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Implications of a Cashless World

June 7, 2012 – Scottsdale, AZ – Back in April, longtime WorldatWork contributor Chris Dobyns emailed to ask if I had seen an item in the Huffington Post  about the fact that 43% of Americans have reportedly gone an entire week without using cash. He asked me whether I had considered the practical and psychological implications of the shift away from using cash. To be honest, I hadn’t.

But since he made me aware of this topic, it seems that this topic is popping up everywhere now. I was at the gym reading Fast Company the other night and stumbled on an article about how mobile phones are becoming the preferred consumer “wallet” in some countries. People walk around with no cash and simply waive their mobile phone when they want to buy something (probably a good future blog topic). I have also noticed in my own life that I’m using cash a lot less. It’s mostly about ease and convenience.

So what does a cashless society mean for compensation profession? Are there potentially huge implications here, or is it potentially meaningless? The HuffPo article cites a SmartMoney article from 2010 that says (in part):

“Studies as far back as 1979 and as recent as 2008 have shown that consumers who pay with cards tend to spend more than those who pay cash. One theory holds that parting with cash is a vivid enough action to elicit a type of psychological pain and that card transactions are too abstract to be painful…”

This makes intuitive sense to me. But I wonder if there is a natural inverse to what they are calling the psychologically painful “vivid action” of parting with cash? In other words, would it be psychologically more “vivid” for employees to receive cash instead of a paycheck or direct deposit every other week?

I know the practical implications of paying a payroll in cash is more than a little clumsy—i.e., the logistics and safety of moving huge amounts of cash; companies might have bands of thugs waiting outside their buildings on payday, etc. But, if the premise is true that consumers have a psychologically difficult time parting with cash (they are more free spending with cards) … couldn’t employers get a positive psychological bump among employees by paying them in big, eye-popping piles of cash every payday? 

You know that’s just the devil’s advocate speaking, but here is the more serious question… do you think the shift to a potentially (or a more) “cashless” society has implications for the employee compensation and rewards field? In what way?

The opinions expressed are solely those of the author and do not necessarily represent those of WorldatWork.

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Fri June 15, 2012 9:42 PMReport Abuse
Maxwell Pontin
Director
Member Since: 12/12/1994
Comments: 1
 

Privacy concerns and data matching are one end of the process, which some employers could conceivably use to manage costs as in Scott Boynton's comment. 

The other end of the process for compensation professionals is that maybe we get a lot less recognition from what we pay and from the pay increases we spend so much time managing than we would with cash.  A few more electrons in the bank account at the end of the month ... as employees we don't feel it and we hardly even see it.

Maybe there's something in that for us to think about.  Perhaps we could put some tangible rewards in place, or maybe we should send electronic pay slips with graphics that show suitably calibrated wads of cash in technicolor!

 
Wed June 13, 2012 8:33 AMReport Abuse
Ryan Johnson (Staff)
Comments: 462
 

Scott - the privacy issue is certainly a worry. In theory (if not already reality), "the big database in the sky" could track every purchase you make and, as you say, decide if you are making decisions that are good or bad for the healthcare plan--and then decide your healthcare premiums. Yikes.

Thanks for the comments guys. Like I said, I'm seeing this story everywhere now. I think it's worthy of another post in the near future.

 
Tue June 12, 2012 12:48 PMReport Abuse
Scott Boynton
Manager Compensation
Member Since: 1/1/2001
Comments: 55
 

One issue that bothers me, and perhaps some others, with a cashless society is the potential loss of privacy.  If everything is electronic, everything is tracked.  That said, I am also using less and less cash in favor of the debit card, primarily due to convenience.  And yes, it DOES in fact hurt more to pay with actual cash than a card swipe because the merchant doesn't give you back your cash like they do your card.  Maybe if they would punch a little hole in my card it would have the same effect as taking my cash. Undecided

Implications for employee rewards?  A worst-case Orwellian outcome might be something like tiered healthcare premiums based upon eating habits, now that potentially someone will know how often you raid the snack machine at work.  It could also make it harder for fibbing employees to get away with checking "non-smoker".

 
Thu June 7, 2012 1:17 PM (edited 6/8/2012) Report Abuse
E Brennan
Senior Associate
Member Since: 4/19/1979
Comments: 589
 

You accurately describe the pre-banking days when paydays were handled exactly as you describe... especially on military bases where the payroll was handed out by the disbusement officer with armed guards standing by.

Employers don't tend to pay people extra when they deposit electrons directly in the bank account rather than count out dollars or even write checks.  But the ancient Jurrasic days when homeparty contractors would get excited by finding $100 bills under their chairs at whip'em'up sales conferences can't be matched by scanning a barcode.  Except for my carhop days when I had tip money or shared in pooled cash kitty income, haven't seen much of the green from my work income for many many decades. 

 
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