It’s an old family joke that when ATMs first premiered, my grandmother believed that a banker sat behind the machine and dispensed the money. To be fair to Grandma, she knew that there weren’t “tiny little tellers” in the machines, like the commercials jokingly stated. It just didn’t occur to her that her banking transactions could be entirely automated.
My own children and grandchildren will probably make similar quips about my technological naivety as our society moves closer to becoming entirely cashless. My son will not remember a time when cash was necessary for a fast food meal, a phone call, or even a parking meter. I can only imagine what else I take for granted that will seem old-fashioned to him.
We do know what is possible now. We’re just waiting for the merchants to catch up with the technology. Here are some of the technological money advancements we can expect in the next few decades — and what they may mean for how we handle our finances:
1. Everything on one chip. One of the possible directions that money could go is for everyone to carry all of the necessary information for transactions on a single microchip, imbedded in a “smart” card or in a phone or mp3 player. In the future, consumers would only need to carry one item rather than toting a wallet full of cash, credit cards, loyalty cards, membership cards and the like. According to PBS, “from the standpoint of making transactions, all that is needed is the card number and type, expiration date, and some means of authenticating your ownership of the card.”
This technology already exists. Most parts of the world already moved to the EMV standard for credit cards, which is also called “the chip and pin”. In the U.S., another alternative that is catching on is Near Field Communication (NFC), where they embed the chip in your phone.
2. RFID tags. Similar to the smart chips, Radio Frequency Identification tags can be used to handle cashless transactions by emitting a coded ID number when it comes in contact with a reader device. There are many applications for RFID, including using them for keeping inventory in any number of industries — replacing the less efficient bar code system that has been in place since the 1970s.
In terms of money management, RFID tags could be placed into cards, bracelets, key tags or other objects and swiped to pay for transactions. Like the smart chip technology, RFID tags already exist — they just need merchants to pick up the technology for them to become more widespread.
3. Electronic purses. This idea was first proposed back in 1995, and has been slow to catch on, although pre-paid gift cards are somewhat similar. With an electronic purse, actual cash would be loaded onto the card, rather than just the account information for a credit card or debit account. So you would need to go to the ATM or place a call to have a specific amount of money transferred to your e-purse.
This technology would help to provide an alternative to cash in small-value transactions. If the money is already loaded on the e-purse, there is no need for the merchant to get approval for the transaction, saving them money on transaction costs.
The Bottom Line
Seeing our society becoming cashless is somewhat worrisome to me. I know from my own experience that spending money by using plastic feels very different from counting out greenbacks to pay for an item. Making transactions easier and faster through technology takes consumers farther away from the meaning and value of money. My kids and grandkids may call me an old fuddy-duddy, but I plan to keep using cash for my transactions. I want it to be difficult to spend my money.