Digital currency is on the fast track to phase out physical money, which poses several problems that will be costly in the long run. (Image credit Flickr)
One word comes to mind when thinking about digital currency ─ convenience. It’s easy to carry, doesn’t wear out and is accepted nearly everywhere. According to a 2015 report from the Federal Reserve, only 32% of consumers in the US used cash for their purchases in 2015, an 8% decrease from 2012 and the numbers continue to decrease. It’s never been easier to pay for things using digital currency- merely press a button, swipe a card or wave a smartphone and the transaction is complete.
Writing a check (nearly unheard of now) or unfolding banknotes and sifting through change is fast becoming an archaic form of tendering debts. Even asking friends or relatives for a loan is as simple as getting a PayPal account and even home businesses can take advantage of digital currency using Square or Stripe. So why use cash anymore? Most news outlets will tell you it’s covered in germs and drug residue and most online retailers will tell you there’s no need for physical money, like in the past days of writing checks or getting a money order to ‘buy 12 CDs for the price of 1’ (or 8 CDs for a penny) through Columbia House.
Square and Stripe allow users to pay with credit and debit cards through their mobile devices. (Image credit Square)
The infrastructure for a cashless economy is already in place- banking can be done online or through an app with no need to ever visit them in person. Nearly every business- retail and restaurants included, accepts everything from debit cards to cryptocurrency and even utilities allow for online payments. So again, the question remains- why use physical cash for anything. There are a few reasons not to transition entirely over to an all-digital currency, the first of which, are man-made and natural disasters. When the electricity goes down, so does the ability to pay with plastic or other digital methods. Great examples of this were seen during hurricanes’ Harvey, Irma, and Maria. The electrical grids in the areas hit by those disasters went down, and people quickly found they could not get goods or supplies using physical cash. In fact, many Puerto Rico citizens are still unable to get the things they need as the electrical grid in most places are still down, and Wi-Fi is nearly non-existent.
Puerto Rico’s power grid before and after Hurricane Maria. (Image credit NOAA)
Another reason not to go strictly digital is availability- the homeless, underprivileged and even some kids may not have access to a bank account, a requirement (along with an internet connection and perhaps a mobile device) needed in most cases to use digital currency. Sure digital services such as PayPal are free to use, but you still need to couple it with a bank account or other financial institution. For them, and even some of us with digital accounts, the aspect of carrying traditional money represents security, safety, and certainty. Unless the government implements some financial digital standard that makes it easy for everyone to bank through and gain access to digital currency (even in power outages), a strictly all-digital economy may be a disaster in the making.
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