The End of Money

by David Wolman

  There, I said it. Traceable. That word inevitably leads to questions about the creepiness line. And they are fair questions. As Pastor Guest reminded me that cold day in Georgia, the anonymity of cash transactions is something we hold sacred. Despite cash’s ever-declining relevance, this association between tactile money and the freedom to pursue happiness without being monitored seems unshakable. It is a God-given right, many people believe, protecting us from intrusive marketing companies and government snoops.20 For Americans, the idea that we have a right not to be interfered with, even though no such right is detailed in the Bill of Rights, is a part of who we are.

  Speaking with an executive from VISA at the Digital Money Forum in London, I raised some of these concerns about compromised privacy in a cashless world. She kept reminding me that a lost or stolen wallet means an economic loss equal to whatever cash is inside it at the time, whereas cards can be canceled and reissued, and consumers aren’t liable for fraudulent charges. Cash users who keep significant savings at home are also vulnerable to theft, and to potentially disastrous loss due to fire, rot, or the next Hurricane Katrina .21 Zeros and ones on computers may be the more abstract form of money, but they’re longer-lasting than decay-prone bills, which, in the case of U.S. dollars, only circulate an average of sixteen to twenty-four months before being committed to a shredder. She was making a decent argument that cash isn’t exactly safe, but she was also dodging my question. Security and privacy are not the same.w22

  Dave Birch isn’t the most neutral source on the topic, given his work with credit card companies. But his technical expertise with secure networks, transactions, and cryptography gives him insight that is informative and, I think, pretty fair. When I bugged him about the Big Brother question, he took his Oyster card out of his wallet as a visual aid. Oyster is a stored-value card providing “tap and go” convenience to London transit passengers on area trains, buses, and subways. There’s money “on” the card, and when you use it to pass through the turnstiles or tap a reader as you step onto a bus, your Oyster account is debited the corresponding fare.

  “If you just say to people, ‘Do you want to be registered, tracked, and traced,’ they’ll of course say, ‘No!’ But the first time they lose a card and want their money back, they’ll see the risks of anonymity, and the next time they get one, they will register. People say anonymity is an advantage of cash, but what they really want is privacy.” In the case of the Oyster card, data about you is stored for eight weeks, or so says the issuer, Transport for London. If you lose a card and a couple of days later call to have it replaced, you can get a new one because your payment information is on file.

  More significantly, if a serious crime is committed at a Tube station, police will want to know who was in the station at the time. Within that eight-week period, they can do so. By Birch’s reckoning, this is a reasonable sacrifice of privacy for the sake of crime prevention, provided it’s set up to minimize the abuse of power and requires a warrant from the court. After eight weeks the information is gone. “By anonymizing the data, no one can go back through and troll years of data about people. That, I think, would be wrong and intrusive.” A Columbia University law professor named Ronald Mann put it similarly in a 2011 radio interview. Ordinary consumers don’t care about absolute anonymity. “The main people who are excited about a wholly anonymous payment system are people who are violating the law.” He was talking about Bitcoin, the virtual currency project, and how regulators might step in to take action against it if they determine that it’s used primarily for nefarious purposes. Yet he very well could have been speaking about cash.23

  Mobile money and banking apps should not keep customer information on the phone—all the data should vanish once the transaction is concluded.24 Yet if you’re unemployed and suddenly start receiving a ton of incoming money from Yemen, or if the software detects that your transaction patterns shift from small transfers now and then to merchants in Raleigh-Durham, to a sudden and huge outflow of money to the Cayman Islands or the border regions of Pakistan, maybe it would be appropriate for the authorities to have some way to be sure everything is copacetic.

  Not to suggest that we should blithely relinquish our civil liberties, but don’t we want the cops to be able to break the glass, so to speak, to access the records necessary to trace a Tucson gunman’s Glock, at least back to the point of purchase? This compromise between the rights of the individual and the state is echoed, of all places, on those crazy Georgia Guidestones: “Balance personal rights with social duties.” There is no perfect equilibrium between the individual need for privacy and government interest in information. The best we can do is try to engineer systems that are as fair as possible and chockablock with checks and balances.

