Origins of the Modern Concept of a Cashless Society, 1950s-1970s

Bernardo Batiz-Lazo, Thomas Haigh, and David L. Stearns

Introduction: Go from Your Country to the Land I Will Show You

The discourse of the future has been particularly important in organizational adoption of information technology. From the 1950s onwards technology companies, experts, consultants, and business professors sold new technologies to firms by presenting elaborate visions of a future world transformed by universal adoption of technology. Acceptance of these visions took place not just individually but also

B. Batiz-Lazo (h)

Bangor University, Bangor, UK e-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

T. Haigh

University of Wisconsin—Milwaukee, Milwaukee, WI, USA Siegen University, Siegen, Germany

D.L. Stearns

University of Washington, Seattle, WA, USA © The Author(s) 2016

B. Batiz-Lazo, L. Efthymiou (eds.), The Book of Payments, DOI 10.1057/978-1-137-60231-2_10

collectively, by industries and occupations. When technologies failed to perform as expected this could be characterized as a bump in the road to the future, rather than as a challenge to the inevitability of eventually arriving at the agreed destination. Once consensus on the future destination was reached, a variety of specific systems or approaches could be presented as a step toward realizing this future goal, making the future a banner around which a heterogeneous alliance of interests could gather. This, of course, would further strengthen the power of the vision itself. The argument for business adoption of future technology has generally been made in the future tense.

So where do these visions come from? Hunts for earliest speculative depictions of particular technologies often lead us to the world of science fiction. Jules Verne wrote about space travel, air travel, and long-range submarines decades before such things existed. H.G. Wells warned of the dangers of aerial bombardment prior to the First World War. As science fiction emerged as a distinct genre in the 1930s and 1940s its practitioners prided themselves on their scientific knowledge and skillful extrapolation. Arthur C. Clarke claimed to have been the first to conceive of a geosynchronous communications satellite while moon missions, space stations and atomic weapons were fictional commonplaces long before their actual debut.

However, readers and writers of science fiction were perhaps more interested in rockets and physics than they were in banking, economics, or organizational innovation. When a fictional society was cashless it was generally also a moneyless utopia, as with the payment cards used by citizens to spend their standard allocation of “credit” in Edward Bellamy’s highly influential socialist novel Looking Backward (1888). Capitalism was the default social organization of American science fiction, but few authors put much attention into imagining its future.[1] By the 1940s many had adopted the term “credit” as the universal name for future currencies, including Isaac Asimov for his two main strands of work (the far future Foundation saga and the near future Robot stories). Usually, however, this functioned as a simple linguistic substitution for “dollar” and one reads of credits being slapped onto counters, flung to parking attendants, drawn from pockets, and the like. So for most authors the use of the term did not imply automatic processing of payments. A partial exception can be found in the early work of Robert A. Heinlein, whose interest in economics and the workings of capitalism was unusual among the science fiction writers of his generation. His early utopian novel Beyond This Horizon described a communications network spanning North and South America. An automated cash register, which he dubbed the “auto-clerk” would encode every sales transaction onto paper tape. These were aggregated and fed into a “huge integrating accumulator” (i.e. a computer, to use the term that had not yet been standardized) in the Department of Finance.[2] However the function of this machine was to make macroeconomic corrections to keep the economy running smoothly, rather than to maintain individual accounts.

In contrast, the vision of a “cashless society” appears to have originated within the world of business and moved only later into the realm of fiction. The genesis of the idea associates with the computerization of retail financial intermediaries. Banks on both sides of the Atlantic began to adopt computers and telecommunications starting in the 1950s. As early as 1954, business technology researchers and consultants in the USA started to discuss the possibilities of a “checkless society” where sleek, efficient, and safe electronic messages would replace cumbersome, costly, and easily-forged paper checks. Once the major banks digitized their accounts, they argued, it would be relatively simple to connect their computers over a telecommunications network, and process most routine payments entirely in electronic form. A few of them even predicted that paper notes and coins would eventually be replaced by a nationwide electronic funds transfer system (EFTS), activated by some kind of economic identification card, ushering in a completely “cashless-checkless society.”

