The Cashless Society

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The Cashless Society

The U.S. government still prints paper money and manufacturers coins, with more than 9 billion bills rolling off the presses in fiscal 2007. However, according to Newsweek,1 95 percent of those bills will only serve to replace worn-out older bills that are being taken out of circulation.

And in the coming years, our nation won’t need to print even that much currency. Why? Because the long-anticipated “cashless society” is now starting to unfold. In the process, plastic cards and digital bits are rapidly replacing paper dollars and metal coins as the preferred methods of payment.

Consider that credit and debit cards are now used routinely in many places where paying with cash, was until quite recently, the only option. For example, customers can pay for hamburgers at drive-thru fast-food restaurants like McDonalds, Burger King, Taco Bell, and Wendy’s. As a result, between 1999 and 2005, the number of terminals in the United States for swiping cards tripled to nearly 7 million, according to Frost & Sullivan, a consulting firm.

Or think about the typical supermarket checkout lane. In 1990, according to the Food Marketing Institute, most shoppers wouldn’t think of using a credit card to pay for groceries. Today, two-thirds of food sales are rung up on plastic cards.

The rise of the Internet has also accelerated the demise of cash. According to comScore Networks, online retail spending, not including travel services, surpassed $102 billion for the year 2006, which represented a 24 percent increase versus 2005. Virtually all of these sales involved credit cards, debit cards, online checks, or electronic payment services like PayPal.

Furthermore, paper checks are being displaced as online banking steadily eclipses traditional banking services. The Federal Reserve estimates that in 2003, Americans wrote 13.4 billion fewer paper checks than just eight years earlier. Meanwhile, during that same eight-year period, the number of electronic payments nearly tripled, from 15 billion to 44 billion. And these transactions aren’t limited to the technologically sophisticated; more than 80 percent of Social Security checks are now transmitted digitally into the recipients’ accounts.

For every American over the age of 15, there are seven credit and debit cards, for a total of 1.7 billion active accounts. According to The Nilson Report, a newsletter for the credit card industry, cash and checks accounted for 80 percent of consumer payments in 1996. Today, they account for less than half the payments, and Nilson forecasts that by 2010 that share will drop to just 20 percent...

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