What Would a Cashless Society Look Like? - Coindoo
cashless society

What Would a Cashless Society Look Like?

Editorial Team Avatar
Nov 4, 2022
16 min reading time

Since the beginning of time, people have been seeking evolution. There was always the feeling that everything could be done better, faster, cheaper, or safer.  

We don’t have to rely on pigeons to deliver our messages anymore. A single company can now provide thousands of people with products every day. 

But who would have guessed that digital innovations would eventually take cash to the brink of extinction?  

There’s no doubt that cash is getting less used with each generation. Mobile phones are now part of everyday life, so people are used to getting things done quickly. Therefore, paying digitally is far more convenient.  

Little by little, we are heading to “the cashless society,” which is both exciting and frightening – depending on what you consider. 

In this article, we will look at the advantages and disadvantages of a cashless society and at the countries that are most likely to bring it to reality. 

But first… 

What is a cashless society?

As the name says, a cashless society is an economic state that doesn’t imply using banknotes or coins anymore. Everything would be traded digitally with credit and debit cards or electronic funds transfers – like mobile phones or computers.  

This surely sounds familiar since most of our transactions are already electronic, especially in times like the Covid pandemic. And we must say – there are a lot of digital payment options out there, like: 

  • PayPal; 
  • Google, Apple, or e-Bay Pay; 
  • Prepaid cards; 
  • Gift cards; 
  • Money Transfers; 
  • Venmo. 

The world has put the wheels in motion for many years now, and people are hyped for the idea of lightness.  

However, everything comes with ups and downs. Before jumping to the hype, we need to fully understand what consequences this system will have and weigh what we can get and what we can lose.  

So, what are the advantages of a cashless society?

Having the possibility to pay without cash brings many benefits to individuals, companies, and institutions.  

To better understand this, let’s see what digital payment offers for each party.  

The advantages of digital payment for individuals 

The advantages of digital payment for individuals

1. Faster transactions

The transaction is made in an instant. And that offers individuals a lot more time.  

No one likes staying in the line for groceries. Yet here we are, waiting for people to search for cash and count it. Simply paying with their card or phone would be more practical. 

And since we’re talking about time, let’s not forget how digital payments facilitated the rise of online stores that don’t require physical journeys or car rides (and money for gas). Not just that, but it made shopping more straightforward, with lots of filters and sorting options. 

2. Better financial management

Having your bank account linked with a digital wallet gives users access to their financial inputs and outputs history, besides their current sold. That offers a better view of their spending habits. 

Some apps even automatically categorize the nature of spending so users can see at a glance where their money goes. 

3. More security against thieves and scams

If somebody steals your wallet, your cash will most likely not be recovered unless the police are nearby. However, a credit or debit card can be blocked with a single call to bank support.  

And if your phone is stolen too, you can always use someone else’s phone to make the call. 

The financial history we mentioned earlier is also an excellent backup for scams: 

  • Online vendors that never delivered your order; 
  • Online courses that never took place; 
  • “Mix-up” orders; 
  • And more. 

You have the evidence that you paid, alongside the exact time of payment. 

4. It comes with fair payment 

One of the most significant disadvantages of paying with cash is that the transaction’s success depends on the cash register. 

Most of the time, we have to lend additional money to the vendor because he doesn’t have an exact change. And if we think about it, every penny left matters – since it adds up.  

And that’s the happy case.  

It’s a lot more frustrating when you can’t even get a particular product or service because you have a large bill – and you have to search for a store that accepts an exchange.  

5. Digital money is clean

With the pandemic going on, we had to say it.  

Cash is continuously moving around, from hand to hand, for years. Unless you are in Japan, the chances that you own old dirty cash are pretty big. Especially if your currency is printed on paper, you can’t even clean it with “money laundering.”   

Now that the world is under the coronavirus threat, it is clear why people have started to prefer digital payments. And this does not apply just to Covid-19. You could get many other diseases by touching old paper money – like Hepatitis A, for example. 

The advantages of digital payment for companies

1. It dashes clients’ flow 

Solutioning the “staying in line” issue doesn’t bring benefits just to individuals but to companies too. Losing clients because they lost too much time to get your products or services is discouraging, especially for small businesses.  

The client’s experience with your company can set you up for solvency or bankruptcy. Therefore, mad clients and mentally exhausted employees are red flags, and they should be solutioned as soon as possible. Plus, a crowded place will also drive away potential clients. 

