Contactless Payments and the Cashless Society: Are We Ready?

Cashless societies do not use banknotes and coins in transactions. However, there is a digital payment ecosystem in place. So, people can make electronic money transfers everywhere.

If you were wondering what is cashless society, you search ends here. In simple terms, you will use electronic transfer media, cryptocurrency, PayPal, or Apple Pay, mainly in a cashless society. 

 Vlad Totia from GlobalData observes that we are already in a cashless world. In 2019, $3.5 trillion was collected as revenue from e-com sales. At the same time, smartphone use is popular in less developed countries too. The users can easily make online payments. Moreover, banks are going fully digital by closing their physical stores. 

Evidently, we are heading towards a cashless world. 

In this article, I have discussed all the essential features of cashless societies. Case studies of some advanced cashless societies are also evaluated.

What is a Cashless Society?

Many of us mostly avoid the exchange of cash. However, other factors make a cashless society. 

Concept of Money Changing Hands Digitally

Cashless transactions started with credit and debit card payments. However, wallet payments, biometric scanning, and other new modes have been added too. 

I feel that people do not need to carry cash for most PoS payments. By 2027, global digital transactions would exceed US $14 trillion. Evidently, people do not deal in cash anymore. 

If you still haven’t understood what a cashless society is, I will help with an example. You may not be into big business transactions. But you still find a PoS machine to pay through a card or mobile wallet in a remote store. That looks like a cashless world, for sure!

Adoption of Technologies Like Credit Cards, Online Transfers, and Mobile Wallets

Since the 2007–2008 financial crisis, many countries tried to increase small and repetitive transactions. As a result, the mobility of money in society increased. The greater the circulation rate of money, the richer the individuals in society. 

Cashless payment options have made the payment process easier and faster. Also, you can pay 1 to 2 dollars like you pay $40 to 50k. Naturally, we are encouraged to make more unit transactions. This increases the mobility of money. 

With this goal, most countries have leveraged the use of cards, wallets, and other cashless payment modes. In Finland, 63% of people use a credit card for daily transactions. However, wallet apps are becoming the US’s biggest proliferator of cashless transactions. 

Apps like Venmo, Apple Pay, and PayPal have boosted online transfers significantly. That’s why we don’t use cash to pay each other. I will use Apple Pay or Google Pay to share money with my friends. Who do I need cash for? 

Advantages and Challenges of Cashless Societies

 Cashless societies benefit all stakeholders in many ways. You can pay in a hassle-free way. Never carry your cards. Forget about cash. Just have your phone with you. But banks also gain from cashless societies. They charge a minimal transaction fee at merchant PoS. 

Cashless transactions mean banks will need fewer people to handle petty cash. Certainly, cashless societies will create a truly circular economy. 

Now that you know what is a cashless society, you will certainly wish to live in a cashless world. But Jeff Jones from Gallup says:

“People aren’t entirely comfortable getting rid of cash as a payment option.”

Many of us need to learn how to use mobile wallets. At the same time, you will find many shops only accepting online payments. In fact, 62% of Americans are against creating cashless societies. 

There are people without bank accounts. They can only transact in cash. Systemic failures in banks can also happen. Consequently, I will lose access to my money. 

To overcome this issue, Joe Biden landed the

“Executive Order on Ensuring Responsible Development of Digital Assets.”

The CBA will now focus on common complaints against cashless transactions. By the order, the central bank will also discuss the prospects of a Central Bank Digital Currency. 

The CBDC will make people understand that they should give equal importance to cashless transactions. 

Types of Digital Currencies

In a cashless economy, you have multiple payment options. Almost all of us have cards. We can also pay with our phones. 

Credit and Debit Cards

Cards came first to liberate people from cash transactions. Now, it is the primary mode of payment in countries like Finland, Sweden, the USA, Hong Kong, China, and others. Cards accounted for 82% of all costs in the USA in 2018. 

An extensive network of businesses dealing in cashless payments has made it easier for us. We can now use cards to pay anywhere in the country. 

Electronic Money Transfers

Electronic money transfer occurs through many channels. While apps like Apple Pay, PayPal, and others are famous, fingerprint payments are emerging. To learn more about this potential, read the article on Biometric Authentication in Contactless Payments. 

Cryptocurrency

I have not emphasized cryptocurrency in this article, as it does not work like regular money. People can’t use it to buy small-scale goods or services. However, its market cap in 2022 was $1.8 trillion. But it can be a potential face of alternatives to cash (as in currency). 

