It’s the morning after the JP Morgan cyber breach, in which hackers stole the information of 76 million households. I’m holding my phone over my debit card, taking a picture that will automatically decipher the digits so the LevelUp app can link directly to my bank account.
It seems like a terrible idea, but I’m on a mission: I’m going to spend the whole week using digital payments, to find out if, as many tech pundits have asserted, we’re headed toward a cashless society. According to the research firm Gartner, mobile payments will top $720 billion a year by 2017, up from $235 billion last year. Wikipedia lists 75 different online payment service providers internationally, from user-to-user mobile payments like Square Cash or Venmo, or user-to-vendor like LevelUp. Apple Pay, introduced last month, promises to add to the digital payment gold rush.
Since I don’t have the iPhone 6, required for Apple Pay, I pick the following apps:
- LevelUp lets me pay participating businesses like CHOP’T or Umami burger
- The Starbucks app works like a digital coffee card, keeping track of my purchases and offering me rewards
- Square Cash and Venmo allow me to pay friends and to view their transactions
- The Passbook app on my iPhone includes apps for Target, Walgreens and Kroger, as well as REI and Air Canada, Macy’s and Office Depot and Pinkberry, and the Apple store
- Google Wallet started as user-to-vendor and now works mostly as user-to-user and stores various gift cards
Because the café I normally frequent only takes cash, debit or credit, I reluctantly head to Starbucks. I order, then hold up my phone to the scanner affixed to the back of the register. “What do I do?” I ask the barista.
“There’s no money on it,” he says.
“How do I get money on it?” He tells me what to tap and swipe, but in the interest of time suggests that I give him $5 that he will then add to the balance of my app. I shake my phone, the balance shows and I hold my phone up to the scanner to pay for my burned-tasting coffee and way-too-soft bagel.
“What is the point of this?” I ask him. He gives me the spiel about earning stars and points and rewards, which is what most of these mobile payment apps offer.
This is the question that sticks with me throughout the week. Why is it better for me to use the Starbucks app instead of my credit card, which offers me points of its own? Will Hernandez, editor of MobilePaymentsToday.com tells me: “You’re using that app to track your rewards. Making the payment is kind of an afterthought.” As the Discover Card pioneered the concept of cash back for purchases in 1996, these companies are battling for, and thus rewarding, our loyalty: the more you give your money to them, the more they offer you in return. With LevelUp, for instance, if you spend $60 at some restaurants, you get $6.00 in credit. Each app or site is designed to keep your money within its own financial ecosystem.
Patronizing Starbucks instead of my local café leaves me with an unpleasant taste in my mouth. Already we’re living in a world of retail supergiants—Amazon, Target, and Starbucks. And the more I rely on Passbook’s or LevelUp’s family of apps, the more my money stays in that circumscribed set of businesses.
Case in point: On the way home, I’m planning to stop at our local food co-op to pick up some groceries, but, sorry kids, no strawberries or bean salad for you. The co-op only takes cash, debit or food stamps.
I discover the best part of my alterna-money week: I’m spending far, far less money than usual. I can’t just grab a non-Starbucks cup of coffee or a newspaper. I can’t even put more money on my MetroCard for the subway, forcing me to use my bike or walk. (Upside of cashless week: I may lose some weight). Most of my monthly bills are deducted automatically from my bank account. There are some things I absolutely cannot avoid spending cash for, like my daughter’s school lunch. I cheat, getting my husband to give her the $1.75.
As for my own lunch, since I wasn’t able to buy groceries—I’m adamant about shopping at the co-op, since we have to work each month in order to shop there. I consult LevelUp, which shows nearby businesses that accept the platform. JustSalad it will be; the app encourages me to choose it by way of a $1 discount. This time I’ve already linked my card and have fewer problems using my phone for food.
However, it’s a challenge to get the rest of my errands done. I need to download the CVS app to get toothpaste. OpenTable, which started as a restaurant reservation app, now lets you pay your bill that way, but, according to OpenTable’s website, only one restaurant in Brooklyn takes it. To really navigate the world walletlessly, I would need a lot more apps, a lot more room on my phone, and a lot more time.
