One of the hot topics for the financial industry, the tech industry, retailers and consumers has been the development of payments via a mobile phone. Most of the talk is about how adoption will be impacted by the various technologies and which one will win out, or the fact that U.S. consumers are very concerned about the security of their financial information and how mobile transactions are processed. One aspect of the conversation that has not gotten as much attention is the growing perception that cash may not be the best payment option, even though it is the most universally accepted.

Everyone is familiar with the saying “you need to spend money to make money,” but probably don’t know that it costs the U. S. Treasury more to produce pennies and nickels than the face value of the coins. The penny costs 2.4 cents to produce, and the nickel costs 11.2 cents! Canada recently decided to stop producing pennies for this reason. But that’s not the only cost associated with cash. There are costs to storing, moving and protecting it. Some estimates show that governments could save as much as 1% of the annual GDP by going cashless. Certain countries, such as Italy, are already mandating large payments can’t be made with cash due to the fact that they lose €10 billion each year handling physical currency.

Cash has been around so long there’s a psychological barrier to imagining a world without it. However, most people have no problem using credit cards to make purchases in store or online, or using services like PayPal to pay virtually. So what will it take to show the true cost of cash? For consumers, the talk about moving to mobile often centers around convenience and time saving, but there needs to be more education around the true cost of cash, which is generally hidden from consumer view. Perhaps one benefit of mobile wallets, the increased opportunity to receive special offers based on loyalty programs or location-based promotions, can increase the value of virtual vs. physical cash.

As one member of the financial community recently told me “While it might cost more to produce currency notes, it costs much less for merchants to accept cash as compared to debit cards or credit cards or any other form of ePayments.”  With that said, would the merchant community get behind this idea? 

At the end of the day I think we’ll see cash for quite some time and live with the fact that it’s a costly (no pun intended) requirement. But the bigger question might be how quickly will consumers determine the adoption of mobile money based on the benefit to the individual?