Decreasing Use of Cash - Assignment Example

Introduction With the advent of numerous ways to pay without using cash, it makes one wonder if we are ultimately moving towards a cashless society. It seems that information systems advances along with credit cards, debit cards, Oyster cards, Tesco Club cards, and other smart cards are making the use of cash almost obsolete. The purpose of this paper is to research how the use of cash is reducing, analyze the accelerators of becoming cashless, review the roadblocks to it happening, give the writer's opinion regarding whether or not a cashless society is likely, and emphasize the role that information systems play in this change. Decreasing Use of Cash According to New Dawn Magazine (1995, pg. 1), "Money - in the traditional sense no longer exists. It died two decades ago when Richard Nixon forever abolished the gold standard. Since then, money as we once knew it has been replaced by an unstable new global medium of exchange that is called 'megabyte money'... megabyte money is a threat not only to our country's long-term growth and prosperity, but to the individual as well." The public now has quite a few electronic money counterparts available at their disposal. The United States Bureau of Engraving and Printing still prints greenbacks in sheets of 32. "In fiscal 2007, the government will print about 9.1 billion individual bills. But 95 percent is to replace worn currency, not to expand the supply. THE BUCK STARTS HERE, say signs on some printing presses. In reality, today's buck usually begins (and ends) as a mere data entry" (Samuelson, 2007, pg. 1). Samuelson (2007, pg. 1) offers the following statistics: * U.S. currency (dollar bills of all amounts) totaled $784 billion in 2006, but probably half or more is held outside the United States by foreigners who prize dollars--especially $100 bills--as a store of value. That suggests that less than $400 billion in currency supports a $13 trillion economy. In 1970, the economy's relative need for cash was almost twice as high. * In 2005, Americans held 1.7 billion credit and debit cards (about seven for everyone over 15), says The Nilson Report, an industry newsletter, and in the past decade, debit-card use has soared. In 1996, checks and cash represented almost 80 percent of consumer payments, estimates Nilson; they're now less than half. (The latest firm figures for 2005 show all paper payments at 50.3 percent of the total, with cash at 20.7 percent; by 2010, Nilson expects electronic payments to exceed 70 percent of the total.) * From a peak of almost 50 billion in 1995, the number of checks written in the United States fell to 36.6 billion in 2003, while the number of electronic payments rose from 15 billion to 44 billion, estimates the Federal Reserve. (The Fed survey doesn't directly measure cash use.) Companies are even marketing products to kids that are supposed to help get them used to the cashless society that supposedly lies ahead. For instance, Mastercard came out with a credit card made just for children. One of the biggest dangers of this card is that it can allow children to go into debt by purchasing and consuming large amounts of products without using cash. "Supporters regard the cards, which are issued by Bluecorner, as the natural step in an increasingly cashless society. They argue that the prepayment cards will familiarise children with plastic without spending too much. The cards are designed to get children used to the fact that cash is obsolete and their money, and the amount they are allowed to spend is controlled by someone else who also profits from their spending" (Watson, 2006, pg. 1). The Role of Information Systems According to New Dawn Magazine (1995, pg. 1), "Certainly there are jumps in technology that have facilitated this. For instance, a product that we market at Norwest is a debit card. It is a Visa Card (credit) but it's a debit card, so the money comes out of your checking account. This year [1994] across the country, Visa's volume (the number of times that the Visa Card is used) is up massively. Check writing is up only two percent in comparison. There has been a structural shift from checks to debit cards and credit cards." Debit and credit cards can be used essentially anywhere that cash could be used. Between the years of 1999 and 2005, the amount of debit and credit card terminals tripled to 6.8 million. Even though people could hardly dream of buying groceries with credit cards in 1990, today 65% actually do. "There's electronic banking (83 percent of Social Security beneficiaries receive their monthly payments by automatic deposit), Internet buying, prepaid cards and automatic identity tags for toll booths" (Samuelson, 2007, pg. 1). The rise of electronic money holds its roots in technology rather than in the field of politics. Processing electronic payments is simply much cheaper than processing cash or checks. It is also much more convenient, as people do not have to carry around as much cash which can be tedious and time-consuming, not to mention dangerous (Samuelson, 2007). Other Accelerators Perhaps the most significant accelerator towards the cashless society is a tiny microchip. New Dawn Magazine (1995, pg. 2) claims that, "The heart of this new economy is the tiny microprocessor, the transistor-packed silicon chip that combines with clever software and laser optics to make possible what we globally call the Information Age." Smart cards already in use include toll road transponders and retail cards in Australia that allow customers to make purchases by simply tapping their card on a reader. Roadblocks "Possibly the most frightening aspect of the movement toward a cashless society is the emergence of technology that would allow a microchip to be placed in the human hand that would identify every human being on the planet and allow them to buy and sell without coins, paper or a card. One expert on this new "biochip" technology charged that the U.S. government will introduce a national I.D. card, supposedly to end illegal immigration that will extend into commercial activity. This card will be the last step before the government will move to place a biochip in the right hand of every American, said Terry Cook, a retired Los Angeles deputy sheriff and a former fraud investigator" (New Dawn Magazine, 1995, pg. 3). The microchip implants are a highly controversial topic, especially among religious leaders and their followers. Microchip implants are already being placed in various animals throughout the world in order to identify them and their owners if they become lost. Veterinary offices and shelters have equipment that can scan the chips (New Dawn Magazine, 1995). Monthly fees and high interest rates are two roadblocks that people encounter when using electronic funds. This goes for retailers as well as customers. Of course, these interest rates and high fees are hidden in the fine print that the customer hardly ever sees when signing up for the enticing offers on the cards. "The fees then finance wasteful marketing campaigns (6 billion solicitations in 2005) and "rewards" (airline