This is perhaps the biggest hurdle that digital payments face: accessibility. “It’s a very fragmented market right now,” says Hernandez. “The infrastructure’s really not in place yet to make this happen.” Apple Pay may be all the rage, the greatest digital payment platform yet, but not everyone accepts it.
The Brooklyn Public Library’s café doesn’t take it, either. I’m working next to my friend, a mom in her mid-30s who only recently upgraded her decade-old computer at the library, when she asks if I want anything from the cafe.
“Do you have any apps on your phone like Venmo or Square Cash?” I ask her. She looks at me as if I’m speaking Martian.
“My phone is too old for those kinds of things,” she says. “You want me to buy you something?” I demur. Man am I hungry.
I’m able to use my L.L.Bean gift card and Amazon points for some sartorial purchases. When I need something else from Amazon, my only non-traditional option is the Amazon Store Card. It’s a kind of Amazon-only Amex; if you don’t pay in full by the end of the month they charge you a serious APR, in this case 25.99%.
Rather than sign up for anything else, I have my friend buy something for me and say I’ll pay her via Square Cash. She reminds me that she actually owes me money so she sends me $5 using the app. A text telling me so pops up mere seconds later. It’s true: once you’ve put in the work of entering your data, actually paying, or getting paid, is incredibly fast and easy.
I want to give up. We need milk. And stain remover. And tortilla chips for the rapidly aging avocados that I don’t want to waste. It seems unfair to ask my husband to buy the milk because my hands are tied, so I go to our local bodega, take out my wallet and pay cash. I feel liberated, so much so that I added items I’d felt deprived of (sadly, mostly cookies) to my pile. It’s $14.51, and I hand the guy a $20. I remember that I owe him fifty cents from when I was short last week, before my week of alterna-money began, so he hands me back one smooth five-dollar bill. I feel giddy.
Clearly, I’m not ready to go cashless, but plenty of folks think cash will go the way of snail mail and VHS. “One day, we’ll all be paying for things with our phones,” CNET predicts. Still, the research company Forrester reported that only 11% of Americans used a mobile wallet in 2013.
Convenience is part of the marketing platform, too, though I don’t think the cashless economy has yet delivered on this promise. Removing your wallet from your pocket or bag, opening it, taking out the credit card, swiping it vs. removing your phone out of your pocket or bag, pressing the button, entering your code, opening the app, tapping it, turning it off. “I’ve timed it,” says Hernandez. “There’s not much of a difference.” Hernandez admits that using a credit card might actually be easier at times.
Then there’s the issue of safety. While it frightened me to input my bank information into my phone, I know that most millennials are well-accustomed to the one-device-does-all world and are less afraid.
And perhaps with good reason. The number of credit card breaches—Target, Home Depot—reveal just how outdated our magnetic strip credit card technology is. In Europe and elsewhere, there’s no strip but a chip, which is scanned and then used in conjunction with a PIN; it’s supposed to be much safer. And perhaps some digital payment technologies will be even safer than that. “Apple Pay is definitely safer than the technology on which the card system is based now,” says Hernandez.
The problems of access, of smaller companies—and less tech savvy people—being able to keep up with rapidly evolving technology, and of course the digital divide (you have to have enough money for a smart phone and then enough disposable income to use the apps) are all in the way of a cashless society. At least for now. Millennials are already on it, partly because of their comfort and partly because of their affinity for design. “There really isn’t much of a difference between paying with a card and a phone,” says Hernandez. “It’s just that paying with a phone looks cooler.”
My week is over. I go through and delete the apps one by one. I go back to cash—the truly safest way to pay, assuming you don’t lose it—and my rewards-granting credit card, and remember something else that Will Hernandez told me. No matter whether we go cashless or not, “We’re still going to carry around our physical wallets,” he says. “We still have our IDs in there.”