On Nov. 12, after more than 200 years in existence, the last penny was minted in Philadelphia.
Due to its growing irrelevance in the economy and its expensive production cost (3 cents per penny), the U.S. government discontinued it for budget reasons. Along with this, more and more consumers don’t use cash, preferring either credit cards or online payment methods such as Venmo, PayPal and Apple Pay.
Over time, these digital wallets have been shown to be miles more convenient than cash or even credit cards. The hassle to find the right bills, total up cash and find change is replaced with the tap of a phone.
Utilizing a digital wallet on a phone is also much safer than carrying around cash. While it is easy for purses and wallets to be stolen, digital wallets add more layers of security: Robbers cannot access the money without entering a PIN or verifying with a Face ID. This may not even be an issue, since most people will realize their phone is missing within minutes.
In fact, sometimes, paying using digital wallets like these can be even safer than paying with an actual credit card. Paying via phones utilizes a process called tokenization, where a one-time-use code is transmitted instead of the actual credit card number. Even if a hacker gets their hands on your transaction, the code will be completely useless to them, as it can’t be tracked back to your card details.
However, digital payment methods do come with drawbacks. One is the unreliable nature of phones’ battery life. Imagine trying to scan out of a subway station, only for your ticket home to run out of battery life. Additionally, many digital wallets, such as PayPal, require an internet or cellular connection to work. Until Starlink provides global coverage, relying only on digital wallets can be a dangerous oversight. The best policy is still to carry a backup credit card.
Concerns have also risen about the processing fees that come with card usage. Processing fees are paid by businesses whenever a customer uses any sort of digital payment method, in the form of around 2.5-3.5% of the total plus a small fixed transaction fee shared among the cardholder’s bank, the card network and the actual payment processor.
While a seemingly small amount, it can quickly add up over many sales and is often the highest operating expense for many sellers. This is especially harmful to small businesses, as the extra payment can really affect their thin margins. Additionally, sellers who sell cheaper items are affected as well, as more transactions lead to more fee costs. As a result, some businesses, such as the Chevron gas station in downtown Saratoga, charge extra for people who pay with a card in an effort to offset the extra expense. In other cases, some stores only accept cash payments.
Unfortunately, these fees are still necessary for the supplier companies to be able to offer services such as fraud protection and reward cards. They exist because the suppliers need to make their profits as well, on top of all their services.
Ultimately, despite the convenience of not having to worry about cash, our growing reliance on digital payments also comes with many concerns. As the world continues to move toward a cashless future, it is important to remember the consequences of a tech-dependent future and its effects on small businesses.
