Converting to cashless
At one time, having a few coins in your pocket was the norm. Today, it is not so common. The prominence of card, online, and mobile-based payments has led many people to stop carrying cash at all – and businesses are taking note. But what does a cashless socio-economy look like, and what are the advantages and disadvantages of a cash-free world?
In 2015, businesses, consumers, and financial organizations carried out more transactions using cashless than cash. Since then, the trend has accelerated even more. Why? The use of plastic over paper has allowed people to stop using physical currency, as well as the expansion of mobile technology. In fact, mobile payments are slowly eroding the use of cards too. Eventually, anyone with a smartphone will be able to pay for almost anything.
Another potential reason for the move to cashless is the rise of eCommerce. Online purchasing platforms like PayPal have affected the number of physical shopping trips that people need to make and, consequently, the money they carry with them. A cashless world sounds extreme, but a handful of US businesses have already abandoned cash. As mobile capabilities gain global momentum, more are sure to follow.
As millennials are more familiar with alternative payment options, switching to cashless could help businesses to attract younger consumers. Cashless payments also make the sales process quicker and easier by taking out the wait times of traditional bills and checkouts. All financial information can be kept in a digital location, providing a constant and immutable record of financial exchanges (presumably powered by blockchain).
If a business transitions to cashless, it is also less likely to be affected by petty theft. Robbing a cafe, for example, would not be so tempting if the cash reward was potentially non-existent. Another long-term benefit of a cashless is standardization, as fewer payment formats mean less complexity. Similarly, widespread cashless could eliminate the need to exchange currencies, making international finance easier for both individuals and businesses.
At what cost?
Benefits aside, a cashless world might not be as seamless as it sounds. Attracting a younger audience is a good thing, but not if it alienates customers of a different generation. Bigger companies may be able to handle cashless payments, but smaller independent businesses might not. Nonprofits and charities could also suffer from a lack of cash as they rely heavily on spare change – but there are alternative methods. As far as theft goes, no cash doesn’t necessarily mean no crime. Criminals will turn to digital tactics. Given the risk of cybercrime, it might be wise to retain some physical cash reserves.
From a consumer’s point of view, being cashless could lead to a loss of control. Imagine being lost in an unknown place, without your bank card and with no mobile battery left. That note in your pocket could be the difference between getting a taxi home and being stuck in a potentially difficult situation. Looking at it from a different angle, cash is limited. If you don’t have cash, you can’t spend it. Thanks to overdrafts and credit, this isn’t the case with phones and plastic. Banks will need to take this into account and put caps on customer spending as cashless becomes common. And that’s without touching on regulatory considerations.
The gradual abandonment of physical money will be great news for some and problematic for others. Businesses and consumers who are accustomed to the worlds of digital and eCommerce will welcome the move to cashless, but those who are not will have a far harder time adjusting and may be ill-equipped to handle a moneyless world. Arguably, all businesses need to become digital natives, and switching to cashless could quickly become a necessary part of survival. This is why, rather than waiting for cashless to experience mass adoption, businesses should assume it will happen and build systems to support it.
While cashless is certainly a growing phenomenon, traditional cash payments are a core part of the current economy. In order for money to be truly eliminated, it would also be necessary for the entire economy to change… And it won’t be an instant transaction.