A mere decade ago, a world without coins and notes as
currency was unthinkable. Sure, the digitally forward among us could foresee a
day when cold, hard cash was no longer a necessity. But it seemed, by and
large, to be a pipe dream – because the vast majority of people, globally, held
so much faith in cash.
Despite the fact that even as far back as 2012, the lion’s
share of transactions taking place was carried out via debit and credit card
transitions, cash remained king.
Then along came COVID, and everything changed. Although
digital payments had made significant inroads by 2020, a cashless world was
apparently still decades away. According to a study by the UK charity Age UK in
October of that year, an estimated eight million people in Britain alone would
have struggled with the concept of a cashless world.
Today, with financial inclusion as a leading strategy for
the vast majority of digital banks and fintechs, living without the clinking
sounds of pocket change could very soon be a reality. But what are the pros and
cons?
Are we ready to go cash-free?
Despite the advances in blockchain technology and flurries
of Central Bank Digital Currency news being released, many leading experts in
the field believe we are still some way off from a wholly digital global
economy.
Udo Mueller, CEO of Paysafecard at Paysafe, does not foresee
the event occurring any time soon: “The current reality is that we are not and
may never be ready for a truly cashless society. If cash were to disappear
tomorrow, it would only worsen the hardship faced by the most vulnerable
members of society, and the levels of financial exclusion would be damaging to
the economy.
“When government policies in India moved towards encouraging
a cash-free society, farmers became unable to buy seeds for their crops and
low-wage earners were forced to choose between a day’s work and spending the
day queuing to exchange their cash at the bank.
“Even countries such as Sweden, where there are higher
levels of equality and financial inclusion, had to introduce measures to slow
down the change towards going cashless to ensure vulnerable and rural people
weren’t left behind. This shows that, although the role of cash may change, not
even the pandemic has been able to accelerate us towards a truly cashless
society.”
Expert Market advisor Zara Chechi concurs: “Whilst most
people rely on cashless forms of payments, such as Apple Pay and online
payments, they can still access their cash by popping into a cash machine. In a
cashless society, this won’t be an option anymore and there is a sense that
people will struggle without the security of knowing they can physically access
their money again.”
The cons of a cashless environment
Whether we like it or not, access to cash is becoming
increasingly challenging for consumers. Banks are withdrawing from their
traditional role of supplying or accepting cash in person, particularly in
rural areas. Mueller, however, points out that physical currency is still vital
for accessing certain services and the wider banking system.
“Many are concerned that cashless payment methods are
dependent on technology, which comes with its own set of risks,” he says. “For
example, if there was a disaster causing large-scale power outages or broadband
failure, the economy would be paralysed with no one able to make payments.
“For others, using cash is simply a preference, a choice
that enables consumers control over their finances even when making online
payments. Furthermore, cash also gives a sense of control over personal data,
with many people becoming increasingly concerned over how their data is
collected and shared by corporations – cash payments are a way to limit their
data trail.”
The lack of trust in current technologies is not
unjustified. With cyber-attacks and fraud incidences becoming increasingly
commonplace, security for online financial transactions requires
ever-increasing levels of protection. This now commonly stretches to biometric
methods that track voice intonations, eye markers, fingerprints, and more.
Sahar Salama, CEO, and founder of the full-service mobile
payments platform TPAY MOBILE, notes that increased digitisation of the economy
is creating a divide between the technologically savvy and disenfranchised
groups. She says this requires appropriate government policy so that everyone
can benefit from the new possibilities of the digital world.
“As our society becomes increasingly cashless, some advocacy
groups have raised concerns about the inclusion of vulnerable groups in the
digital economy. While these concerns are warranted and it’s true that not
enough is being done to include everyone in the digital economy yet, the
solution should be a collaborative one that involves governments, regulators,
financial services, and fintech providers all playing an active role, rather
than a rejection of the concept of cashlessness.
“For a cashless society to be truly successful, digital
payments must be accessible and appealing to everyone.”
The challenge of eradicating cash
So, while technology is innovating at warp speed, making
digital payments faster and more efficient than ever before, it is the
reticence of consumers on the ground that makes going completely cashless
currently impractical.
Mueller says: “Consumers still see cash as an important part
of the payments landscape with research showing that 28% of customers wouldn’t
consider shopping in a store that didn’t offer cash payments. Not only would a
cashless society require a complete economic overhaul to ensure significant
groups of the population weren’t left behind, but it would also require a
significant shift in consumer attitudes – even for those with access to other
payment methods.”
He points out that eCash is a solution with the capability
to bridge the gap. eCash provides a barcode-based cash-in/cash-out
infrastructure utilising existing retail locations like supermarkets or kiosks
– locations well-integrated into the daily lives and routines of consumers –
offering a lifeline to cash-reliant consumers in a digital economy.
“Lower- to middle-income populations, who are often, especially
reliant on cash as part of their income (e.g. taxi drivers, hospitality staff,
teenagers receiving pocket money, owners of SMEs such as cafés and bars), need
an easy and cheap way to digitise their cash to make digital financial
transactions and pay for products and services online,” Mueller says.
And it's not just about whether or not a cashless world can
be achieved, it's also about listening to what customers want.
“We believe that, when it comes to payments, the choice is
critical and access to cash – as well as the rights of consumers to continue
paying in cash – should be protected.
“The pandemic certainly opened up the payments landscape,
but just 10% of consumers said they’d plan to be completely cashless within the
next couple of years, which was only a 1% increase on pre-COVID figures, and
50% of consumers plan to make at least 25% of their transactions using cash in
the future.”
He concludes: “Cash still has an important role in society,
especially in terms of financial inclusion. At present, industry figures show
1.5 million adults in the UK are unbanked and 2.2 million rely on cash for
day-to-day spending.”
Top 6 countries about to go cashless
#6 United Kingdom
#5 Finland
#4The Netherlands
#3 Norway
#2 China
#1 Sweden
Leading contactless payment methods
Credit/Debit cards
Mobile payments
Cryptocurrency
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