What Will the Tooth Fairy Do?

Summary

The article discusses the decline of cash usage in favor of digital payment methods, reflecting on the implications for traditional transactions, including the whimsical role of the tooth fairy.

Abstract

The author recounts a pre-pandemic experience at a New York City restaurant where credit cards were refused, prompting a discussion on the changing landscape of financial transactions. With the rise of Fintech, digital wallets, and payment devices, the need for cash has significantly diminished. The Federal Reserve Bank of San Francisco reports that cash accounted for 26 percent of total transactions in 2018, down from 30 percent in 2017. Despite this trend, cash remains the primary method for purchases under $10. The shift away from cash is global, with countries like China predominantly using QR codes for transactions. The article also touches on the U.S. exploring a digital dollar. The COVID-19 pandemic has further accelerated the decline in cash usage, leading to a coin shortage in the U.S. as brick-and-mortar transactions decreased.

Opinions

The author expresses bewilderment at the restaurant's cash-only policy, highlighting the growing expectation for digital payment options.
There is a personal anecdote about the author's reliance on digital payment methods for various transactions, from morning coffee to charitable fundraising.
The author questions the future role of cash, particularly in light of the tooth fairy tradition, suggesting a potential digital evolution for such customs.
The author notes with interest that young adults (18 to 25 years old) are the demographic most likely to use cash, despite the overall trend towards digital payments.
The author seems intrigued by the widespread adoption of QR code payments in China and considers the broader implications of digital currencies on global economies.
The author reflects on the irony of a coin shortage during the pandemic, contrasting the traditional use of coins with the rise of digital currency.

A world without paper money

“We only take cash”

Hmm? Pre-coronavirus, my friend and I were out to lunch at a relatively popular NYC restaurant with our daughters. When the waiter refused my credit card, my friend and I were bewildered. Our kids were confused. I asked the waiter to repeat himself more than once.

Cash?

My 10-year old asked if that was what the tooth fairy left when she took her teeth.

As I ran to the ATM to take out some greenbacks, I wondered — how has Fintech — and the advent of digital wallets and payment devices — affected cash usage?

Personally, I don’t really have much of a need for cash anymore. If I’m not using a debit or credit card, I’m using another form of payment. Morning coffee? There’s an app for that. Teacher gifts or office pools? Venmo. Raising funds for a worthy cause? GoFundMe. Street vendor? Stripe or Circle. Set up Apple Pay on your phone, and you don’t need to even carry your credit cards.

The use of cash in the United States has been declining over the last several years, accounting for 26 percent of total transactions in 2018, down from 30 percent in 2017. However, it continues to be the primary payment method for purchases under $10, consisting of approximately half of those transactions, according to the Federal Reserve Bank of San Francisco. Interestingly, the age group that uses cash the most is individuals aged 18 to 25 years old, while the next age group, those 25 to 44, uses cash the least.

And the use of cash is declining in other countries as well. Take China. That’s right, visit the world’s most populated country and you may have a very hard time doing anything — from riding a bus to buying fruit at a market — with cash or credit cards. Almost all transactions are done by QR code via apps such as WeChat Pay or Alipay. Initially introduced in 2006, QR codes are now the preferred method of payment — and are currently only available to those with a Chinese bank account. A number of other countries have announced plans to investigate digital currencies, and the U.S. has held hearings on the future of a digital dollar.

For now, it looks I’ll continue to have to search my bag for spare dollars in exchange for a lost tooth. But maybe, just maybe, in a few years, I’ll be able to transfer the funds from my tooth fairy account.

Side note

I wrote this story prior to COVID-19. The use of paper currency has declined so much due to the pandemic that there is now a shortage of coins in the United States. According to the U.S. Mint, the vast majority of coins come from recirculated transactions. As the amount of brick and mortar shopping declined, so did coins. Not sure how you can throw a digital currency into a wishing well though.