COVID-19 has had some thought leaders declaring that we should prioritize the move towards Cashless Societies and contactless payments.
First off, what exactly is a “Cashless Society”? A Cashless Society simply means that all financial transactions will take place without physical cash. The closest example of a Cashless Society is Sweden. According to the European Payments Council, cash transactions accounted for just 1% of Sweden’s GDP in 2019, and cash withdrawals have been steadily declining by about 10% a year.
What Are The Advantages of a Cashless Society?
A Cashless Society is meant to be more consumer convenient, and thus drive up transaction volumes in the overall economy.
Some of the other key benefits include:
Lower Crime Rates
Cash is an easy target for criminals, so it make sense that not having physical cash on your person or at your business place would be a major deterrent for robbers.
Less Money Laundering
A cashless society is intended to make money laundering more difficult by the automatic paper trails. Illegal transactions, such as illegal gambling or drug operations, typically use cash so to avoid any paper trail. Money laundering becomes much harder if the source of funds is always clearly identifiable by a digital record. It is harder to hide income and evade taxes when there’s a record of every payment you receive.
Eliminates the Costs Associated With Paper Money
Cash comes at a cost – it costs money to print physical bills and mint coins. Then there’s the cost of storing and depositing the money in a physical location. Going cashless means a reduction in vault space and costs.
What Are The Drawbacks of a Cashless Society?
Going cashless isn’t without downsides. Here’s some of the cons:
Hacking and Fraud
While cases of violent crime and robbery will decrease, you’ll still be at risk of theft due to hackers. Hackers and fraudsters have sophisticated ways of stealing data and wiping out accounts, which can take some time to restore and resolve with your bank.
No More Privacy
Money launderers aren’t the only ones who prefer cash. Some people just prefer not having their every transaction recorded. The elimination of cash means less privacy with transactions.
A Glitch Can Limit Access to Funds
When systems malfunction, merchants can’t accept payments and you’re left without quick access to funds until the systems are restored.
Unless special outreach efforts are made, those in society that aren’t technologically savvy – like the elderly, and the poor and unbanked will likely have an even harder time in a cashless society.
If a smartphone is needed to transact, those without one will be left behind until they can afford it.
Ultimately, addressing the rising need for contactless, cashless payments should also come with the drawbacks taken into consideration.