Thursday, August 30, 2012

People do not want a cashless society

With the technology available today, we would be ready to switch to a cashless economy. While having every transaction recorded in some way may trigger some privacy issues, imagine how easy it would be to keep records, file taxes, avoid theft, and how difficult tax evasion would become. So are we ready?

No, argue Naoki Wakamori and Angelika Welte, and it is not because merchants are holding back. Household still hold on dearly to cash, at least for small transactions. Indeed, the Bank of Canada conducted three years ago a survey on payment methods. One can use its data to estimate a model of payment method choices, then run a counterfactual experiment where card payments would be available universally. Wakamori and Welte find that cash usage barely changes. This means that households have a strong preference for using cash. Younger generations, though appear to be more ready to use debit or credit cards, so a cashless society may still lie ahead.

1 comment:

Evan said...

I find cash is a good way to manage my budget. I withdraw $x at the start of each week, and then know when I have reached my limit.

Until credit/debit cards give you feedback on your account balance (or your total weekly spend, or something similar) every time you make a purchase, I will stick with cash.