2. It facilitates access to a broader target market

As we said before, digital payment opened the doors to many online stores, making it possible to provide products and services to clients from other cities or countries. Therefore, you can branch out, have more sales, and the list continues. 

Of course, clients can always pay cash on delivery, but you would have to trust the delivery company to bring you the exact value of the payment. And this is risky since the delivery man is also an individual – and he can be robbed anytime. 

3. Small retail businesses are more secured

If malicious actors break into your small shop but you don’t have any cash in the register, what could they steal? Surely your freshly made bagels will not make a big hole in your funds. But plump cash registers, yes. And you sure don’t want that.  

4. It leads to the client’s fidelity

Gift cards are one of the best instruments to get new clients and keep the current ones. Usually, they can be used for specific stores. Therefore, it’s inevitable for them to use the gift card instead of buying from your competitors. Once people try out your products for the first time, they can return for more if the quality matches their tastes.  

The advantages of digital payment for a public institution 

The idea of a cashless world is not backed up just by the willingness to pay much more easily. 

The reason is actually the economic security around the world. Let’s think about some of the reasons why the economic state is so unbalanced: tax evasion, financial fraud, lack of trading transparency, and so on.  

Digital innovations took a step further and made it possible to identify illegal economic activities. A cashless society would record every transaction made – with the exact time of payment, complete information on the trade partners, and even the nature of the payment.  

Therefore, an entirely cashless society could massively decrease financial criminal movements. 

Then what are the disadvantages of a cashless society?

Even if there are many benefits that fully digital payments can bring, there are still some flaws. So, before we embark on the idea of a cashless society, let’s go through the most significant disadvantages it could bring. 

First of all, if your card gets stolen, it will take time for you to get back your assets. You will need to call the bank support, open a new account, and wait for it to be approved.  

Borrowing money from friends will be almost impossible in a cashless society. Unless they lend you their own card or wallet account (which is way too risky) or buy you a gift card. You could also forget your card at home, and your smartphone could run out of battery. Nobody nearby would lend you, their card.  

How about people that don’t even have smartphones or bank accounts? You would be surprised by the numbers.  

According to Pew Research Centre, just 51% of South Africans own smartphones, while 9% have no phones at all. In Panama, only 46% of people have a bank account. If a cashless society would occur anytime soon, these people would go broke instantly. So, a transition period would be necessary.  

Let’s consider the elders too, who are not comfortable with the technology innovations – especially if they don’t have anyone to teach them.  

And if we are going further, we can think about homeless people who don’t have smartphones or bank accounts and who have struggled for years to find a job. If it’s hard for people with academic education, imagine how it would be for them. 

Are there cashless countries?

Not yet. But they are way closer than you think. 

You may be surprised, but the first country that is most likely to become entirely cashless is the first country in Europe that adopted banknotes – Sweden

Swedish authorities assured the rest of the world that they are planning to go entirely cashless until 2023. And this plan is perfectly achievable, considering that 87% of Swedes are using just digital payments. 

How did they manage that?

The fact that Sweden was always pro to economic evolution clearly helped, but it was still a challenging process, and it required legal regulation.  

So it is that most public transports don’t allow cash payments anymore. This was followed by different restaurants, hotels, and in the end by markets and supermarkets. The ATMs are harder to find too. So, most people had no choice but to learn how to make digital payments.  

However, it didn’t happen all of a sudden. Those regulations were preceded by the launch of Swish, the most utilized banking app in Sweden at the moment. Swish was the outcome of the collaboration of the six largest banks in that country and Sweden’s Central Bank.  

The app is available on any kind of smartphone, and it makes it easier to transfer money to another person instantly, regardless of the bank they are signed to. This new payment method proved to be convenient, especially for group hangs in restaurants.  

In less than ten years, the app became so popular that it is not just used by more than half of the population, but it became an actual verb, synonym with “to transfer.”  

The banks had to be assured that they cover as many flaws as possible with digital payments. For example, when you make a transfer on Swish and want to show your vendor that you paid him, you need to tap the screen to prove that it’s not just a screenshot. 

Children are also included in the digital payment system. If they turned 6, their parents could open a special account for them so that they will have their own “allowance card.” Not to mention the parents could look at how much money is spent and eventually educate them in this matter.  

And take note that most of the Sweden Alpha Generation never saw the cash. Therefore, it is inevitable for the country to become cash-free sometime soon.  

