What would a cashless society look like?
3 minute read
22 Jun 2022
The concept of a cashless society is nothing new. Commentators have been predicting a firm shift away from cash for years, so it’s always been a case of if, not, when. But what are the repercussions of a world with only cashless transactions?
Digital transactions only: the future of payment?
Our lifestyles go hand in hand with technology and the digital world. We carry phones with the processing capability of computers, we wear smart watches, and we connect speakers and headphones wirelessly. It makes sense that the way we pay has also been transformed – we’ve gone from days of providing a signature when paying by card to simply tapping the side of a wireless pay point.
Although there was already a good uptake in cashless payments among certain demographics, the Covid-19 pandemic saw a surge in cashless payments. Many shops and businesses encouraged card and digital payments to prevent the spread of coronavirus.
This was further fuelled by another change in our spending habits. We couldn’t go to shops in person, so online shopping during the pandemic soared, adding billions of extra dollars to the ecommerce sector.
Digital payments are secure and can offer purchase protections you simply can’t get with cash. Regardless of whether you’re using your phone or a card, there is information or biometric data that only you know – be it a PIN number or fingerprint/face ID/voice recognition. This means that even if the worst was to happen and either of these things were stolen, you have some level of protection.
Also, a lot of card providers allow you to cancel or freeze your card instantly via online and mobile banking. Another added safety feature that cash simply does not have.
Convenience is also a factor in the quick rise in cashless payments. Carrying cash means having to know exactly how much you’ve got on you and carrying exact change, which can be annoying to handle.
Holding large amounts can also make you a pickpocket’s target. Cash is particularly inconvenient if you’re a frequent traveller as cards and digital banks typically give you the live exchange rate. Allowing you to potentially get more bang for your buck than converting cash into other foreign cash.
The Swedish example
Sweden’s bid to become the first fully cashless society is looking more and more likely. The country has deemed it legal to refuse to accept cash as a means of payment. Many businesses are card only and in large cities such as Stockholm, cash is non-existent.
This rapid adoption of cashless payments has even influenced the Swedish language, with the word ‘swisha’ entering daily Swedish conversation. Inspired by a popular cashless payment app that the majority of Swedes use. Cashless payments are so popular that the Swedish government is now looking at introducing the world’s first national digital currency, the ekrona.
Generally speaking, Scandinavian countries could be the first cohort to go cashless. The World Bank has tipped Norway to be the readiest to turn cashless and Finland has said it would be ready to go cashless in 2029.
Interestingly, the UK’s number of cashless payments is also very high, causing some to speculate that the country could also be one of the first to go cashless.
The cost of cash
Whilst cash does have its merits and uses, there are hidden costs behind it. Firstly, handling cash incurs costs for the merchant. They must count their cash at the end of the day manually to balance their books, which can be both time consuming and prone to human error. Cashless transactions are cheaper to run and more efficient. Payments are instantly recorded so settling your accounts at the end of the day is easier than with cash.
Moreover, cash can be stolen without a trace and zero paper trail. If someone steals your card or mobile, they likely don’t know your PIN or the access code to unlock your phone. Even if they do end up spending money on your card or phone, their transactions will instantly appear in your account, giving insight into their fraudulent actions. Additionally, a lot of card providers will contact you if they notice anything remotely suspicious, whereas cash has zero accountability.
It is this lack of traceability that allows money laundering and tax evasion to occur. Hiding cash is very easy to do because it is simple to make it seemingly disappear whilst it is very much in operation but being used for potentially illegal things. Cash facilitates many – if not all – black market activities.
Cash is also easy to counterfeit and forge. According to the US Department of Treasury, there is anywhere between $70-200 million’s worth of fake USD in circulation. A counterfeit card or digital transaction simply wouldn’t work or go through.
The bottom line
The debate as to whether entire countries should become cashless is as lively as ever and will likely not be settled any time soon. However, there are plenty of perks to going cashless, namely the security and convenience it provides. Cash may well be on its way out.
If you would like to take a step towards digitally handling your money, sign up for a Zenus Bank account today.