Today is the day the Canadian penny begins to disappear from circulation. Good riddance, we say. Pennies made no economic sense, cost more to make than they were worth, and needlessly weighed down trouser pockets and cluttered coin dishes everywhere. One member of Parliament is now saying Canada should go even further and eliminate the nickel. It’s an interesting idea but it overlooks a larger truth: that in a few years from now, cash of any denomination will probably be a thing of the past for a large number of people.
Ottawa’s argument for pulling the penny out of circulation was that, over a period of years, it will save money at the Royal Canadian Mint, and that managing the penny is a burden for banks and businesses. The penny won’t be missed; it is a minor change in our currency, no pun intended. Other countries have switched currencies altogether (think of the euro), or updated antiquated systems (think of the confusing shilling, crown and 240 pence to the pound in England before decimalization), or, worst of all, had to devalue their currencies (they still remember the “old franc” in France). The disappearance of the Canadian penny can hardly be called daring.
But where do we stop? Pat Martin, an NDP MP, already has announced that he will introduce a private member’s bill to eliminate the nickel and, necessarily, the quarter. Under his system, the only change we will carry in our pockets will be dimes, 20-cent and 50-cent pieces, as well as loonies, toonies and a new $5 coin that will need a nickname that rhymes with oonie.
Mr. Martin’s proposal is worth considering, but not without taking into account what is really going on in the world when it comes to cash. In Japan and South Korea, paying for small purchases with a smartphone is commonplace, even at vending machines, and Canadian banks will be bringing in the same “e-wallet” system in the next year or so. As long as there is no cost to it, Canadians will no doubt seize upon a technology that allows them to pay for a coffee by waving their phones over a small sensor or via an app. Soon, cash will be the least convenient way to pay for small purchases.
So when Ottawa next contemplates eliminating denominations from our currency, it should take into account that we are heading toward a world in which cash will be less and less vital. There will always be some need for cash, of course, but no government can responsibly think about the issue without recognizing that the need is about to change dramatically.