Cashless Economy
Introduction
A cashless transaction is one where no token currency is used for financial transactions but rather through digital information. This method of paying through cashless transactions has been possible through barter systems in the past and credit, debit, or mobile payments at present. These days a digital form of currency known as bitcoin is also used for cashless transactions. In this method, the token currency is track recorded and exchanged between transaction parties only through the electronic digital form. This concept of the cashless transactions has been discussed widely throughout the world, as society is rapidly moving towards cashless transactions in near future.
Going cashless is a trend these days as it makes the exchange of currency easier, and the formal authenticity of the exchange remains recorded. On 8th November 2017, the demonetization campaign took place in a hurried motion, and even after four years is a topic of hot debate whether it was fruitful to call upon the sudden change for capturing black money and motivating the Cashless India campaign. A target of 25 billion digital transactions was set by the government. This juncture between cash-based to a cashless economy is a matter of discussion as there are many underlying causes between this transaction, for example, will the transition be a short-term process or a long-term phenomenon? What are the psychological economic and mental or behavioral aspects of these transitions? Are the people of India ready to accept these changes and how fast? All these questions need to be answered with to-the-point replies. In order to look at the transparency of the matter enabling the smooth transition from cash-based to a cashless economy.
Cashless System
In this very era, people are almost moving towards digitizing every aspect of their day-to-day lifestyle. The way people make payments is going to be nothing different. A leading company called ‘Global Data’ has predicted which countries are going to be the first and more likely to be moving towards a cashless society. All the developments point towards the question that what is the need for token currency anymore if we are fully excelling towards a cashless future? Though it can still be of need that physical money might still be of use, especially between banks. Most coins minted are of less value than the materials needed to mint them.
Finland for example is a country that is fast-moving forward to becoming a cashless leader in the world. Finland ranks second to Ireland in terms of use of cards, third in internet banking, and second in smartphone penetrations. Although the country has a small population of 5.5 million, cash is not mandatory both in rural and urban settings. Though it is not taking aggressive measures to go cashless as Sweden is, still the probability of Finland going cashless is more at the moment. Sweden is sitting in the fifth of the Global Data rankings as the country has slightly lower internet banking penetration or use of debit and credit cards than South Korea, Norway, Finland. By 2023, Finland holds the capacity to go totally cashless. China, being with the probability of becoming a superpower has developed to extreme points in the rapid adoption of mobile payments. QR code scanning is the most used way for mobile payments. As China is having a leading position in e-commerce, it has become the reason why China is moving forward in the cashless trend. As China is a densely populated country is the reason why it is not ranking first, as the adoption of the cashless society takes more time in densely populated countries than in small ones. Thus, most of the countries are moving towards a cashless future that is soon to arrive. South Korea is mostly the cashless society champion of Asia. With most of the infrastructures nationwide and roughly 6% of the country’s GDP being e-commerce spending; South Korea has more than 100 transactions on an average per card every year. The United Kingdom has excelled vastly in its technological field, arguably the UK is leading in the global market with mobile payments being very random. It is very common in the UK to make day-to-day transactions, even the most mundane payments by card or mobile.
Thus, the UK was predicted to be holding the ideal capability to become a cashless society by the mid-2020s. Australia is also gearing towards a cashless economy with a ranking of seventh, as open banking facility has been slightly slowed down due to security reasons, but by 2022, the majority of people will be having at least one smartphone while internet banking penetration is predicted to reach at least 70% of Australians.
In the 1990s the trend of using the noncash method began. Digital payments were spread vastly by the 2010s in many countries with intermediaries such as digital wallets, PayPal, Apple pay, and NFC payments by electronic cards or smartphones. Cash had been banned for use in a few kinds of transactions, which would be very easy to pay in cash and a larger amount of cash would be treated with suspicion and case of use in money laundering also terrorism financing. The 2016 United States User Consumer Survey study claimed that 75% of respondents accepted or preferred a credit or debit card as a payment method while only 11% refused to cash. Though a cashless society is wildly discussed there are still some countries with increasing token currency supply. For example, South Africa’s supply of banknotes varies vastly compared to most nations. Since 2007 Sweden has decreased currency supply significantly. Also, China reduced currency supply from 2017 to 2018.