So, are those measures enough to make the country (and then the world) entirely cashless? Well, not really since banknotes back up every fiat currency. So, Sweden took action and started to develop its own CBDC- e-Krona.  

E-Krona is a digital currency issued by Sweden’s Central Bank that is not backed by banknotes but just on trust – the same way banknotes are not backed by gold anymore. It was inspired by Bitcoin and Facebook’s Libra, being developed on blockchain technology. However, this will be centralized, with the central bank distributing the assets.  

The development of e-Krona started in 2017, and it was followed by a set of public interviews with Cecilia Kingsley, the deputy governor of the central bank. It is not an official currency yet, since the pilot project was released in 2019, and the next steps need to be backed by Ricksbank’s economic reviews. But it is expected to be ready for implementation by the end of 2021 or 2023 at the latest.  

Sweden is not the only country that is looking to become cashless. There are four other candidates on the podium: 

  • 78% of payments in Finland were made with debit or credit cards in 2018; 
  • In 2019, China implemented a technology that gets rid of cash AND credit cards – the facial recognition payment; 
  • 95% of people in South Korea own a smartphone, and most of them prefer to use it as a funds transfer instrument;  
  • In Australia, there were recorded less than 20% cash payments in 2019.  

Why are people concerned about the cashless society?

We saw that a cashless society is definitely possible and that it brings a lot of advantages, the disadvantages being easily resolved by a more extended transition period.  

However, many people are not thrilled by this idea. With the rising popularity of digital payments, a series of research was conducted to understand why a fully cashless world’s economy still has a long way to go.  

One of them was conducted by Roy Morgan, a leading Australian market research company. They found out that some of the most significant reasons people need to use cash are payments to family and friends, merchant acceptance, and budgeting. But there was one reason that stood out with 24% of mentions – privacy and security concerns. 

First of all, if hackers get access to your bank account, you don’t have any other source of money. Note that it is not you who was robbed but the bank itself, so even if you have federal law on your side, it will still be challenging to recover the money. 

Second of all, digital bank payments mean no privacy. Banks have access to every input and output of your account. Everything is stored.  

On the one hand, yes, it offers you protection against scams and salary abuse, and it can easily track criminals.  

But on the other hand, if this data falls into the wrong hands, we have no hope. And note that over the years, politics were always unstable. Who knows what new form of government will we have tomorrow? 

Not to mention that banks are sharing our information with many other companies, especially with tech giants. 

These are real concerns that need to be considered before making the final decision.  

Are cryptocurrencies a solution?

Yes and no. 

Crypto gives a solution to all the fiat cashless economy’s flaws on a general level. All the accounts are firmly secured due to the encrypted data, making hacking extremely difficult (and pricey), as we described in our article about blockchain security.  

This encrypted system also means complete data privacy – nobody knows who or where you are. Plus, there’s no one else assigned to your assets, making you the only manager of your account. Bitcoin and altcoins practically offer all the cashless society’s benefits alongside autonomy, security, and anonymity.  

However, there is something we can’t do with crypto – we can’t identify illegal economic activities, which was the main reason countries started to promote a cash-free society.  

For now, cryptocurrencies are a solution for individuals, but it doesn’t have what it needs at an institutional level. That doesn’t mean it can’t be better in the next couple of years. We just need to put our wheels in motion and come up with creative solutions.  

Summing up

  • In a cashless society, every transaction will be made digitally, with credit and debit cards or electronic funds transfers; 
  • The main advantages for individuals are fast payments, better financial management, security against thieves, fair payments, and even a healthier life; 
  • The main advantages for companies are the dashing clients’ flow, access to a broader target market, security for small retail businesses, and clients’ fidelity; 
  • For institutions and governments, a cashless society means a step further in identifying illegal economic activities; 
  • The disadvantages of a cashless society are the difficulty in lending money to friends or the homeless, the possibility for your phone to run out of battery, the fact that elders are not comfortable with technology, and the lack of bank accounts or smartphones in specific countries; 
  • There are no cashless countries yet, but Sweden has all the chances to get there by 2023, with 87% of Swedes using just digital payments; 
  • Although there are a lot of people who are pro with the idea, there are also people concerned about their security and privacy, considering this approach’s flaws; 
  • Cryptocurrencies offer a solution for individual concerns, but not institutional ones, being impossible for now to track illegal activities. 
* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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