To a lot of people a cashless society might sound like a science fiction, but we are almost there. Several powerful forces are propelling the movement to a cash-free world, large financial companies and the government parastals inclusive.
But are we there yet? No! With regards to logistical challenges, we need to address some social issues before giving up completely on cash.
Benefits Of A Cashless Society
With cash, it’s easy to steal money, whether the amount is large or small. Also, illegal transactions like drug trade, typically take place with cash so that there’s no record of the transaction—and so that the seller can be certain about getting paid.
Financial crime should also dry up. It is harder to hide income and evade taxes when there’s a record of every payment you receive. Money laundering becomes much harder if the source of funds is always available.
No Cash Management
It costs money to print bills and coins. Businesses need to store the money, get more when they run out, and deposit cash when they have too much on hand. Moving money around and protecting large sums of cash could become a thing of the past.
When you visit a foreign country, you may need to buy local currency. But payments are easy if both nations can handle cashless transactions.
Instead of figuring out another currency, your mobile device handles everything for you.
Disadvantages of a Cash-Free World
Depending on your perspective, going cashless might actually be problematic.
Electronic payments mean less privacy. You might trust the organizations that handle your data, and you might have nothing to hide, but your payment information could turn up in ways that are impossible to predict.
Cash allows you to spend money and receive funds anonymously.
Hackers are the bank robbers and muggers of the electronic world. In a cashless society, the consequences are higher if somebody drains your account because you don’t have any alternative ways to spend. Even if you’re protected under federal law, you face significant inconveniences and other consequences after a breach.
Glitches, outages, and innocent mistakes can also cause problems, leaving you without the ability to buy things when you need them. Likewise, merchants have no way to accept payments from customers when systems malfunction. Even a simple dead phone battery could leave you “penniless.”
The poor and unbanked will have an even harder time in a cashless society. They don’t have expensive devices for making payments, and those who operate in the informal economy would have no way to get paid or receive aid.
If we’re forced to choose from just a few payment methods, can we expect financial institutions to give us a fantastic deal?
Payment processors may just cash in on the high volumes, eliminating the savings that should come from less cash handling.
When you spend with cash, you feel the “pain” of every penny and note you spend. But with electronic payments, it’s easy to swipe, tap, or click without noticing how much you spend. Consumers will need to renew their efforts to manage spending.
Negative interest rates
When all money is electronic, governments have the opportunity to promote negative interest rates. That’s typically a move to stimulate national economies, but the result is that money loses purchasing power.
What Does a Zero-Cash World Look Like?
Without cash, payments happen electronically. Instead of using paper and coins to exchange value, you authorize a transfer of funds to another person or business.