What Is a Cashless Society and How Does It Work? (2024)
A cashless society is one in which cash, in the form of physical banknotes and coins, is not accepted in any financial transaction. Instead, people and businesses transfer money to one another digitally—via credit or debit cards, electronic money transfers, cryptocurrency, or online and mobile payment services, such as PayPal and Apple Pay. Although no existing society is cashless, many economists believe that consumer preferences, competitive pressures on businesses, profit seeking by banks, and government policies designed to facilitate cashless transactions will soon lead to at least a few cashless societies.
There are various measures of cashlessness, yielding different rankings of countries along a “cashless continuum,” but most experts agree that Sweden is now closest to the cashless ideal. Cash is now used in less than 15 percent of transactions in that country, and the value of cash in circulation has declined significantly in the 21st century, now representing about 1 percent of GDP. Swedish retailers and restaurants are now permitted to refuse cash payments merely by posting a sign, and more than half of all Swedish bank branches no longer handle cash. To facilitate the transition to cashlessness, central banks in some countries have introduced government-backed digital currencies to replace or complement banknotes and coins.
Proponents of a cashless society argue that digital transactions are more convenient for both customers and businesses and that cashlessness would cut down on many criminal activities. They also maintain that the trend toward cashlessness is unstoppable, given the increasing digitization of economies and consumers’ growing preference for conducting daily business with mobile devices. The trend has been propelled, however, by banks that have intentionally made cash transactions less convenient for their customers (e.g., by closing branches and removing ATMs) to encourage the use of digital services that are more profitable. The global coronavirus pandemic that began in 2020 also contributed heavily to an increase in touchless and cashless transactions.
But there are potential drawbacks to a cashless society. First, it would largely exclude “unbanked” (mostly poor) persons, who do not use or cannot obtain a bank account. Second, it could invite serious breaches of privacy, because few purchases and sales would be anonymous. Third, even minor technological glitches could block access to funds, and systemic failures due to natural disasters or massive hacking could make all purchases and payments impossible. Fourth, during a severe economic crisis threatening the solvency of major banks, depositors would be unable to rescue their money by withdrawing it in cash. Nor could depositors prevent troubled banks from taking a portion of their deposits in “bail-in” scenarios, under which the institution’s shareholders and creditors, including depositors, are held responsible for its debts (in the U.S., up to $250,000 of each deposit would be protected from such seizures). Finally, ordinary depositors would not be able to protect themselves from negative interest rates, which central banks in some countries (e.g., Japan) have imposed to combat recession or deflation after cuts in positive interest rates to near zero have failed. Negative interest rates permit private banks to charge depositors what amounts to a fee for holding their money, thus encouraging them to spend and invest. Indeed, some economists consider that to be an argument in favor of a cashless society, as it would make painfully deep negative interest rates workable because they could not be avoided through cash withdrawals.
In a cashless society, digital currencies entirely replace all forms of real money, including cash and coins. Paper money is useless in a cashless society since it is not accepted as payment. Additionally, the funds in your bank account are only available digitally.
A cashless society is a concept in which money changes hands through digital means rather than physical banknotes or coins. In practice, this would look like customers going about their day—buying coffee, paying bills, shopping for groceries—without ever touching a bill or coin.
What is a cashless payment? The processing of payment transactions without cash is referred to as a cashless payment. Cashless payments can occur both online and in-stores via a point of sale (POS). Cashless payments have opened up a wide range of opportunities for businesses and customers.
By minimizing the risks associated with cash-based transactions, a cashless society can help mitigate financial losses and protect consumers' assets. Furthermore, proponents of a cashless society emphasize the potential for greater efficiency in financial transactions.
Crucially, this substitution has significant consequences for social inequality: while people with higher incomes typically benefit from cashless payments through easy and frictionless payments and access to short-term credit, people with lower incomes become increasingly dependent on financial services for which they ...
More than half of all bank branches no longer handle cash. Seven out of ten consumers say they can manage without cash, while half of all merchants expect to stop accepting cash by 2025 (Arvidsson, Hedman, and Segendorf 2018).
Physical currency isn't becoming obsolete any time soon, so it's important to weigh up your options before deciding to go fully cashless in 2024. Ensuring you can accept some cashless payments though, is essential to keeping with today's trends and customer expectations.
Without cash, we would be forced to leave a record of everything we buy. While this may not bother some, there are many who worry that governments and/or corporations could use our purchasing histories as a way to track us, monitor us, and even intimidate us.
The downsides of going cashless include less privacy, greater exposure to hacking, technological dependency, magnifying economic inequality, and more. Credit and debit cards, electronic payment apps, mobile payment services, and virtual currencies in use today could pave the way to a fully cashless society.
We may not be a cashless society by 2060, much less by 2030. But the fact is we're closer to becoming a nearly cashless society every day. The transition from a mostly cash to nearly cashless society didn't happen overnight.
For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase. In short, getting rid of cash would impose hardships on society's most vulnerable people and could jeopardize our privacy.
Cashless payments improve overall efficiency and reduce operational costs in a business. These types of payments are faster to process as customer service teams don't need to handle, count, or bank physical cash, and all accounting can be stored and completed digitally.
A concern closely linked to security is privacy. Identity theft and compromised personal information are potential dangers in a cashless economy, but privacy might be compromised in other ways too.
A cashless society offers a range of benefits such as convenience, transparency and stability. However, there are concerns about financial exclusion , privacy and security. It has been suggested that disadvantaged groups are most likely to be disproportionately affected by the transition away from cash.
A cashless society offers a range of benefits such as convenience, transparency and stability. However, there are concerns about financial exclusion , privacy and security. It has been suggested that disadvantaged groups are most likely to be disproportionately affected by the transition away from cash.
Without cash, we would be forced to leave a record of everything we buy. While this may not bother some, there are many who worry that governments and/or corporations could use our purchasing histories as a way to track us, monitor us, and even intimidate us.
Nope. We might use less cash, but our society still has a long way to go before it's totally and completely cashless. And just because some stores didn't want to accept dollar bills for a while (and maybe still don't), that doesn't mean a cashless society is here to stay.
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