  Another issue to keep in mind with the privacy puzzle is the distinction between what we say we value and are concerned about, versus how much we actually act on those concerns. Many millions of consumers don’t seem to mind that Amazon recommends book titles based on their previous purchases, or that Facebook lines up ads that its algorithms determine might be of interest, based on users’ profiles and online activities.25 Much of this is semantics. Ask the people of Kenya (or anywhere) in a survey if they want a giant telecom company to store data about them and track who they send money to or receive it from, and they’d surely say no. But ask them if it would be OK to shut off their M-Pesa service and they’ll say hell no. In one recent study 84 percent of M-Pesa users said that the loss of this service would have a “large negative” effect on their lives.26

  Some skeptics may still want to know what would happen in the cashless future if the whole Internet or electrical grid were to fail. Won’t we need something to transact with? “Ah, yes,” Birch told me back in London. “There is this idea out there that a hacker is going to knock the Internet down for days, or that if we start to do a lot of transacting over telecom networks, those networks become targets for economic terrorism. If I were to pick a fight with me, that is the point I would raise,” he says, in a modest concession to technophobes and ardent defenders of cash. My disaster preparedness guide from the American Red Cross even instructs families to keep some cash in their emergency kit, alongside flashlights, canned food, and bandages.

  But Birch’s rebuttal to his hypothetical self is swift. “Look at what happened in Ireland in the 1960s. The banks went on strike, but pretty soon I.O.U.s began circulating like currency. Today, it would be the same.” Just a few years ago, none other than the state of California was handing out I.O.U.s, and they worked, insofar as people believed in their value. Should sovereign currencies ever fail, instead of paper I.O.U.s denominated in the national currencies we’re so accustomed to, we could ramp up digital trading in Facebook Credits, airline miles, cellphone minutes, virtual currencies, coupons for merchandise at Walmart, Ven, carbon emissions credits, Kilowatt Cards, or future currencies that we can’t even yet imagine.

  As for a complete blackout of the power grid, rendering electronic money inaccessible, or maybe even nuking it entirely, Birch’s view is that were that day to ever come, we’ll have more substantial things to worry about than the fate of our digital money accounts. Hiding from rabid dogs and roving bandits, say, or securing stocks of food and water. Should that apocryphal day come, not even all the gold in Fort Knox will buy you anything of value.

  FOR THOSE OF US UNWILLING to cast our lot with the Cormac-McCarthy-meets-Book-of-Revelation scenario, we’re left to wonder what will happen to cash in the decades ahead. My money is on cellphones, or something of a different name but that is a futuristic version of today’s smartphones: completely networked computers in our pockets, embedded in wristwatches, or maybe even tiny chips worn behind our ears (sorry, Pastor Guest!), that will also serve as a wallet, bank branch, currency converter, and seamless payment tool, propelling commerce forward, eliminating the monstrous costs of cash, and providing a critical leg up to billions of people.

  I could be wrong, of course, and in some ways I
hope I am, because that will mean incredible innovations are coming. If the weatherman can be so off the mark forecasting rainfall a few days from now, how could anyone reasonably predict the course of technology over the next ten or forty years? What we do know is that these alternatives must beat cash at its own game—ease of use, fungibility, universal acceptability—while succeeding where it currently fails. Cash is dying a death by a thousand cuts. We just can’t know if it’s 109 or 9 more cuts until it’s dead.

  I’ll leave you with one last idea, courtesy of the Gates Foundation’s Mas. His concern about cash, remember, isn’t necessarily the objects themselves, their peripheral costs, or the fact that cash is a tax-free loan from the people to the government—none of that. Mas’s beef with cash is all about inconvertibility, and the punitive price the poor pay because of it.

