The Future (and Past) of Cash

Like virtually every aspect of life, the COVID-19 pandemic has altered our relationship with cash- perhaps permanently in some aspects, but temporarily in others. This makes it an intriguing time for an industry conference titled The Future of Cash. I’m sure some snarky folks will quip that cash has no future.

I beg to differ. Even in the much hyped “cashless societies” (the Nordics are most often cited) old school paper currency continues to play a role- and authorities have for the most part tabled efforts to retire it, recognizing that the notes deliver ongoing value. Here in the US, the role of cash in the payments ecosystem has been slowly declining for years but remains relatively middle-of-the-pack compared to other countries.

Recent Federal Reserve research indicates that cash use has fallen more rapidly over the past year. However, much of that acceleration can be traced to the shuttering of over-the-counter businesses during pandemic lockdowns. Think about it- if you’re having goods delivered from Instacart, Grubhub or Amazon rather than going to the local grocer or neighborhood storefront, there’s no way to use cash. A decent share of those in-person shopping experiences had better return, or we’ll have bigger problems than cash usage to overcome.

Research and speakers from both the Fed and the European Central Bank are on the agenda for this two-day virtual conference, running February 17-18. There’s an EU focus- and an early wake-up time for Americans to go with it- but the topics are universal, such as financial inclusion, scenario modeling and infrastructure/distribution challenges. I’ve found the group’s programming to be compelling in the past, and I plan to be there.

I was recently reminded of changes in cash patterns when I learned that Kroger stores- including subsidiaries like Ralph’s and Harris Teeter- now charge a convenience fee for cash back at the point of sale. (It’s unclear how many fees they actually collect, since they’re waived for loyalty club members, but let’s set that aside for now.) Not long ago, cash back was considered a win/win- a courtesy for the customer and an opportunity to thin out the cash drawer. Suddenly it’s treated as a revenue opportunity, and perhaps something of a nuisance if more $20 bills are flowing out than coming in.

Rewinding to my college days, I recall the neighborhood drugstore standing ready to accept a check for up to $5 over the amount of purchase with university ID. Before the days of ubiquitous ATMs, it became something of a Friday night ritual to buy a Bic pen in order to cash out some pizza money. I can’t decide which part sounds weirder in 2021- the 15 cent pen purchase, or writing a check at the drug store counter. Obviously, debit cards fill the need these days but community institutions- whether credit unions or mom and pop storefronts- remain in the mix.

One final irony- I recently got my first word of a financial services conference returning to an in-person setting- in June, in Las Vegas. It’s for the ATM Association, further reinforcing the link between cash and an on-premise, tactile experience.