consumers, what does this mean for the future of numismatics? Those who enjoy collecting coins will continue to do so, but the general lack of rare and valuable coins in circulation may have an impact on the attraction of new collectors to the hobby, as most hobbyists often describe their interest starting by finding a unique and exciting coin in their pocket change. The Great American Coin Hunt was an excellent idea, as it temporarily re-invigorated the hobby by encouraging the release of fantastic coins back into circulation and brought back the nostalgia of simply finding a great coin in one’s pocket change instead of looking for one online, at a coin shop, or at an auction. More will need to be done, however, to draw new people into the hobby, as many younger collectors now describe their interest coming from coins that their relatives have passed on to them rather than discovering fascinating coins in their own change.

On a more positive note, will the United States Mint’s new 2019-W quarters, struck at the famous West Point Mint and released into everyday circulation, make a difference? Perhaps—Red Book senior editor calls them “one of the most exciting coin programs issued by the U.S. Mint in many years” and estimates their retail value to be $25 or more in average Mint State (with higher-grade “gem” examples selling in the hundreds of dollars). “As more collectors become aware of these coins, and realize they need them to complete their sets, demand should rise,” said Garrett.

To read the entire article by Oz Shy, please visit the website of the Federal Reserve Bank of Atlanta.

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Comments

  1. Tom says

    A cashless society is most certainly on the horizon. Perhaps not so much in my lifetime but it is coming. When we can’t buy or barter we will see the light.

  2. Tony@GA says

    We need to make a conscience effort to “use” cash. I appreciate the privacy aspect it offers. “Use it or lose it”.

  3. cagcrisp says

    Federal Register announced today the Following:

    Pride of Two Nations Limited Edition Two-Coin Set™ for $139.95

    I Assume this is the previously announced United States Mint and Royal Australian Mint two coin set…

    Could be wrong but that’s my Assumption…

  4. justanotherdaveinpa says

    I see those on pre-sale at Apmex for the past week or so.

    One silver proof curved coin from RAM and a clad US proof curved Apollo. for 139.00

    No Way.

  5. cagcrisp says

    IF my Assumption is correct…

    …Then for $139.95 you get a 2019 CLAD Proof Apollo 11 half dollar (WAY WAY OVERPRICED @ $32.95) and you get a 2019 Royal Australian Mint 1 oz. Proof Silver $5.00 coin.

    Mintage is limited to 10,000

    Thus IF my Assumption is correct…

    …You are paying $107 for a 1 oz. Australian coin with a Mintage of 10,000…

  6. justanotherdaveinpa says

    I think the cashless society is very similar to the paperless society which so far hasn’t been very successful.

  7. Buzz Killington says

    OffT — The paperless society has been amazing. I have literally never heard anyone asking us to go back to carbon paper and stacks of canceled checks in the closet.

    OnT — I just read the Harriet Tubman $20 note is delayed until 2028. You can pencil that in as a likely date that we will stop printing paper money.

  8. Blair J. Tobler says

    The Pride of Two Nations set is NOt the Australian set. The Australian set is only available through the RAM. I don’t know what this new set is.

  9. cagcrisp says

    @Blair J. Tobler says,”The Pride of Two Nations set is NOt the Australian set. ”

    ” The United States Mint will market the set on its website and provide a link to the Royal Australian Mint’s website for U.S. customers who wish to purchase the product.”

  10. Blair J. Tobler says

    That’s true cag, but the Mint (US) wouldn’t be setting the price. This Federal Register posting is for a product which the Mint (US) is setting the price for. Also, I ordered the Australian set. Nowhere on their website or on the order acknowledgement does it call it “The Pride of Two Nations”. The acknowledgement calls it a 50th Anniversary Lunar Landing Partnership. Also, the international price for the set converts to about $122 (US).
    This is why I believe this new posting is something different.

  11. just another dave in pa says

    I sure hope it’s something different.

    The paperless society is a mess and even voting machines are being reverted to paper ballots in many places.
    Digital media is fine in many instances but a paperless society is not happening anytime soon.

    I felt that the Innovation dollars were probably a pre-cursor to the introduction of digital currency. At the end of that series I expect the true innovation of digital currency to appear but that’s probably too optimistic.

  12. John Moore says

    May 12 Coin World article regarding the Royal Australian 50 th anniversary joint US partnership talks about another US partnership coming out from the Royal Spanish Mint.Not sure if this is the Pride of Two Nations.

  13. John Q. Coinage says

    The future is this, cashless & you don’t drive a computerized car dos Alexa2, she knows everything about YOU. So, you hop in & request “Please take me to pizza hut…” Alex2 Answers you: Well, I checked you blood work, your cholosteral is HIG, so you are going to Vegan Palace, and YOU will like it…” Welcome to 2060…….oh & Presidnet BAron Trump has recalled all US currency, to be redeemed @ 60% of face……coins are outlawed for commerce…

  14. cagcrisp says

    @John Q. Coinage says,” So, you hop in & request “Please take me to pizza hut…”

    Won’t be Any Meat at pizza hut to get cholesterol very high…

  15. John Q. Coinage says

    CHEESE……..assuming still cow or goat or other cheeze = fat on dough, imagine congealed fat….or with double bacon [beyond PORK 2050…] Or I want to go to Sizzler… oops no meat there either… BY 2o6o meat will be outlawed……. Soylent Green Pie…….. never mind!

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