Online and Mobile Payment Services

Mobile wallets are the most popular form of digital payments market in the USA. In 2021, 40% smartphone users made payment from mobile. PayPal has popularized mobile payment in the USA. Cashless societies like China and the UK have made the most significant advancements in online and mobile payments. 

Progress of Cashless Initiatives in Key Countries

Some countries favor digital wallets. Some others rely more on credit and debit cards. 

United States

The cashless transactions in the USA are primarily contactless too. Read articles on the recent spread of easy-to-use contactless payment technology in the US. Most scaling and start-up businesses are accepting cashless payments. So, people seldom carry cash. As per the FDIC National survey, about 4.5% of US citizens are still unbanked. 

The challenge is to include them in the cashless ecosystem. 

United Kingdom

The UK uses more wallets than cards. Small merchants have started accepting online payments profusely since 2015. GlobalData found that transactions worth GBP 8513 happened in cash only in 2022. 

Japan

Japan has focused on increasing online payments in sectors like international tourism. Thus, international tourists do not have to carry cash. This also means freedom from converting currency. To promote the use of cashless payment, Japan gives small merchants incentives such as cashback. 

Germany

 Compared to other countries, Germany is less into a cashless economy. In 2021, Germans did 58% of transactions in cash. However, card and wallet transactions are increasing day by day. 

Governmental Policies Facilitating Cashless Transactions

Most governments are giving incentives to merchants to use cashless payment modes profusely. However, President Biden’s Executive Order on Ensuring Responsible Development of Digital Assets focuses on many dynamic areas. 

It includes educating everyday Americans on the importance of a cashless economy through content marketing. It also includes taking in online and card payments complaints every day. The goal is to make the process safe and sustainable. Government decisions to introduce CBDCs can help the cause, too. 

 The CBDCs are much like cryptocurrencies. It has a different name and can be exchanged digitally only. However, the central banks will fix or regulate it only. Presently, the Bahamas, Nigeria, and Jamaica have a prevalent CBDC. The UK pulled off their “Britcoin” in 2019. AMerica is still learning if CBDCs can be a safe alternative in domestic payments. 

Implications for Customers and Businesses in a Cashless World

Are cashless payments totally safe? We must know what challenges may come our way of being genuinely cashless. 

Exclusion of the Unbanked Population

Brit-coin failed as over 1 million unbanked citizens couldn’t use it. Likewise, many people in other countries prefer cash transactions. They consider that cash transactions can help in managing finances. Most of them have low income. 

Privacy Concerns

In the USA, The Flagstar Bank data breach affected 1.5 million customers. So, one of the biggest challenges in cashless societies is saving people’s money from hackers. During the digital transfer, customer data might leak. 

Potential Technological Glitches and Systemic Failures

 Hackers are using deep fakes to create ‘flash crash’. For instance, many fake news stories about banking crises have been posted on Twitter. Hackers created duped accounts of bank chiefs to do so. Solvency risk is a significant threat, too. In cashless societies, you cannot withdraw and use your money when solvency is declared. 

Business Benefits of Cashless Societies

The American, British, and other governments are incentivizing merchants to accept payments. The customers enjoy its benefits already. 

Convenience for Customers and Businesses

If customers can pay faster and more conveniently, they will buy more. It will benefit businesses. Customers can now use cashless payments almost everywhere. So, you will prefer not to carry cash. You can only use your mobile. 

Many banks are giving cashback to merchants to set up cashless payment modes. Moreover, shop owners will be relieved from handling petty cash. They can also manage their revenue returns easily. 

Reduction in Transaction Costs

Online transfer is free for customers. In the same way, mobile and wallet payments have reduced transaction costs in many ways. The processing charges for using cashless services are reducing every day.

Decrease in Physical Crime

 In 2022, the USA recorded robberies in 7162 stores, 6781 gas stations, and many others. This rate will go down if cashless societies are formed. 

Nobody can simply come in and run away with my money if I go cashless. Even if I am forced to make a transfer, it will leave a clear digital footprint. The robber can be tracked using the same. 

Wrapping Up……

Other than faster and easier payments, cashless societies help to keep your money secure too. Many governments are trying to make digital banking easier. In conclusion, the number of unit payments will increase in a cashless world. 

There are many unbanked customers in several countries. They can use cash only. Many merchants cannot accept cashless payments properly. People are however most concerned about their accounts being hacked, while making online or card payments.  But there is a huge growth future growth opportunity for cashless societies. People like to pay hassle free. People of all countries are highly adopting it. The US government is increasing the awareness of people about it too. In future, truly cashless societies might exist worldwide.

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