How the War on Cash is a Boon for Global Financial Literacy
The war on cash leaves many unbanked in a difficult position. The use of technology may aid the unbanked - and their financial skills.
The push to go cashless is getting a boost from credit card giant Visa, whose CEO Al Kelly recently proclaimed: “We’re focused on putting cash out of business.”
Nothing vague about that statement. Cash transactions account for 30% of retail spending. Putting cash out of business would give Visa, the dominant payment technology company, a huge chunk of new business.
You won’t hear any arguments from Millennials, who often view cash as a nuisance. Within 20 years there will be no more ATMs, one expert predicts. So while Visa’s war on cash might be bold, it is not far-fetched or even wildly optimistic. The world is moving that direction.
Half of Sweden’s banks already do not keep any cash on hand. Amazon’s brick-and-mortar retail stores only accept credit cards and mobile payment methods. The Department of Motor Vehicles in Louisiana ditched cash last year. Boston’s transit agency has similar plans. India is considering the move nationwide.
In the U.S., killing cash is mostly about convenience. Why mess around with pennies, or even quarters for that matter, when a simple swipe or scan is quick, secure and leaves your pockets or purse unburdened?
There is a downside to progress, of course. Millions of people in the U.S. and billions globally do not have access to credit cards or e-payment systems. In the U.S., some 20 million adults are unbanked, according to the Federal Deposit Insurance Corp. The number is even higher–40 million–according to an estimate from Operation HOPE, which puts the number globally at 2.5 billion.
These people would be further distanced from the financial mainstream—unable to gain access to any product or service that packed its cash register off to the museum. Yet the same mobile technology that lets a teen go to the mall and spend freely with nothing more than an iPhone can also make it easier for an economically disadvantaged adult to open a bank account and avoid expensive payday lenders.
Developing nations are making a big bet on mobile wallets as part of their financial literacy strategies. With limited access to banks, people in nations like India, Uganda, Kuala Lampur, Philippines, and Malta through their phones can open bank accounts and take advantage of lower cost loans—and take advantage of online financial literacy tools.
To make this new world a reality as quickly as possible, a Visa pilot program is offering 50 U.S. Businesses up to $10,000 to stop accepting cash. The money is meant to cover the costs of converting to a new model. The company appears set to launch a similar program in the U.K.
This is good news for the financial inclusion movement. Mobile technology is a powerful ally in the fight for financial literacy around the world. But we must show the less fortunate how they too can gain access and benefit from a cashless society.