Although newer generations may feel at home when talking about card payments and cringe at the thought of carrying a coin purse wherever they go, cash is still the modus operandi of today’s society. Throughout the centuries, people have gotten used to paying cash for whatever they needed to buy and for a long time, other payment options were simply inconceivable. However, more and more countries have shifted their focus to electronic payment and are trying to incorporate it as the main payment option in their citizens’ day-to-day lives.
What’s the current status of the shift towards becoming a cashless society?
Breaking up with cash is a difficult thing to do, that’s for certain. India’s experiment proves this just right. In November 2016, India’s prime minister Narendra Modi decided to withdraw a staggering 86% of the country’s paper money in an attempt to eradicate tax evasion.
Of course, chaos then ensued. The shortage of cash rendered lots of people unable to pay their contracts or determined them to postpone events. Additionally, the sudden huge lines left ATMs cashless and entire sectors of the economy suffered tremendously from the shift. During this period, electronic payments naturally soared through the use of card and electronic wallets payments.
However, as soon as most of these invalidated bills made their way back into general circulation, people quickly got back into their hardened habit of using cash. The good news is that although this experiment did not reach its intended goal of putting an end to tax evasion, it did move India an inch closer to becoming a cashless society.
To this end, it’s safe to say that every country in the world is marching at its own pace on the road to cashlessness. Some have made greater strides than others and have thus become more reliant on cash payments than they’d ever been. For example, in South Korea, a staggering 80% of the total amount of registered transactions are made by way of electronic payment. The country ultimately wants to be completely cashless by 2020. European countries such as Denmark, Norway, and Belgium are in the vanguard of this financial development.
Sweden has made the most steps towards becoming a cashless country. Here you’ll find that you can’t pay cash even on trams and buses, as well as shops and cafes. Instead, the barista will greet you with a smile and point to the sign you’d failed to notice - ‘We don’t take cash.’ The shift could not have been possible without mobile payment platforms that allow easy payment, without any need for cards. To this end, Swedish and Danish banks have combined efforts to create ‘Swish’, the direct payment app that makes it all possible in Sweden.
Germany is also one of the countries wanting to reduce or altogether eliminate the need for cash payments. However, a recent survey shows that only 25% German consumers trust electronic payment and would rather stick to cash. Apart from the people’s general reluctance towards ditching cash, it seems that Germany is still ill-equipped for such a major transformation. The numbers speak for themselves: while in Sweden you’ll find there are 91 terminals for cashless payments for every cash machine, in Germany there are only 13 such terminals.
A YouGov Profiles report shows that 7 in 10 people in the US still use cash to pay in stores. What’s more interesting is that a staggering 65% do not feel attaining cashlessness by 2020 is a feasible scenario.
What are the pros and cons then?
As with any other revolutionary economic shifts in today’s modern society, there will be those who support this shift and those who are totally against it.
Objectively speaking, there are reasons both to hop on the cashless bandwagon and to just let it casually pass by. For once, such experiments around the world have proven that a lessening of cash liquidity is also the reason for a drop in illegal employment, trafficking, and other illegal activities. As long as every possible transaction is verified and tracked, there will be considerably less room for any suspicious activities.
Additionally, central banks would be more than happy to rid themselves of coins, for example, which are far more expensive to make than they’re actually worth. Most people would also happily wave goodbye to jingling pockets and heavy coin purses. Surveyed consumers everywhere have one more thing they do agree on and that revolves around the fact that it’s riskier to carry cash around. It's also more time consuming to count it every time you need to pay or receive change, as well as more exhausting to plan ahead so that you carry the exact amount you need for that day’s outings.
Small businesses could also benefit from going cashless - studies have shown that cashless payments could actually come with a 10%-15% increase in the number of hourly registered transactions. This is, of course, more valuable to small businesses which cater predominantly to young people, who are more prone to being open-minded to this transformation and who will appreciate the time they save by simply touching, tapping or swiping to pay for their order.
Cash also has very physical attributes that come with a cost. It needs to be guarded, moved and counted. And all this ironically costs money.
However, there are also important factors weighing in against becoming part of a cashless society. For, as many people cheering for electronic payments, there are just as many who would feel more comfortable if their transactions couldn't be traced. What’s more, let’s not forget that while society may be in such a rush to have a complete makeover, it’s actually leaving a great chunk of the people behind, such as the elderly.
Having said this, there is also a great number of businesses which don’t want to switch to an exclusive electronic payment system. This is out of a desire to keep a loyal clientele, which may not have access to the banking system or just aren't capable of entirely kicking their cash-paying habit.
Ultimately, it’s safe to say there’s a delicate balance between what people want and what people need, and in terms of economic aspects, countries everywhere are striving to reach it. All in all, society is definitely changing and heading towards a less cash-centric economy.