miles, cash back). Store prices for everyone get nudged up to benefit the most upscale cardholders, who qualify for the most generous rewards. The card companies say they're merely balancing "incentives" for cardholders and stores to use the cards" (Samuelson, 2007, pg. 2) People are generally rather terrified of the idea of a cashless society, not so much because of what it would mean for them convenience wise, but because of who is promoting the efforts. The OECD is the main pusher of the concept, and they have a history of choosing what benefits the European Union rather than the United States (Vernon 2002). "The idea of a cashless society has been around for decades. Even back in the 1960s, as bank cards were beginning to come into vogue, it was clear the trend was already on the horizon. But the cashless society now envisioned goes beyond that. It would involve a digital system of currency where people can exchange credits and debits by computer 'just as they would pass a $20 bill from one wallet to another.' The issue, then, is not whether a cashless society is coming, but how it will be administered and toward what ends. Some of its cheerleaders are in fact trusted by advocates of free enterprise" (Vernon, 2002, pg. 1). Vernon believes that it has a potential for good, but also that it would make it easier for the government to collect and raise taxes, privacy would be invaded, and that an attack would occur on United States sovereignty. He offers a few questions: Would a world without money work in favor of international bureaucrats who want to "make it easier for government to collect taxes" to get their hands on your dollars despite the wishes of Congress' To what extent will legitimate economic, sovereignty and privacy concerns be satisfied' Will this system make it easier for someone to plunder your bank account' (Vernon, 2002, pg. 1) People who are against the cashless society say that its implementation is all about control. "A cashless society would mean total control over everyone as people would be forced to pay for everything electronically. Every purchase would be traceable and the ability to buy or sell could be halted immediately at any given moment" (Watson, 2006). Watson says that other items of control include cashless coke vending machines where one cannot get a soda without a credit or debit card; implantable microchips used to get into clubs, pay for items, or exist merely as body art; thumbscans for school children to get their lunches; and biometric scans for those entering amusement parks to be identified (Watson 2006). "We are constantly being told that the future is cashless, there are cashless lanes at the supermarket that move quicker and more efficiently, and with technology such as RFID we will receive a superior service at the price of being tracked, traced and having our personal data recorded at all times. Of course the cashless society would mean a massive boost in control and wealth for the globalist taxers and the banking corporations. With even more charges and levies on everything we spend and the ability to lend out more than even more than they already do, the banking elite would profit on an unprecedented level. Taxes would also be easier to collect electronically" (Watson, 2006, pg. 1) Is It Likely' According to Moyer (2006, pg. 1), "Money is becoming much more of a concept than a physical entity, and most ordinary mortals haven't really noticed the switch." People are using their credit and debit cards to purchase meals, fuel, movie tickets, groceries, clothing, and almost everything else. People can even pay their taxi fares with card readers that are located right inside the cab. Increasing amounts of paychecks are deposited directly into peoples' bank accounts, and increasing amounts of peoples' bills are being paid through direct debit, electronic checks, electronic bill pay, or through a debit card transaction. Even food stamps are issued on cards that resemble debit cards. Moyer (2006, pg. 1) says that, "Banks offer incentives to consumers for using these direct-pay options, which allow them to keep better tabs on their customers and their money." According to Moyer (2006, pg. 1), "Still, there is something compelling about cold hard cash. You can count it with your hands. You can roll around in it and make origami with it. It's the currency of choice for tooth fairies and grandparents, panhandlers, migrant laborers and off-the-books household staff. Let's not forget mobsters and drug lords." There is still a tremendous amount of cash floating around out there for a country that is supposed to be turning into a digital society. This is because of the simple fact that a lot of people simply prefer it, mainly for the reasons mentioned in the previous paragraph. Some prefer cash because of privacy issues. Paying with plastic opens the door for opportunists such as marketing firms to step in and gather data about Internet transactions. According to Moyer (2006, pg. 1), "But as much as the government is pushing for the acceptance of digital payments as a substitute for cash, in a way it is against its own interests to do so. Private-payments companies threaten to take away the government's ability to control the money supply and benefit from seigniorage, the difference between the cost to produce the money and its face value. That's potentially a huge source of income loss to an already strapped federal government." Conclusion The purpose of this paper has been to research how the use of cash is reducing, analyze the accelerators of becoming cashless, review the roadblocks to it happening, give the writer's opinion regarding whether or not a cashless society is likely, and emphasize the role that information systems play in this change. There are now a variety of ways available to pay without having to use cash, and it makes it seems as if we are heading in the direction of becoming a cashless society. Credit cards, debit cards, Oyster cards, Tesco Club cards, and other smart cards that have been introduced thanks to advances in information systems are making cash seem as if it is becoming an outdated commodity. It is highly likely that we are heading in the direction of becoming a cashless society. References "Moving Toward a Cashless Society." 1995. New Dawn Magazine No. 33. Online. http://www.newdawnmagazine.com/Articles/Moving%20Towards%20a%20Cashless%20Society.html Moyer, Liz. "The Myth of the Cashless Society." 2006. Forbes. Online. http://www.forbes.com/2006/02/11/cashless-society-cash_cx_em_money06_0214cashless.html Samuelson, Robert. "The Cashless Society Has Arrived." 2007. Real Clear Politics. Online. http://www.realclearpolitics.com/articles/2007/06/the_cashless_society_has_arriv.html Vernon, Wes. "Cashless Society 'Inevitable;' a Boost to Globalist Taxers'" 2002. NewsMax. Online. http://archive.newsmax.com/archives/articles/2002/6/28/181711.shtml Watson, Steve. "Getting the Kids Used to the Cashless Society: Mastercard Introduces Credit Cards for Children." 2006. Infowars. http://www.infowars.net/articles/january2006/270106cashless_society.htm Read More