Benefits Of Cashless Economy
The fact that financial transactions will get easier is the biggest reason why a cashless economy is likely to be more preferred. People will no longer find a need to carry loads of cash in their wallet in order to make payments which is safe in a way or more. Neither will people have to carry plastic cards or line up for ATM withdrawals thus making it easy while traveling. It will be helpful especially during emergencies as one will not have to be physically present or have to conduct the payment during office hours. The recent renunciation of service tax on card transactions is one of the spurs by the government, followed by a succession of cuts and freebies. Likewise saving on highway tools, purchase of insurance, railway tickets also adding cashback offers, discounts by wallet like Paytm, reward points can increase and improve the cash flow marginally.
Tracking and recording all our transactions while we spend, will help it fill income tax returns and in the case of a survey, it will be easier to explain the expenditure. The records will help to keep track of the spendings thus, helping in better budgeting. Different types of apps and tools will keep track of the spending patterns and throw a good understanding over the coming years. Away of controlled spending can also result in higher investments. If people continue to use mobile payments and cards and the same amount of cash does not flow back into circulation, it is more likely that the latte factor will be brought down. Also, if the card on the mobile is stolen then one can block the card or mobile wallet, which as a facility will not be seen in the case of cash stealing. Now people can pay the exact amount without worrying about not having changes.
Disadvantages Of Cashless Economy
Since we are not traditionally used to being a cashless society, identity theft is the biggest issue of fear surpassing digital transactions. Even well-educated people are prone to falling into phishing traps. As day by day, the issue of online fraud is increasing the issue of hacking will keep on growing as more and more people get into the digital transaction platform. Also, the recent activity of the government to undo the two-factor authentication will not help too much of an extend. The removal of the two-factor authentication facility will only increase the exposure of thousands at the risk of identity theft. Another matter of issue is the poor redressal mechanism as if people lose money online they will have no link to it. There goes a hectic process and inadequate grievance redressal, these kinds of issues have no legal process to deal with the kind of frauds and can turn into a financial nightmare. Dependence on mobile phones will increase for all transactions on move thus losing our phones can prove to be a huge double difficulty and can increase the problem of identity theft. It could also make us seem helpless in the absence of physical cash or any other physical form of payment options. It can also be trouble if you are traveling abroad or in villages where there can be no proper banking infrastructure or other payment options. We will need to keep our phones constantly charged as if the phone is dead, we can be stranded in between of making payments or any other financial emergencies. People who are especially not tech-savvy can face a problem getting face to face with the new payment method especially older people if they get locked out of their account, might find it troublesome to figure out their way back to the account. Such problems will render more and more difficulties for people who are tech unfriendly. Furthermore, it can cause overspending as spending on cards and mobile wallets are more convenient and faster than spending cash. People might feel more detached from their money if they spend it on digital platforms rather than spending it in cash. This is the reason why overspending is a problem in the digital medium furthermore spending by cash is a habit that will take some time to break.
Conclusion
The dream of becoming cashless is the step to a cashless society. A cashless economy is one where the flow of cash is non-existent, and payments are done on digital platforms instead. The payments will be mostly done by credit or debit cards, mobile wallets, or any other form of revolutionary digital payments in the future. India is the fourth largest user of cash. In simpler words, a cashless economy employs no liquid money. Though it might sound exciting and easy, in reality going totally cashless is a faraway dream. A lot of people are still used to using cash thus making it troublesome for these people to actually switch to a new mode of payment. A lot of factors can hinder the way to a cashless society including internet blockage which might stop the payments in midway and make it impossible for people living in the area of low internet connectivity to join in the trend of digital payment or becoming cashless society. Thus, the presence of a good internet connection everywhere is mandatory.
Top 13 Interesting Facts
A cashless society might increase the efficiency and privacy of a legitimate transaction.
It can also encourage illegitimate transactions and a threat to privacy.
It is impossible to make transactions during a power cut.
We lose our privacy, and our private life might get invaded by government agencies who will have a way to interfere with our data.
Printing of token currency will be saved.
Robbers cannot steal money as carrying a large amount of cash through a card will be possible.
It can stop the spreading of various communicable diseases.
Government can track down on which goods or items we are spending and also how much.
Cash is harder to track, unlike digital payments.
Cards might soon be replaced by bio scans such as fingerprints, DNA tests, or retinal patterns.
Cashless transactions are way cheaper.
Electronic transactions make it mandatory for both parties to have an active digital presence.
People won’t ever find a lost coin or a lost dollar bill.
Debadrita Debroy
Writer
13angle
