Have you ever wondered what the pros and cons of a cashless society were?
Learning how to manage money is enough work and the changes in the industry may confuse you.
However, taking time to understand when things change can help you in the long run. Your money management skills will continue to improve when you learn new information.
During the Coronavirus pandemic, there were constant coin shortages because few people were eating at restaurants and shopping in-person.
Ultimately, this led to a coin shortage with an increase in contactless payments.
As a result, many people have started the conversation around if this will be the new normal for the future.
Above all, it's already on the way and several powerful forces are for a cashless society including some governments and financial service companies.
To clarify, no society is 100% cash-free just yet. It's going to take a lot of work to completely give up on cash, especially when it relates to social issues.
Let's explore the advantages and downside of a cashless society.
What is a cashless society?
A cashless society is where you rely totally on electronic payments. There won't be any more cash at banks and every transaction will happen using a card or smartphone.
Some of the most popular cashless payment types are:
- Tap and pay: More people are embracing Apple and Samsung Pay instead of using a physical card.
- Credit and debit cards: This is the most common way people pay for things.
- Payment apps: PayPal, Venmo, Cash App, and Zelle are popular ways people send money to each other immediately.
- QR codes: this is less common in the U.S. but other countries use this method. You scan the QR code from the merchant and the transaction is complete.
- Easier currency exchange process when traveling internationally
- Less crime because there's no cash to steal
- Less financial crimes
- Reduced time associated with the handling of money. Cashless payments are faster.
- Easier to overspend
- Far less privacy
- Potential for security issues
- Economic inequality could be increased
The advantages of a cashless society
1. International payments are easier
The pros and cons of a cashless society impact traveling abroad. A benefit would be not having to carry cash when going through the airport and getting to your final destination.
You will be able to do everything from your mobile device including exchanging currency to enjoy your trip.
2. Lower crime rates
Having cash creates a higher risk for theft. You can have your money stolen or even simply lose it. Above all, it's hard to find and recover money after it's stolen or lost.
Eliminating cash would reduce the amount of stolen and lost cash.
Certainly, there will still be crime when it comes to cash. But, the frequency would be a lot lower.
3. Paper trails
Comparing the pros and cons of a cashless society include fewer illegal transactions due to paper trails. Illegal gambling and drug operations that usually handle cash will be easier to track.
Money laundering becomes more difficult when there's visibility into the transactions. It's harder to conceal income and not pay taxes when there's a record of everything you do with money.
4. Faster transactions
Moving to a cashless society would improve the transaction times. The advancement of technology will make transactions more convenient.
You will have instant access to your money through your card or phone instead of having to count cash and pay the merchant.
The downsides of a cashless society
1. Tendency to spend more
For most people, using cash allows them to spend less money when budgeting. In reality, it's much easier to overspend when all you have to do is swipe a card.
More people could experience financial issues and find themselves in a ton of debt in a cashless society.
Having a detailed budget will help people manage their money effectively.
2. Cashless society sacrifices privacy
Using all electronic payments sacrifices privacy in the process. You will not be able to spend money without somebody knowing. All transactions will be recorded in some fashion no matter where you spend money.
3. Increase of cybercrime
Cybersecurity is a big issue in many industries. You will see an increase in cybercrime in the financial industry with a shift to a cashless society.
Certainly, it will be easier to retrieve your money since it's electronic, but, you may experience short-term issues from the breach.
Hackers are always trying to find a financial gain and this would increase in the electronic world. You're more exposed to hackers online and may not be able to pay your bills if your funds are depleted in a successful hacking attempt.
4. Economic inequality could be increased
This could be a big issue for many counties. Everyone doesn't have a bank account and moving to a cashless society would hinder a lot of people.
The economic wealth gap could increase if there's not a plan to address this potential issue.
Which countries have a cashless society
Several countries are already in the process of removing cash. In fact, some countries have consumers who want a cashless society.
Sweden is the leading adopter of a cashless society. Also, China, South Korea, and the United Kingdom are on track to become cashless soon.
Final words - pros and cons of a cashless society
The shift to a cashless society is closer than most people think thanks to the results of Covid-19. The pros and cons of a cashless society are clear and it takes time to completely shift away from something so normal.
The ultimate decision to shift completely will depend on the maturity of the country and the urgency. With more people on board to move to a cashless society, we may see it sooner rather than later.
How do you feel about a cashless society? Are you for or against it?