Dave Stearns on Visions of the Cashless Society

David Stearns, a professor in the Information School at the University of Washington, is a software developer who went back to graduate school to become a historian of technology. His research has focused specifically on the history of VISA. At Digital Cash he presented on the rhetoric of the cashless society, a phenomenon that has always been described as inevitable, looming, just around the corner. But where did this phrase come from? How did it work as a resource for actors at the time, and why haven’t we achieved it? As a negative statement or vision, the phrase says what the future will not contain. Stearns offers some ideas of why we’re not yet there.

Stearns showed an n-gram view of word usage of “checkless society” versus “cashless society” in sources indexed by Google. “Cashless” postdates “checkless” society, as the latter concept lost popularity over the years when banks realized they wanted to eliminate paper for electronics. This was a two-step process. First, in late 50s and early 60s, banks deployed the rhetoric of a looming crisis in check processing. As the Federal Reserve began processing more checks each year, people feared that the means of routing and sorting checks couldn’t keep up. This led to innovation in check processing – often a long and tedious process – as mechanical devices began reading checks and including more efficient routing numbers. In the 1950s, Bank of America, for example, collaborated to create ERMA, an early computer applied to the banking industry that read and sorted checks. Another result is that the looming check crisis provided an excuse or rationale for why computers should be applied to all aspects of banking.

Second, once telecommunication linked banks to create a cheaper and quicker way to process checks, it soon became clear that if every major bank adopted a computer, and they were linked, the industry could develop a national system that enabled the transfer of credit through electronic means. This system would eliminate paper checks and save money by moving it more quickly. This idea started to fire up in mid-60s, when Martin Greenberg’s Computers of Tomorrow discussed how new computers were going to revolutionize lives and predicted that credit cards – referred to by some as ‘money keys’ – would become a natural occurrence.

Computer manufacturers also responded. Thomas Watson, the CEO of IBM, envisioned that customers would use terminals and ID cards. The idea of a checkless or cashless society also became a rhetorical resource and trend that middle management could draw on for legitimacy, since they had few ways of making themselves more visible to higher ups.

At the same time, there was angst and uneasiness. As a negative imaginaire, the cashless society had immense room for interpretive flexibility, allowing stakeholders to express different anxieties and visions of its realization. The speculation was not about whether these systems will come into being but in what form, and who will control them. Stearns went through some key groups:

The Federal Reserve, smaller tech-challenged banks, and the thrifts all thought that infrastructure should be built in the same way as the road system, the electrical power system, and the postal system – as a critical piece of infrastructure that should be implemented by a federal agency and should be either federal or at least privatized and highly regulated. But these constituencies also had differences. The Fed wanted to develop the electronic analogue to their check processing system then take charge of running it. The small banks wanted it developed cooperatively, then have national coverage and the ability to transfer funds across state lines, but deny access to competitors down the street.

Large tech-savvy commercial banks saw the cashless society differently. Citibank saw electronic point of sale as a special case of an ATM, and an ATM as a special case of a branch that is not shared between banks – for this reason, banks determined to charge a convenience fee if a customer used their card at another ATM. Citibank, for one, saw point of sale as a competitive weapon to draw customers to their bank.

Meanwhile large national retailers kept out of the banking world but provided an electronic system of payment. Sears and Wards, for instance, had rolled out electronic cash registers that were connected all over the nation.

The last group was the national payment card networks, which developed the first nationwide debit card in 1975. The card worked like a credit card’s cousin but could be settled against a customer’s account, replace paper checks, and be cleared electronically over night. VISA’s vision of cashless society differed from the tech savvy banks, which wanted the debit card to work like an ATM: secured with a pin not a signature. VISA’s card, like Entree, which was introduced in 1975 but took about 20 years to gain true popularity among consumers, could be authenticated with a signature, not a PIN number. Since most banks did not issue that card, debit cards were not initially widely used. Stearn said it took another generation of bank management to reconcile this conflict of interest.

Even with an ever-evolving cashless society, there are still some social dilemmas. Stearn closed by presenting some basic social problems that prevent us from achieving a cashless society. First, if we moved to cashless, how does spontaneous altruism work? How would we give a dollar bill to someone on the street, or offer incidental tipping to someone who assists with hotel luggage, for instance?

Second, religious practices: there’s a need to do a physical demonstrable act of putting money in a collection plate. Finally, there’s the role of gift giving in ceremonial times, such as weddings. How would we continue such practices with payment that has no physical form?