Navigating the Transition to a Cashless Society: Implications for Markets and Economies
A cashless society is one in which coins—paper and coin currency—aren't utilized for monetary transactions. Instead, all transactions are electronic, making use of debit or credit score playing cards or fee platforms such as PayPal, Zelle, Venmo, and Apple Pay. Many countries are headed in this way, but it is hard to expect which ones will absolutely abandon foreign money.
People and companies as an alternative send cash to each other digitally, the use of credit or debit cards, digital cash transfers, cryptocurrencies, or on-line and cell charge systems like PayPal and Apple Pay. Although no contemporary society is cashless, many economists are expecting that patron possibilities, competitive pressures on groups, income in search of by banks, and government legal guidelines aimed to allow cashless transactions will result in at the least some cashless societies over the following few years.
In this investigation, we look at the mechanics of shifting to a cashless society, exploring the numerous advantages and disadvantages of this changing phenomenon. The assessment takes into consideration the realistic aspects, inclusive of decrease dangers and more suitable supervision in virtual transactions, in addition to residual worries like privacy and safety vulnerabilities. In the midst of the ongoing discussion, opposing viewpoints on the lengthy-term price of physical coins and its position in small companies emerge. We look at the numerous reviews and ramifications influencing the monetary panorama as research disagrees at the viability of a completely cashless destiny.
“Cash may still be king despite pick up in digital transactions” is an article written by Gayatri Nayak, and posted on The Economic Times on November 28, 2023. The article explores the move towards a society that relies on transactions of physical cash. It examines the implications of this transition for democracy highlighting both the advantages and disadvantages.
The following report includes an analysis of the article which examines the pros and cons of a cashless society, pointing to its speed and ease of use while addressing issues of privacy and security at the same time. Additionally, the report tackles concerns regarding increased surveillance and potential privacy and security issues. On top of that, the article specifically discusses the long term value of real currency and its relevance to businesses. Besides, it emphasizes the challenges associated with distinguishing between cash and digital transactions considering factors such as tangibility, convenience, and security. Moreover, the report provides strategic recommendations to promote financial literacy programs that encourage investments with interest rates improving infrastructure developing tailored products and encouraging the adoption of digital transactions through incentives and public awareness campaigns.
As stated, the world seems to be moving towards the direction of a cashless society. The article breaks down how a cashless society has a variety of pros and cons. Most of the benefits listed in the article concerning a cash free society are that which relate to the simplistic aspect from less risk of carrying cash, to having an easier time tracking expenses as opposed to using receipts. On the opposing view, the article lists the cons which range from lack of privacy, to risk of being hacked, as well as losing track of spending as it is not as immersive as physical money. However, fundamentally cashless society has benefits of protecting business owners from employee theft, as well as creating a faster service. Speaking of the safety of digital payments, Andre Gholam, CEO of Logica states that smart phones could be a subject of hacking and a great deal of security must be offered for protection and consistency. As stated in the article “Cash may still be king despite pick up in digital transactions”, the author claims that despite the increase in usage of digital cash, paper money still holds more value as opposed to digital. Moreover, many small scaled businesses refuse to use digital payments. The article claims that this might lead to a loss of customers as many rely on the advanced digital payments as this might be an inconvenience. On the other hand, businesses that adopt cashless payments may find an increase in revenue. Despite digital payment’s seeming growth, the article highlights how credit cards have not been able to replace cash, which makes them side with the prediction that a cashless society might not be accomplished. However, in the article “Here’s how a Cashless Society will Impact the World”, the author concludes that the United Kingdom will very likely enter into a cashless society in the next 15 years to come. Also, Sweden only accounts to two percent of cash payments and many suspect that this number will go down to 1 percent. Overall, it is clear to see that many advanced countries are headed into a cashless world, as many are already adopting such means to payments. Yet, it is unclear about the less developed countries around the world. Digital payments are equal sided with their benefits and cons. In my opinion, it is difficult to choose between cash and digital transactions as it depends on situations and personal preferences, which can be made according to various elements. Most importantly, taking into consideration the advantages and disadvantages of each type of transaction.
First, the advantages of cash can be tangibility, convenience, privacy and security. To illustrate, some people prefer physical currency and what it provides as a tangible form of money. This makes it less subject to fraud or theft than digital payments. According to Nayak (2023), people still prefer cash as savings instrument for its “store of value”. Also, cash is more convenient for small daily transactions. Besides, cash transactions are private and aren’t recorded, which can benefit people who want to preserve their financial privacy.
