The Covid-19 pandemic has taken us another step closer to becoming a cashless society. Indeed, in some countries, such as Sweden, only 2% of all payments now involve cash. And many retailers now refuse to take cash at all.
Certainly, there are clear advantages for getting rid of cash, the big question is, what are the disadvantages?
The benefits of going cashless
For businesses, handling cash is a cost and comes with risk. Without cash, there’s no chance of physical theft, missing notes or coins. With cash, you need to pay someone to handle it and cash up at the end of the day and that comes with the risk of error. If that isn’t inconvenient enough, the cash then needs to be taken to the bank to be paid in. With payments going direct to a business bank account, the risk of errors is significantly reduced and accounting becomes much easier.
A cashless society also makes it easier for state authorities to track money for taxation or legal purposes. Police bodies have greater visibility over money laundering and profits from crime. However, there is a possible downside here. Data protection and privacy laws may need to be updated for state authorities to track and record every transaction.
If you travel a lot, carrying around a lot of cash isn’t the best idea. It’s also much simpler when it comes to converting cash, as your credit card issuer, or bank, does it for you. With KoalaPays account, you can convert money from over 20 currencies and we’re adding more all the time.
A cashless society also means that the inconvenience of carrying around coins would become a thing of the past. As an added benefit, the need to mint notes and coins would be eliminated.
And finally, let’s not forget why fewer people are using cash right now. Removing cash from society makes for a more hygienic society.
Reasons for holding onto cash
What would we miss if cash disappeared? Certainly, when it comes to personal expenditure, people tend to have more control over their spending if they can see and count their cash before paying. If you’re trying to stick to a budget, it can be easier to overspend or make mistakes is you’re using a card. However, as more people adopt mobile banking apps, this can be avoided. At the same time, some people, such as the older generation, may not be as tech-savvy, preferring cash.
For others, cash can have an emotional value. Paying cash into a child’s bank account for a birthday gift really isn’t the same as giving physical cash.
Even today, not everyone has access to a bank account. If you can only pay by card or online, then some people may not be able to pay at all. Fortunately, new fintech companies such as KoalaPays are making it easier for people to make payments without even having access to a bank account.
One big disadvantage of a cashless society is that you would need to have some form of bank account. Theoretically, this would give banks a monopoly on money. Without more competition, financial institutions could charge more punitive fees for holding funds and allowing customers to carry out transactions. It’s envisaged that competition from new fintech companies would prevent this, but central banks too could impose onerous monetary policies for customers such as negative interest rates on savings.
While a cashless society removes the risk of physical theft, fraudsters are finding ever more sophisticated ways to steal money digitally, whether that’s cybercrime, hacking or phishing bank/card details. There’s also the risk of system failures, meaning you can’t access your money when you need to.
A cashless society clearly offers a lot of advantages to businesses and individuals alike. However, there are still drawbacks to overcome. Contactless has certainly done a lot for speeding up queuing and making it more convenient for fast, low cost payments, but consumers are emotionally attached to cash, so we’re not likely to see the end of cash just yet. However, with financial technology getting better all the time and new services appearing from companies such as KoalaPays, the cashless society may not be too far away.