Why cash is losing its currency
(CBS News) For generations now, storekeepers have been making change by taking bills and coins out of the cash register drawer. Now many experts say changing technology is nickel-and-diming old-fashioned cash out of existence. So is paper money a relic of a bygone era? Our Cover Story is reported by Lee Cowan:
This is an update of a story first broadcast on March 25, 2012.
It's what the wallet was invented for, to carry cash. After all, there was a time when we needed cash everywhere we went, from filling stations to pay phones. Even the tooth fairy dealt only in cash.
But money isn't just physical anymore. It's not only the pennies in your piggy bank, or that raggedy dollar bill.
Money is also digital - it's zeros and ones stored in a computer, prompting some economists to predict the old-fashioned greenback may soon be a goner.
"There will be a time - I don't know when, I can't give you a date - when physical money is just going to cease to exist," said economist Robert Reich.
Economists like Reich say the demise of cash has been happening ever since our financial fortunes could first be told by a piece of plastic with a magnetic strip.
That was half a century ago - and now? "95 percent of the transactions in America, or more, have nothing to do with physical pieces of paper or coins," Reich said.
Think about it. Parking meters, taxis, tolls, even Girl Scout cookies don't require cash anymore, all proof (argue some) that cash's days are numbered.
"Twenty-two, thirty-two years from now, will cash still be here? I think we can put it in the grave already," said author David Wolman. In his new book, "The End of Money," he argues the biggest knock against cash is that it's costly.
"It's really expensive to move it, store it, secure it, inspect it, shred it, redesign it, re-supply it, and round and round we go!" Wolman said.
It already costs the U.S. government almost TWICE as much to make a penny and a nickel, than they're actually WORTH.
But that's only one cost. Wolman says cash is also the currency of crime - drug deals, bribes, and bank robberies.
And there's something else: It's not particularly clean.
"I'm right there with you," Wolman agreed. "It's pretty gross!
The filth factor alone, he says, should make cash a no-no at food establishments, like his neighborhood ice cream shop, Salt 'n Straw in Portland, Ore.
Owner Kim Malek isn't about to turn cash down - not yet anyway. But she's happier when people pay with their smart phones instead.
"It makes paying fun, which you don't hear very often," Malek laughed.
She's using a new app called "Pay With Square" - essentially a digital wallet that is now accepted at some 75,000 locations nationwide, from ice cream shops to barber shops.
All you do is register, and it creates a virtual tab using your phone. When it comes time to pay, you don't have to take out wallet, a credit card, even the phone itself.
Instead, a photo pops up on the register. All the customer says is their name - and the money is seamlessly deducted from an account of their choosing.
Jared Fliesler uses "Pay With Square" all the time - he works for Square, the company that first turned your smart phone or your tablet into a credit card reader.
All this easy mobile money flying through the clouds has some a little leery about security. But Fliesler said the protections built into the system are far better than cash.
"All the receipts are sent digitally to you directly in your app. You don't really have to worry about signing and they can verify you by face and by name on the screen, so you don't have to worry about your ID," he told Cowan.
And it's not just Square - everyone from Apple, to Google, to Visa - even most major banks - are looking to change the way we spend.
Pay Pal for one, believes it's digital wallet technology can be the future of shopping - no wallet, no cash, just a mobile device with an app that combines all your credit and checking accounts, along with coupons and other offers.
"The real innovators in this area have to prove to us that this is really life-changing," said Wolman. "And that it's not just king of cool to pay for something with your mobile phone."
Lost in all of this, of course, are the poor with no access to phones or fancy tablets. And there are those who DEPEND on cash, like waiters, parking valets, skycaps and baby sitters, none of whom are anxious to see cash disappear.
"Don't we lose a little of the nostalgia of having actual money in our wallet and coins in our pockets?" Cowan asked Reich.
"We do lose something if we don't have the money, the cash, the coins," he replied. "When it's all digital, it's a loss of a lot of icons, a lot of symbols about who we are, how we're doing and what we value things for."
But that mobile money train has already left the station. Most agree a cashless society is not only inevitable, for most of us, it's already here.
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