Paper Money

Coins, paper money, plastic cards soon to be historic

The timeline futurists have predicted for the arrival of a cashless society came into sharp focus March 22 when financial industry experts briefed members of Congress on the rapid development and public adoption of mobile payment devices.

During the first of three hearings the House Subcommittee on Financial Institutions and Consumer Credit says it plans to conduct on the future of money, technology experts noted that the ability to use handheld devices — smart phones — to access financial services in-store and online has already opened up channels of transactions that were not possible just a few years ago.

And, amazingly, the experts said that within the next five years smart phones are likely to become the primary way most Americans pay for goods and services, no matter the size of transactions.

Ed McLaughlin, chief emerging payments officer at MasterCard Worldwide, in his prepared testimony noted that while 85 percent of today’s transactions are still being conducted using cash and checks, smart phones and the Near Field Communication technology now used in them and tablets such as iPads provide such convenient and secure environment that their use will rapidly displace not only coins and paper money, but credit and debit cards as well.

Many in the numismatic community will likely be skeptical of such a rapid march to jettison traditional forms of money, especially in the United States, where we’ve spent more than 30 years trying to replace the $1 Federal Reserve note with a dollar coin and failed, despite logic and costs clearly pointing to the wisdom of such a change. Many researchers say the biggest obstacle to changing to dollar coins has been the “convenience factor.”

If convenience is truly the reason the small dollar coin has failed in the United Stares, then the financial technology experts are likely right on target. Smart phones and tablets are convenient and their use is growing by leaps and bounds. (The experts told Congress that wireless subscriber connections now exceed the total U.S. population and almost one out of three are smart phones or wireless enabled Personal Communications Digital Assistants.)

The banking industry will play a key role in the success of the rapid deployment of mobile payment technology, especially the Federal Reserve System. It is important to understand that the Fed is embracing the new technology and is playing a leadership role in mapping the path to standard protocols and security.

The Fed’s attitude toward mobile payment technology stands in sharp contrast to its approach to dollar coins. Congress and the United States Mint have had to beg and cajole the Fed into making dollar coins available to the public. Essentially the Fed has ignored every small dollar coin — Anthony, Sacagawea, Presidential and Native American.

Collectors take note: The coins in your pockets may become historic relics much sooner than you might have imagined. Young people 3 years of age and younger today may never experience buying candy and toys with cash money (subsidiary coins and paper dollars). Instead they are likely to grow up learning to tap their smart phones to pay for such items. The future of money is rapidly changing. ¦

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