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Nancy Scola is a reporter covering technology for POLITICO Pro.
Stores are shuttering all over the United States, and many of those still open are balking at cash. Shoppers are switching orders to Amazon and Walmart.com. Many restaurants that have stayed open won’t take cash, and operate without any contact at all, requiring customers to pay first online.
What once seemed like the oldest, most reliable way of paying now seems fraught: A physical object changing hands, bringing people closer than 6 feet, covered in who knows what.
“Do I want to grab the thing that you were just holding in your hand? No,” says Harvard economist Kenneth Rogoff, who has advocated for a less-cash society, and predicts the crisis “is absolutely going to drive people to prefer credit and debit to cash.”
Or, as one Twitter user, @DonGone5 put it last week, “Still no cash accepted. $10 dollar bill now been in my wallet so long, Alexander Hamilton has shot himself.”
Filling the void, in many cases, are digital payments that are quick, clean and easy. That sudden shift is a huge opportunity for tech firms such as online payments giant PayPal, which also owns the Venmo app. CEO Dan Schulman says the company is seeing the number of new customers setting up accounts each day “basically double” from prepandemic rates. Square, the digital payment company run by Twitter CEO Jack Dorsey, has found itself fielding calls from merchants whose customers no longer want to touch any surfaces.
Some of the change might be temporary. And some might not—which has Silicon Valley excited, and others worried.
For years, tech companies have been pushing toward a more virtual, less cash-based payments system, and pressing regulators to free them from the restrictions that govern traditional banks. Now, in the U.S., the government has been moving in this direction of its own accord, discouraging paper checks in a rush to get stimulus money out to Americans.
But the sharp jag away from cash also worries those who look out for older and poorer Americans—groups that tend to be more reliant on paper money either for lack of tech savvy, out of habit or because they don’t participate in the formal banking system.
“Even in this pandemic crisis, we have the same vulnerable people we had before that did not have access to banks or credit cards,” says Vallie Brown, a cash advocate and former Democratic member of San Francisco’s Board of Supervisors.
There’s an ideological component as well: Among cash’s strengths is that it’s universally accepted and difficult to track, giving Americans a just about anonymous way to, say, donate to their preferred church or live out their life as a persecuted minority or back a dissident group. “Some of us still use cash because we think it’s nobody’s business,” says Jim Harper, a visiting fellow with the libertarian-leaning American Enterprise Institute.
For more than 200 years, paper cash has been at the heart of the American economy. How close could coronavirus come to killing off cash—and if it does, is society ready?
Money habits can be hard to break. It took years for ATMs to replace visits to human bank tellers; now, Americans withdraw cash from them at a rate of some 5 billion times a year.
By one measure, cash is far from gone: The Covid-19 pandemic, like most emergencies, has seen people stashing away paper money. Federal Reserve data shows a slight uptick in U.S. currency withdrawals globally, although much of that could be overseas squirreling away a safe-seeming currency.
The pandemic, though, has forced Americans to change their spending habits almost literally overnight.
After resisting the move for years, for example, the 1,200-store Southeastern grocery chain Publix this month started accepting Apple Pay. The U.S. Treasury has made it plain that Americans will get their coronavirus stimulus money much quicker if instead of a paper check they opt for direct deposit, either through an on-file account or the just-launched “Get My Payment” portal. (Paper checks are a common financial tool of cash-based Americans, often turned into dollars and cents at one of the country’s thousands of check-cashing places.)
The shift extends to the physical equivalents of cash. The Department of Agriculture is right now rushing to expand a pilot program that lets the country’s 42 million recipients of the Supplemental Nutrition Assistance Program—what we once called “food stamps”—buy what they need from online grocers like Amazon Fresh.
For so-called fintech firms now building the apps and infrastructure to support mobile banking and digital payments, this kind of economy is a long-held dream. Beyond purely online players like PayPal, San Francisco’s Standard Cognition has been developing technology to turn physical stores into fully cashless environments; pick up a can of soup in its demo store and an AI-boosted camera automatically tracks your purchase and bills your credit or debit card stored in the company’s app. “We get rid of the physical touch point,” says CEO Jordan Fisher. “There’s just nothing there.”
Advocates for moving away from cash also point out that it’s much, much faster to send money via the internet than to mail a check, an argument that has led major fintech firms to bid for a role in the important national business of getting coronavirus-related funds out to Americans.