Second, limited tracking and high transaction costs can be considered as disadvantages of cash. For instance, people can’t trace spending or cash transactions to track down incidents like fraud. Furthermore, cash transactions can be more expensive because of ATM fees or transaction fees at stores.
Third, the advantages of digital transactions include easier payments online or via mobile wallets. Bushnell (2023) claims that this option can reduce the potential for violent crime because many people don’t prefer carrying a large amount of money for it comes with inherent security risks. Moreover, digital transactions are a lot faster, and easily trackable. Using paper receipts to track expenses can be challenging in contrast to the digital paying accounts that provide a clear spending record (Bushnell, 2023).
Fourth, the disadvantages of digital transactions include lack of technological infrastructure in some areas, which can make the digital transaction challenging. It can also be disrupted by power or internet outages. Additionally, digital transactions may create privacy concerns. Bushnell (2023) states that the money tracking advantage that some people prefer can cause privacy concerns for others mainly because digital transactions are recorded by banks and other financial institutions. Another disadvantage is the security concern. Since digital transactions are easier to track, they are more prone to the potential of fraud and cybersecurity. “Private financial information can be stolen and connected accounts can be compromised” says Bushnell, 2023.
Overall, even though digital transactions are replacing cash payments, the store of value motive of cash is keeping it strong in the market, with many contradicting views on the preferred type of transaction.
My insights highlight many tactical suggestions for addressing the persistent need for cash despite the growing trend of digital transactions. First, it becomes clear that giving financial literacy programs top priority is essential. It is possible to counter the prevalent lack of knowledge about alternative, potentially more lucrative avenues and effectively reduce reliance on cash by educating the public about a variety of investment options beyond cash holdings. One more important recommendation that stands out is to encourage interest-bearing investments. The inclination towards cash as the primary savings instrument may be lessened by enacting policies that encourage investments in government-backed schemes or higher-yield products. This could divert funds from cash holdings into more lucrative ventures.
Furthermore, it becomes clear that improving the digital payment infrastructure is essential. It would be easier to move away from cash for routine transactions if digital payment systems were made more resilient and secure (Bushnell, 2023). Enhancing the digital infrastructure has the potential to hasten the integration of digital payment methods, thereby diminishing reliance on tangible currency. Creating customized financial products is also important. The introduction of hybrid financial instruments that combine reasonable returns with liquidity could serve the needs of people who depend on cash as a safety measure. These products could successfully address the need for security while promoting diversification because they are made to be easily accessible substitutes for conventional cash savings.
In addition, encouraging the switch to digital transactions seems like a sensible move in the right direction. The adoption of digital payment methods such as cashback offers, loyalty programs, or discounts may have an impact on consumer behavior and encourage a move away from cash payments (Bushnell, 2023). It is imperative to conduct ongoing research and analysis to track changing consumer trends and cash demand patterns. Insights from continuing research could be used to guide the development of focused policies that address the causes of continued cash demand despite an increase in digital transactions. Lastly, it becomes clear that supporting public awareness campaigns is an important tactic. Cash as the main savings vehicle could be reshaped by emphasizing the risks of holding too much cash and highlighting the advantages of diversification. The promotion of alternative financial instruments and the encouragement of a gradual move away from cash could be greatly aided by these campaigns.
To conclude, digital payments have experienced some resistance as a payment method. Several developed nations have started to adopt it. Still, there are a lot of advantages and some limitations to it. It is claimed to be far more effective for customers and businesses. Not to mention that, given the appropriate security measures included in digital platforms, it can always shield companies against employee theft. It's unclear how digital payments will spread or if they will ever completely take over the globe. Some indications state that it will happen, where others affirm that few might favor cash payment options. In Lebanon for example, there is a growing popularity of electronic wallets. However, as the country navigates economic challenges, there are transaction limits, and security considerations associated with electronic wallets. Thus, the complete adoption of that method might be doubtful, raising questions about the ongoing preference between traditional cash transactions and the emerging digital landscape.
Written by Adnan labban
References:Bushnell, M. (2023, November 26). Cashless Society Pros and Cons: Are Digital Payments Really Killing Cash? Business News Daily. https://www.businessnewsdaily.com/15255-cash-free-society.html
Here's How a Cashless Society Will Impact the World. (2023, May 5). FutureBranches. https://futurebranches.wbresearch.com/blog/cashless-society-strategy-impact-the-world
Mokbel, L. (2023, November 17). Electronic Wallets: A Safe Option? This Is Beirut. https://thisisbeirut.com.lb/economy/199222
