Humankind has evolved tremendously. It cannot be denied that there have been astounding changes in all facets of human life. One of them is the use of money in how we trade with each other.
The exchange of goods through the barter system collapsed when the concept of currency was established. As times changed, the concept of currency moved from coins to paper money, and eventually to cashless forms of monetary transactions. Today, we have reached a situation where a totally cashless society is actually achievable.
A recent report by AT Kearney states that the first truly cashless society will be a reality in five years. In Sweden, as of 2016, cash payments accounted for less than 15% of all retail transactions. Moreover, according to UK Finance, only 34% of payments are made in cash, and debit cards have overtaken cash as the most preferred mode of payment.
While cash won’t disappear from our everyday lives anytime soon, various technological innovations are working towards replacing paper money. This includes wireless payments such as credit and debit cards, digital wallets, internet banking, and the like. Without a doubt, the impact of a cashless society will be monumental.
Let’s take a look at the pros and cons of a cashless society.
What does a cashless society mean?
A cashless society is one where financial transactions are executed digitally, without physical banknotes changing hands. A cashless society makes use of electronic forms of payment such as credit and debit cards, mobile wallets, payment apps, internet banking, cashless point of sales (POS) systems, and other forms of digital payments.
Why do we need a cashless society?
There is no escaping the fact that we are already on our way towards a cashless society. Which brings us to the question ‘Why do we need a cashless society’? Well, the simple answer is there are many benefits to be gained from a cashless society.
Primarily, cashless transactions are faster and much more convenient compared to cash transactions. Furthermore, a cashless society eliminates the need to carry cash and count it out every time a transaction occurs.
However, like all other things in life, there are pros and cons to a cashless society. Let’s take a closer look to analyse if the pros outweigh the cons.
What are the benefits of a cashless society?
The impact of a cashless society is huge and it has quite a few benefits:
- A cashless society fosters lower crime rates as there is no tangible money for criminals to steal.
- Money laundering and tax evasion are reduced because there is always a paper trail.
- A cashless society facilitates easier currency exchange while travelling abroad. There is no need to figure out currency exchange rates as technology assists you in more ways than one.
- By collecting extensive data through digital transactions, consumers can use behavioural insights to manage their spending habits and preferences.
- The risk of handling, storing, and depositing cash is eliminated.
- Cashless transactions hinder the generation of black money and therefore curbs corruption.
What are the setbacks of a cashless society?
Now let’s discuss the disadvantages of a cashless society:
- Your payment information is accessible to all the businesses that you transact with and personal data can be vulnerable to data breaches. If your account is hacked into, all your savings could be drained within minutes.
- Technical problems like outages and downtime can hinder easy access to your money.
- People from the lower economic strata, especially those who are without bank accounts, could face difficulties paying or receiving money. The same holds true for the older generation who may not be comfortable with digital modes of payment.
- People used to cash transactions might find it harder to manage their finances. Handing over cash is a tangible thing but with digital payments, it may be a challenge to keep a check on how much you spend.
- Many banks, businesses, and other institutions charge an overhead fee for digital transactions.
Why digital payment is better than cash?
As cash transactions are more likely to be unsafe and less transparent, one may argue that digital payment is better than cash. Here are few more reasons why digital payment maybe considered better than cash transactions:
- The risk of losing money is lower as credit cards, mobile wallets, and other platforms for digital payment can be blocked if stolen, but lost cash is nearly impossible to recover.
- Digital payments mostly result in cost savings through improved transaction speed and efficiency.
- There is more transparency with digital payments as it facilitates tracking and increased accountability.
- Digital payments can foster better financial inclusion for the general populace by increasing access to a wide range of financial services.
- Digital payments can empower women, especially in developing countries, by giving them more control over family finances and therefore improving their economic opportunities.
Is going cashless legal?
Yes. In almost all cases, cashless transactions are completely legal. Nearly all countries accept cashless transactions as a legitimate means of payment. In fact, many businesses are making the move to go completely cashless.
Conclusion
While there are many pros of a cashless society, it is the cons that will need to be addressed and straightened out. The world can already feel the impact of a cashless society and this may be what the future holds in store for us. However, as of today, it would be safe to state that a fully cashless society still appears to be some way off at the moment.
Also Read: Mobile Money: The Rise of Cashless Economies