Last month, Square’s Dorsey prodded the government (via tweet, of course) to let his payments company and others in the fintech industry help figure out how to get Americans their money in a hurry. Schulman, of PayPal, says he pitched a business acquaintance, Treasury Secretary Steven Mnuchin, about distributing government funds via PayPal. This week, the Treasury Department approved both PayPal and Square as distributors of the $350 billion in small-business loans that were also part of the stimulus package.
To some, however, a pandemic-triggered decline in cash is nothing to celebrate. Cash is an essential financial tool of the millions of Americans who either don’t have access to banks or credit cards, or who opt to not make use of them. (While it’s still possible to use PayPal and Square without a bank account, such as by transferring funds to a prepaid debit card, the services are designed around banked Americans — not to mention ones with smartphones and broadband.)
Last year, the city of San Francisco passed a ban on cashless stores; that’s one reason Standard Cognition’s contactless demo store, on the edge of the city’s tech-heavy SoMa neighborhood, still takes dollars, which are collected through a “store ambassador.” (The store is currently closed because of the coronavirus.)
One unlikely place to look to better understand the tensions caused by the move away from cash: the Washington, D.C.-launched salad chain Sweetgreen. In 2016, the fast-casual food retailer stopped accepting cash. There was outrage: The company, the thinking went, was blocking cash-preferring patrons from getting access to healthy foods. The company rolled back the ban two years later. But the company designs at least some of its stores to highlight the most efficient way to get your hands on a kale Caesar salad: pay for your order online first, breeze in, pick up your meal from a designated shelf, and be back out the door in seconds. This still leaves cash-payers a step behind: Skipping cash lets you skip the line.
That hybrid, bets PayPal’s Dan Schulman, is what’s likely to stick post-pandemic: we’ll go back to shopping out in the physical world but stop paying in cash, instead paying online either before or after.
PayPal and Square have much to gain by looking like innovators helping the country in its time of need. For one thing, on topics like taxes and insurance, fintech firms like these are attempting to carve out more favorable regulations for the still-young industry. The Electronics Transactions Association, a D.C.-based lobbying group, put out a Covid-19 briefing document saying the payments technology industry stands ready to move money “in a safe and effective manner with little to no physical contact, in-person and online.”
In some countries, mobile banking is seen as a tool for economic inclusion. Kenya’s central bank has found that that country’s M-Pesa system, named after the country’s currency, has boosted access to financial resources. The service, backed by major telecoms, works by tapping the country’s vast network of prepaid airtime resellers to act as cash-exchanging microbanks — often by young people in cities eager to send money back to the rural areas in which they grew up.
The M-Pesa model, though, hasn’t taken off in the U.S., where there is less demand — even with access challenges in the U.S., there is a far wider variety of trusted, safe, traditional banking options than in Kenya — and less infrastructure to support it; for one thing, the pay-as-you go plans that put users in frequent contact with bricks-and-mortar resellers are less prevalent.
And there are concerns that a quick, pandemic-inspired wholesale shift to digital money will instead hurt unbanked Americans. In part to address that worry, in recent weeks House Democrats have floated a “digital dollar” plan that would equip Americans with simple online accounts that would make it easy for the government to distribute direct payments to Americans, whether stimulus checks or, someday, so-called universal basic income.
And the importance of getting those payments fast only grows with gathering momentum in Congress for more cash infusions to Americans coping with coronavirus.
PayPal’s Schulman sees all of this as part of a coming shift: Every transaction that we choose to do virtually instead of with cash builds up our muscles for the change, getting us comfortable with never touching that Alexander Hamilton bill again. And those are muscles, he argues, we’re going to need in the near term, especially as unemployment skyrockets.
“There’s now multigenerational distress being felt and therefore the need for there to be some sort of common platform amongst family members,” Schulman says. Translation: a grandpa who figures out how to Venmo his grandkids some birthday money using the app’s user-to-user functionality is one who knows how to Venmo his family members cash when they’re in real economic need — or to get Venmo’d cash when he is in need.
Already, we’re adapting our behaviors. PayPal reports that in the first week of March, payments tagged with its medical mask emoji—often to canceled housekeepers, babysitters, hairdressers—grew 375 percent.
Of course, there’s another possibility. And that’s that cash comes roaring back after coronavirus, perhaps something like the handshake, a practice that seemed odd, even foolhardy during the pandemic but that we return to out of habit or, as it turns out, it still has its place.
Is the Coronavirus Killing Off Cash?
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