  In a recent paper, Mas describes a sentiment that I don’t share, but that is probably more true than not: “People don’t want to entirely let go of the physicality of cash.” If cash is going to coexist alongside electronic money for a long time to come, how could we rebuild it to satisfy the human desire for tactile money while eliminating its constellation of inefficiencies and hazards?

  A couple of years ago, Mas had a brainstorm. In a way, he had been building to this concept for years, ever since he started thinking about barriers to savings. He calls it the “smart banknote,” and the best way to think of it is to imagine that an iPad had sex with a $20 bill.

  The offspring would be a banknote-shaped piece of paper that isn’t paper at all. It’s an electronic display, but as thin, crumple-able, and durable as a typical $20 bill. The smart banknote has two modes: When it’s deactivated, it looks like the screen of a computer monitor or an e-book reader that’s turned off. It’s blank and has no value. In its activated form, it appears like a banknote—whatever the issuer wants, be it political propaganda, corporate logos, tone-deaf design, or other elements signifying that it’s a trustworthy medium of exchange.

  With your phone, you could transfer money onto the note, via the tiny antenna nestled in its fibers. The note would “become” of value by displaying the amount of money you’ve transferred from your bank account. Let’s say $20. That note is tradable as is, as if you’d gone to the ATM to withdraw it like an ordinary banknote. Holding it might even boost your tolerance for pain, just like today’s paper money.

  You hand your activated note to a merchant in exchange for goods. She now has two choices: hold it as a $20, or use a phone (or something like it) to deposit $20 into a bank account, thus removing the value from the object and rendering it deactivated. The image broadcasting the idea of that value is now gone. Result: instant convertibility between the physical and the electronic world, as well as instant access to the wider financial system, anywhere, anytime. Merchants could maintain a supply of deactivated notes, without the need for security or fear of robbery, because who’s going to rob a store full of worthless e-paper? On the other hand, customers could receive cash back during transactions, like people do today when paying with a debit card.

  My preference is still to go digital all the way. Counterfeiting and hacking would eventually cause problems for smart banknotes, just like all banknotes throughout history. But what I like about Mas’s idea is that it could be the perfect bridge: a bridge between physical and electronic money, and a bridge between the cash-dependent present and the cashless future. I also like that it caters to the quirks of human taste and behavior. Smart banknotes could satisfy both those who feel they must have some tactile form of money and those who have no such requirement.

  Two years ago, Mas’s team at the Gates Foundation funded a preliminary study of this “blue sky” concept of the smart banknotes, reasoning that it merited at least an initial assessment. They tasked some consultants to investigate technologies with names like magnetochromatic microspheres and active-matrix organic light-emitting diodes, and to report back with an appraisal of the smart banknote’s feasibility.

  Their conclusion: not anytime soon. In their closing comments, the researchers wrote that they don’t think the necessary materials and technologies will be available for another ten to fifteen years. When I read that, I thought: ten or fifteen years? In the history of the technology known as money, that’s almost no time at all.

  CHAPTER 8

  The Emissary

  Warmed against and worn between

  Hearts uncleansed and hands unclean,—

  What is there I have not seen?

  —RUDYARD KIPLING, THE COIN SPEAKS, 1907

  The Clackamas Banquet Center, just east of Portland, Oregon, is attached to a Denny’s at an intersection shared by two gas stations and a McDonalds. On a September morning that can’t decide if its fate is sunny or drizzly, I pull into a parking space next to an old Pontiac sedan. An elderly man is lifting a plastic bin full of coins from the trunk.

  The Coin and Currency Show is underway in a teal-carpeted room lined with rows of rectangular tables, each with a desk lamp angled downward over the merchandise. The window shades are drawn to minimize the glare bouncing off the display cases. The carefully aligned collections of coins remind me of flying over port terminals and looking down on lineups of hundreds of shiny new cars, soon to be dispatched to the interior of the country, or shipped overseas.

