A Cashless Future is Getting Closer

Money is an evolving technology; from barter to cash to checkbooks and now to online banking, then change never stops. Although cash remains a key part of some businesses, factors such as the high cost of cash maintenance (including currency printing, ATM fees, cash storage, etc.), complex operations and others are prompting the government, businesses, and individual to embrace a cashless society. 

All evidence indicates that we are approaching a cashless future, and this article discusses what a cashless future looks like, its benefits and drawbacks. Read on to discover all the juicy details.  

What is a Cashless Transaction?

A cashless transaction is one where cash, including coins and paper currency, is not used for monetary transactions. Rather, transactions are online or electronic and are conducted using credit or credit cards or payment services provider such as Apple Pay, Amazon Pay, PayPal, Visa, etc.

Global Money Trends

Although the world is embracing digital payment methods, cash is still in high demand. According to a survey by MasterCard, 85% of monetary transactions globally involve using cash. Across the universe, cash circulation continues to be stable, with a noticeable increase in the ratio of cash circulation to GDP. This is because cash provides anonymity and is universally accepted. 

A 2016 report posits that cash will continue to remain relevant in the years to come. However, cashless transactions are more efficient and are expected to drive the move to electronic payment.

Let’s consider what a cashless society looks like:

• Credit and Debit Cards

While credit and debit cards are among the most popular alternatives to cash now. However, experts say these may not be enough to support a 100% cashless world. Rather, mobile devices could become the primary source for transactions if cashless payment is to be fully adopted.

• Automated Payment Applications 

Electronic payment apps, including PayPal, Zelle, and Venmo, are ideal for P2P (person-to-person) payments. Bill-splitting apps such as Splitwise and Settle Up can help friends split bills fairly. Also, fintech companies, including Fiserv, Stripe, and Adyen, support B2C (Business-2-Consumer) and B2B (Business-2-business) for reliable and fast transactions.

• Mobile Payment Providers

Mobile payment services work alongside wallets such as Amazon Pay and Apple Pay to provide safe, secure, and cashless payments. Countries with fewer cash transactions rely heavily on mobile devices as payment tools.

• Digital Currencies

Virtual currencies such as cryptocurrency are becoming an acceptable form of payment. Already, many businesses accept cryptocurrency. It introduces innovation and competition that helps to lower costs. However, there are lots of uncertainties and risks that make the payment system impractical for use.

Benefits of a Cashless Society

There are many benefits to a cashless society, including the following:

• Reduced Crime Rate

Going around with cash makes you an easy target for criminals, and once the money is stolen, it’s difficult to prove the cash is yours. But with cashless payments, you don’t have to walk around with wads of cash. A study by some researchers discovered that the crime rate in Missouri was reduced by 9.8% when the government implemented Electronic Benefit Transfer cards.

• Reduced Cost of Maintenance

It costs a lot of money to mint coins and print paper money. Besides, businesses need to get cash when they run out, store this cash, deposit the cash, and in some cases, transport the cash. Banks spend a lot on security to physically protect their branches against robberies. With a cashless society, all of these measures and countermeasures are not needed, thus saving businesses a lot of money.

• Convenient International Payment System

Travelers often need to change their cash to local currencies. However, if you travel to a country that accepts cashless transactions, you don’t have to bother changing your money or having cash to start with. Rather, with your mobile device, you can conveniently pay for goods and services anywhere in the world.

• Traceable Paper Trails

Financial crimes are more prevalent where cash is the primary means of transaction. Illegal businesses such as drug trafficking, gambling, and pimping typically use cash, which make such transactions untraceable. 

Cashless transactions leave an identifiable paper trail, making it difficult for money laundering and illegal businesses to thrive. Also, it is harder to evade tasks and hide income with cashless transactions as there are usually records of every payment. 

Drawbacks of a Cashless Society

Going cashless also has its drawbacks, including:

• Tendency to Overspend

Spending cash makes you realize the impact of taking out physical money to spend thus cautioning you against excessive spending. But electronic payments make it easy to click, tap or swipe without noticing your income depletion. Thus, consumers have to readjust their spending patterns consciously.

• Hacking Risks

Just as armed robbers and criminals are waiting to rob you on the streets, cybercriminals and hackers are waiting to rob you online. While most online payment systems have watertight security, it is not 100% failproof. You could be targeted and drained of your money, leaving you stranded. And even if you are protected by federal laws, recovering your money may be long and tedious.

• Technological Glitches

Service downtimes, outages, mistakes, and glitches can create problems for merchants and customers, leaving both parties without a means to pay for goods and services or accept payment.

• Increased Economic Inequality

If mobile devices become the standard for transactions, those unable to purchase smartphones will not be able to pay for goods and services.

• Service Fees

If the world is made to choose from an online payment platform, it will create a monopoly system, causing the payment platforms to charge a fee for their services. Imposing these fees will cancel out the savings that should have come from handling less cash.

Conclusion

The world is changing, and there is no stopping it. But as the world moves towards a cashless system, stakeholders must subject the system to checks and balances to guide against threats, disenfranchisement, and exclusion. 

Only a cashless system built with dependable technology and by trustworthy players will ensure everyone enjoys a higher standard of living where transactions are easier, faster, and more convenient.