By Philip Delves Broughton

It seems quixotic that we should resist the pull of electronic payments and digital banking and get back to using cash. Why would we give up the ease of swiping our cards or tapping our phones in favor of clammy banknotes and fiddly coins? In "The Power of Cash," Jay Zagorsky, who teaches at Boston University's business school, asks us to fight the lure of a cashless economy and stand up for the green.

Mr. Zagorsky's conversion to cash came when he served as an unpaid adviser for a Boston Federal Reserve survey of how people paid for things. He helped design and implement the survey from 2010 to 2018, a period when many Americans were shifting from paying in cash to using electronic payments for even their most mundane daily purchases.

In 2015, he reports, 17.1% of Americans said they did not carry cash. By 2022 that number had more than doubled to 34.6%. Among 18-to-34-year-olds the number not carrying cash went from one in four to almost one in two. The author notes a similar shift in the use of ATMs. Visits to bank machines peaked in 2009 with about six billion withdrawals. By 2021 the number of ATM withdrawals had fallen to less than four billion.

Some countries and cultures seem to hang on to cash more than others. Measured by cash in circulation as a percentage of gross domestic product, Japan emerges as far and away the most cash-intensive developed economy at 23%. The U.S., by contrast, sits at around 10%. Sweden, at 1.3%, is the most cashless country in the developed world.

Germany still loves cash. A 2021 survey found that only 4% of Germans did not carry cash, and 30% said cash was their preferred method of payment despite their access to all the modern digital-banking systems.

But so what? Does it make any difference if we zap and ping rather than use cash and coins? Perhaps we should roll it even further back to cowrie shells. Mr. Zagorsky believes cash still matters and his argument falls under three broad categories.

First is the case for national security. Mr. Zagorsky observes that "a cashless society stands on three legs: a continuous and stable supply of electricity, communication networks working all the time, and secure computers." What happens if an earthquake strikes, or a foreign enemy takes down the communication and banking systems? In the ensuing chaos and darkness, the author writes, those with cash will survive and those without will be left waving their plastic into the wind.

Second is the personal-finance case. We know that when people spend cash, they tend to feel the cost of their purchase more acutely than when they pay electronically. Handing over notes triggers a different set of reactions in the brain than merely swiping a card. We feel the loss more, and become more attached to what we buy when we pay in cash. Banks and credit-card companies know this, and encourage us to swipe because we are likely to spend less carefully.

Furthermore, electronic payments generate data that retailers use to tailor -- and often increase -- prices. Not only do we sacrifice our privacy when we pay electronically, we also allow ourselves to get fleeced.

Finally, there is the social-justice case. The unbanked poor still depend on cash, as do people who beg for money on the street. Cash does not require an immigrant or tourist to read transaction documents in a foreign language. It also cannot be arbitrarily cut off by autocratic governments.

As he builds his argument for cash, Mr. Zagorsky offers a brief history of the rise of personal credit. The prevalence of plastic is relatively new. Five years after Neil Armstrong returned from the moon in 1969, he applied for a Diners Club card. He was rejected for not having enough income. Today, offers flood into our inboxes offering cards designed for every kind of financial situation.

And it's more than easy credit that is available. There are many subtle ways that companies streamline the customer experience, under the guise of convenience, to maximize credit sales. Their goal is to expand the amount of money you think you have available, through credit and multiple forms of payment, and to constrict the time between choice and purchase.

Companies don't want you dithering over a shopping cart, physical or online, laden with goods. So "for a faster checkout next time," they store your data. The elimination of cash from so many purchase processes has also eliminated the time to think, reflect and change your mind in your own financial self-interest.

The villains of Mr. Zagorsky's book are familiar: banks, tech platforms and credit-card companies, which profit from ever more low-cost, high-volume transactions; and governments, which prefer the transparency of electronic payments to the murkiness of cash.

To make the case for cash these days is really a debate-club conceit, and this comes through repeatedly in the book. Mr. Zagorsky argues that cash would save merchants money by helping them avoid the fees charged by credit-card companies and clearinghouses, and that this money would come back as consumer savings.

But he knows equally well that the reason merchants accept these costs is because using plastic makes consumers' lives easier and keeps them spending. There are no fools in this grand financial settlement, only interests. Mr. Zagorsky also says that cash is good for people's math skills and even that it is "fun to hold and use." The thrills must be short on campus.

--Mr. Delves Broughton is the author of "The Art of the Sale: Learning From the Masters About the Business of Life."

(END) Dow Jones Newswires

April 22, 2025 10:12 ET (14:12 GMT)

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