  This regional coin show is tiny compared with national events that easily draw thousands, sometimes tens of thousands, of visitors and collectors. But the woman at the entrance tells me many people here will still do $10,000 in business today. I’m not in that league, but I am here to transact. The year of living cashlessly is over, and inside my briefcase is a thin gray metal box, once used for storing slides, as well as five old yellow Kodak film canisters and two Zip-lock sandwich bags filled with a motley assortment of coins.

  A few months ago, my father sent me his childhood coin collection. The coins were bought with earnings from his days running a paper route in Columbus, Ohio, when he was eleven and twelve. They aren’t a collection in the connoisseur’s sense; more like a relic of youth, resting somewhere between pocketknives and photography on the continuum of boyhood hobbies of the 1950s.

  Knowing that I was neck deep in information and meditation about the role and fate of physical money, my father had dug the coins out of storage and put them in the mail. What he doesn’t know is that I’m looking to sell some of them. I want to see what it’ll feel like to part with physical money that has a different kind of value.

  Shunning cash for the year turned out to be troublesome only now and then. I never got a shoeshine. I was disappointed the few times when I couldn’t give anything to street performers, and more than a few times when ignoring panhandlers, although we all know that’s a no-win no matter what. I also skipped on visiting a few farmers markets and street fairs, where most of the vendors only accept cash, and I became something of a Grinch to kids at neighborhood lemonade stands, frequently passing them on my jog and always delivering the same excuse.

  But most of the parking meters where I live take plastic, I don’t use Laundromats, and I’m lucky enough not to have to patron the payday lenders on nearby Martin Luther King Boulevard. With the exception of my week in India, the time I had to buy that ticket on the New Jersey Transit train, and one evening in Iceland that I’ll explain in a moment, coins and banknotes just kind of fell out of my life; or at least out of my day-to-day dealings. (Inside my head, it was just the opposite.) I don’t have any cash in my wallet, although I do have a few Kilowatt Cards that I’m hoping to transact with, and the sample gift card the Japanese printing experts gave me during our conversation about counterfeits. Looking back on my year, I now see that it would have been exponentially harder for me to only use cash.

  IT TAKES ALL OF FOUR MINUTES of chat with a dealer at the Clackamas show to learn that my father’s collection isn’t impressive: “junk,” to use the numismatics term of art. It’s mostly coins that are utterly plentiful, and none of them have famous production errors that
would pump up market value. They are in half-decent condition, if that, and all the coins lack the kind of stellar back-story that might turn a dud into a jewel. I suppose I could make one up. This is the same Belgian coin Teddy Roosevelt and his guide flipped while on safari in Africa, to see who would get to pose next to the rhino. But without credible paperwork backing my claim, no one would buy it. Numismatists have a nose for authenticity.

  Up to now, I’ve avoided coin geeks and notaphilists; they constitute a snag in the case against cash because their stake in keeping physical money around feels more valid than others. The doomsayers, counterfeiters, drug dealers, central bankers, scalpers, technophobes, zinc industry lobbyists—no one makes a very convincing defense. In the short term, fine, we still need cash to facilitate certain kinds of commerce, and I don’t want to stick a fork in it until we have a proven alternative—or more likely, alternatives—that meet the needs of working people who currently depend on cash. But as its relevance declines and its costs keep skyrocketing, we should think about funeral arrangements.

  Yet there is something about the collectors’ specialized knowledge of, and affection for, coins that gives me pause. When they talk about physical money, they’re talking about sculpture, civics, markets, industry, and history all in one. What will happen to the entire subculture of numismatics and notaphilia when my cashless paradise is finally here? Have I become so averse to physical money, so single-minded in the pursuit of friction-free transactions and more currency options, that I no longer appreciate the romanticism of a hobby anchored to the physical world and fueled by a little national pride?