Traditional ways of payment, such as cash, are becoming a reality of the future and are slowly turning into the reality of today. This is due to technological innovation, the shift of consumers’ preferences and financial system innovation, where countries such as Sweden and China are at the forefront of this noble cause. However, one can ask the following questions: How does a cashless society look? What are the prospects in a cashless environment for people, businesses and economies?
Cashless Society: The New Way of Making Purchases
Cash use has decreased over the past decade due to credit card use, mobile money, and digital wallets. This process was boosted during the COVID-19 pandemic when physical cash became almost unnecessary. These factors fuel the adoption of digital wallets and other forms of peer-to-peer payment applications to lower cash use.
Advantages of Cashless Environment
Cashless societies offer numerous benefits, including:
- Digital payments make financial management easier because they involve a lot of savings on physical cash, and the transactions take less time than when using physical money, especially when handling many customers.
- Digital payments are more secure than physical notes because they use encryption, authentication technologies, and mechanisms to detect fraud, compared to cash, which is easy to fake.
- Integrated cashless societies offer the opportunity to track spending and fraud activities by creating a paper trail to discourage offences such as money laundering and tax fraud.
- Mobile and similar money payments facilitate access to funds by users who do not qualify for conventional banking facilities, hence improving the financial options available to the disenfranchised section of the population.
Risks of a Cashless Future
While the advantages of a cashless society are appealing, there are also substantial problems and considerations to consider:
- It is caused by the collection, storage and use of huge amounts of digital transaction data and spending habits in a society that can easily be monitored by financial institutions and governments.
- It may lead to the exclusion of other groups of people, such as older adults, low-income earners and the rural areas, as they are left behind in the advancement of technology thus creating a technology divide.
- Digital payments reduce security as the shift to societies without cash exposes them to hacking, data breaches, and system crashes that threaten to bring down economic activities and loss-making.
The place of digital currencies: CBDCs
The Government and central banks around the world are studying the use of CBDCs to enable efficient and secure digital currency for a cashless society. Central banks retain authority over the issuance and rules of assets, among other activities, thereby avoiding privacy and hacking threats linked with completely independent digital payment systems.
The Future Outlook for Cashless Societies
Societies without cash may soon exist, given the current advancement in technology in digital cash. Government and financial institutions will focus on infrastructure, cybersecurity and potentially CBDCs. Such models may be adopted due to convenience and in an attempt to combine the strengths of different models.
Conclusion
The future of a cashless society is thrilling and challenging, with benefits and drawbacks that will transform our relationship with money. While the transition to a cashless economy promises simplicity, security, and openness, it also raises privacy, accessibility, and cybersecurity concerns. As the world approaches a cashless future, an appropriate strategy for solving these difficulties will be essential to making sure that the advantages are available to all.