Note that the transition to a cashless society was usually understood as also requiring the elimination of checks even though these were the best established alternative to banknotes and coins in the 1960s and 1970s. Indeed, by the mid-1960s both “cashless” and “checkless” are used almost as substitutes and often in the same sentence, such as: “Predictions of a cashless and checkless society are becoming widespread.”[3] This was also the case in trade press reports whereas central bankers were more concerned with eliminating checks. Some referred to the “checkless society” or “checkless/cashless society” but we believe that these linguistic variations did not correspond to systematic differences in meaning but were different names for the same vision: the point was to remove the circulating paper from the system, whether that paper be personal checks or banknotes.

Figure 10.1 illustrates the variations in the use of the term “cashless society” by searching Google’s library of digitalized books (Google’s Ngram Viewer). This search suggests that the term appeared in use by 1959, peaked around 1980, and has remained more or less constant ever since. According to this database, the term “checkless” appeared at the same time and peaked just before 1975. Since then it dwindled until it became out of use. In comparison, the contemporary term “electronic payments” has become ever more popular in use. One can only speculate the reasons for this behavior but, perhaps, the negative connotations of

Use of the terms "cashless society", "checkless society" and "electronic payments", 1950-2008

Fig. 10.1 Use of the terms "cashless society", "checkless society" and "electronic payments", 1950-2008

“cashless” has limited its use, personal checks are almost extinct outside of the USA and France, while the term “electronic” has a more modern, forward-looking ring to it. An alternative explanation is that towards the end of the 1960s the rhetoric started to shift to a “less-check and less-cash society” after the initial hype might have been deemed unreasonable.

Although the cashless-checkless society remained mostly a banker’s dream throughout the 1950s and early 1960s, by the mid-1960s its advocates could make a persuasive case for the need to consider electronic replacements to paper checks. Over the decade, the volume of checks processed by the Federal Reserve had risen from 14 billion a year in 1955 to nearly 22 billion (about 60 million each day), and the projected rate of growth for the next decade was even higher.[4] Even with magnetic ink character recognition (MICR) and high-speed check sorters, the Fed was already finding it difficult to keep up with the explosive volume. This increasing volume was also incurring a significant monetary cost. At this time, all paper checks written in the USA had to be physically sorted, routed, and delivered to the issuing branch before the check was settled and final payment made.[5] This process incurred not only significant handling and transportation costs (estimated at $3.5 billion per year), but also “float” costs for the depositing institution until settlement was received.[6] Handling costs are per check, but float costs are per dollar, so any further increases in volume, or delays in clearing, would result in significant cost increases.[7]

  • [1] Leading in some cases to inconsistencies, such as those of the Star Trek universe. See (accessed December 7, 2015).
  • [2] Robert A Heinlein, Beyond This Horizon (Reading, PA: Fantasy Press, 1948), 3—7. See also thediscussion of economics and the role of government on pages 71—72 and 102—3.
  • [3] Diebold Group. “Summary Report of a Survey on the Impact of Electronics on Money andCredit.”
  • [4] Norris Lee, “Tomorrow’s Checkless, Cashless Society: the Problems, the Solutions, the Benefits,”Management Review (September 1967): 58—62. Another contemporary study estimated a similartrend but of different magnitude as it stated that approximately one and a half billion checks werecleared in the USA in 1939, and this volume increased to 6.5 billion in in 1950 and to 13 billionin 1960 (Boris Yavitz, Automation in Commercial Banking, New York, 1967, p. 11). Both theseestimates concur in identifying a spectacular rise in check volume and activity, with no corresponding increase in the value of deposits, thus placing a severe strain on the US banking system.
  • [5] This remained true until the passage of the “Check Clearing For The 21st Century Act — Check21” in 2004.
  • [6] While the check passed through the clearing system, which could take several days, the depositinginstitution had to pay interest on the deposited funds and often make some portion of those fundsavailable to the depositor, even though the depositing bank would not receive payment from thecheck issuer until the clearing process was complete.
  • [7] These costs were also more pronounced in the USA than in other countries due to the sheer number of banks. In 1966, there were 14,000 banks in the nation, so the likelihood that a check neededto go through the national clearing system was higher than in countries with fewer banks per cap-
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