So many things in life have fallen into obsolescence in recent decades. The internet has used its previously unthinkable influence to push staples of the modern world into obscurity, then extinction. Just twenty years ago we had movie rental stores, home phones, film cameras and paper maps.
These things have faded away, and it seems that the next facet of modern life to be done away with is physical currency. Money has already begun to migrate to cyberspace, and the first casualty on the way to extinction is the humble coin.
As inflation rises, smaller denominations become less and less useful. Nearly nothing costs less than a quarter, much less a dime or nickel. Relics like the penny are not only inconveniences but drains on the economy. In the United States, it costs more money to make a penny than it is actually worth. Minting pennies and other small coins cost millions of for little things that people don’t really use anymore. They just don’t perform as they used too.
Consider this: the penny is now worth about 1/26th of the value it was when President Lincoln, who appears on the coin, was in office. Several decades ago, coins were used in the majority of purchases. But, as inflation rises as it naturally does over time, the dollar, and therefore the cents that make it up, decrease in value, and you need more of them to purchase things. Gone are the days of nickel and dime stores, quarter payphones and even payphones themselves. Some coins are more trouble than they are worth, and governments are starting to realize this.
Just Not Useful
When it comes to rejecting coin use, the price isn’t always the issue. While it is true that using small denomination coins costs governments and thereby citizens money, people also just plain don’t like using them. Carrying around handfuls of little bits of metal just doesn’t appeal to people.
Take Nigeria for example. The government went to great lengths to introduce small denomination coins which were promptly rejected by the populace as unneeded and inconvenient. Despite there being legitimate reasons for using these tiny and cumbersome coins, everyday citizens still find ways around using them or just give them away, making their impact on the economy minimal. Getting rid of smaller coins is both economical and convenient.
Governments Taking Action
The Canadian government discontinued making their penny in 2016. The government then asked businesses to round prices up or down to the nearest 5 cent increment. Consumers’ bottom lines are mostly unchanged, and the government saves money it can then spend on the people.
This is not an isolated incident, either. There are strong movements in the United States to retire the penny, citing the cost imbalance related to minting the little copper tip jar fillers. The problem is, however, that the penny is actually made from zinc. The zinc mining companies of the world have an exceptionally powerful lobby in the U.S. Capital, so progress on legislation to eliminate distributing pennies has been stalled.
However, successful programs in other countries have been successful. For instance, Italy has planned to eliminate inefficient coins like the one and two cent coin. It is following in the footsteps of Belgium and The Netherlands who scrapped the one and two cent coins over ten years ago. Coin extinction has happened in these countries and will continue to occur in others. Slowly but surely, coins are being phased out of use, and it is likely that higher denomination coins and likely all cash will be relegated to secondary importance.
Closing in from the Top
Coin extinction isn’t the only way that cash is becoming obsolete. At the other end of the spectrum, large denomination bills are also being phased out. Big bills like the 500 Euro note have been eliminated to curb counterfeiting, international money laundering and terrorism. It is generally only illicit transactions that use such high volumes of untraceable cash, as exceptionally large transactions that are legitimate are done so in the safety of the electronic realm.
Even societies that traditionally favor cash transactions to electronic ones are getting on board. Germany, for instance, is considering reducing the amount and scope of hard currency transactions in their countries to address the problems mentioned above. All signs are pointing to cash of any kind going the way of the dodo at some point in the perhaps not so distant future.
A World Without Cash
So, how would a world without coins and bills work? Is a truly cashless economy possible? Well, global society is already well on its way. A cashless society, defined as one in which there are little to no transactions made with hard currency, is already present in some parts of the world. European countries, especially the ones in which small coins have gone out of use, already limit opportunities for cash purchases and encourage alternative methods of payment.
What Is a Cashless Transaction?
Cashless payments are happening all around us already. They are characterized by electronic forms of payment. Amounts of money are transferred, usually via the internet, to different accounts and balances are updated instantaneously. Banks and other financial institutions are instructed through electronic communication to transfer money from customer to vendor. At its most simple, it’s just numbers on screens changing values and goods or services being exchanged.
This may sound “less real” or “unsubstantial,” but consider the fact that modern society has been making transactions with bits of cloth, paper and non-precious metals for generations. They used to be backed by precious materials like gold or silver, but that hasn’t been the case in decades.
Additionally, most of the world’s money is already just numbers on a ledger somewhere. Only around 8% of all of the money in the world exists as physical currency i.e. coins, bills and notes. So, while many of the total transactions made in the world are done in cash, the money itself has already been digitized.
What Are the Alternatives to Cash and Coins?
So when the day finally comes that we see complete coin extinction and the discontinuation of cold hard cash, what will people do? Fortunately for us, modern society already has had a lot of practice with cashless payments. We’ve been doing transactions without coins or bills for decades via traditionally electronic and credit methods, and new methods of payment are cropping up and being perfected every day.
Credit and Debit Cards
These are probably the most common forms of non-tender payment methods. Credit cards, of course, allow users to buy now and pay later, and debit cards allow vendors and service provider to directly withdraw funds from bank accounts to add to their own, eliminating the middleman. These are all well and good for developed nations without strong ties to hard cash transactions, but what about developing countries or those with traditional attachments to bills and coins?
To answer this questions with cards, banks and financial institutions have come up with prepaid debit cards. These cards can be loaded with money, by cash or direct transfer, and be used by the bearer without being tied to a bank account. Simply put, it is an electronic, reusable check with “cash” as the recipient.
It works the same as hard currency but in a smaller and more convenient package. Workers in developing nations who do not have access to bank accounts or people who are distrustful of financial institutions can still enjoy the freedom and relative anonymity of cash in an easier, plastic package.
Money Over the Net
Banks contain money in electronic form but still work largely with notes and coins. Some internet financial services, however, conduct all of their business online and provide financial services and the ability to transfer money electronically without the use of physical locations.
One of if not the most widely used service of this kind is PayPal. Users can easily load their money into a PayPal account or be paid via the service, and transfer the funds quickly and easily to other users.
The company has even started a PayPal credit card to really give banks (pardon the expression) a run for their money. This method of electronic payment is joined by other contenders such as Samsung Pay, Apple Pay, Google Wallet, Alipay and many others, making the future of transactions look very wired indeed.
The Future is Now
While it may be difficult to imagine a world in which there are no coins or paper money, it is not hard to envision a world dominated by electronic transactions. Coins continue to depreciate in value and usefulness while at the same time, internet-powered monetary purchases are finding new and exciting ways to be viable.
Throw in the rise of blockchain cryptocurrencies, and it seems likely that one day, we will all be antique coin collectors. Coins will join the ranks of technology and ideas that humanity has outgrown.