Stop printing money

By Tyler Davis

The U.S. State Department’s international aid agency, USAID, formed the Better than Cash Alliance, a partnership between private and public organizations that aims to move the global economy from paper money to digital banking on Sept. 19.

The alliance, which includes organizations ranging from the Bill and Melinda Gates Foundation to Visa, hopes moving money online will create transparency and efficiency, something we should be striving for. The alliance claims paper money is inefficient and unsecure. We should transition fully to bank cards and other upcoming, paperless technologies.

Going digital makes sense for USAID, an agency that deals with corrupt foreign governments that often take their own cut of U.S. foreign aid before it reaches its destination. Digital transactions will give USAID the ability to track its funds while providing impoverished people with access to banking. America is slowly moving away from cash, a transition that will improve the way we do business.

Our society is ditching paper. People rarely send letters, as shown by the financial troubles of the U.S. Postal Service. Twenty-five percent of all books sold are e-books, according to the Association of American Publishers. College classes are going paperless, and businesses aren’t far behind. If we are becoming a digital society, why are we still carrying these pieces of paper in our billfolds?

The cost of printing paper money, while an insignificant percentage of the federal budget, is nothing to be laughed at. The Federal Reserve’s currency budget for 2012 is $747 million. A one-dollar bill costs 5.2 cents to produce and on average lasts less than five years in circulation. Pennies actually cost more than twice their face value to produce.

Paper money is more susceptible to counterfeiting and use in criminal transactions. There is an estimated $70 million to $150 million worth of counterfeit U.S. bills in circulation at any given time, according to a 2000 report from the U.S. Department of the Treasury. One in every 10,000 $100 bills is a counterfeit.

Protecting digital money from fraud is done with encryption, a concept measurably more secure than anti-counterfeit printing practices. Many encryption algorithms are considered almost impossible to crack. For example, cracking Pretty Good Privacy, a common encryption program available to the public, by trying all possible combinations of the 128-bit key would take a computer 10 trillion years, according to PGP’s website.

For an idea of how all-digital currency could protect against counterfeiting and the other faults of online commerce, look no further than the experimental currency Bitcoin.

Bitcoin is a digital currency introduced in 2008 by a cryptographer known by the pseudonym Satoshi Nakamoto. It is protected by cryptography that differentiates each Bitcoin from the other. All transactions are publicly tracked, and all parties involved are listed anonymously to protect against fraud and theft.

This also makes it difficult to conduct illegal transactions using Bitcoin, which would be an added benefit of a cashless economy. Criminal business is still done mostly through cash transactions because they are less traceable.

Although Bitcoin never caught on, partially because of the legal risk of a nationless currency and Nakamoto’s disappearance from the Internet in 2010, the idea briefly enjoyed some small-scale success. A few brick-and-mortar stores even accept Bitcoins.

Credit cards have been a cashless option, but soon they will be even simpler. Some stores are now accepting digital payment in U.S. currency using mobile phones.

In August, Starbucks teamed up with a startup called Square to begin accepting mobile payments from customers’ phones in its coffee shops. Companies like Square, Stripe, PayPal and, more conventionally, Visa and MasterCard, prove that American consumers are comfortable with paperless transactions.

Soon it will be normal to use a mobile phone to make payments, and modern cryptography would make it much harder for money to be stolen. The only security risk is the phone itself, which can be password protected and deactivated if stolen. When a mobile device acts as your virtual wallet, stopping theft means simply reporting it as stolen and deactivating the account. This technology even makes the credit card, a relatively recent method of payment, obsolete, yet we still carry on the antiquated practice of exchanging printed money.

There are some instances where a cashless solution wouldn’t make sense, such as tipping and informal transactions, but for the most part, our shopping habits prove that we are ready to ditch paper. It’s time for cash to go the way of the handwritten letter. We have better ways to do business now.