The amount of online and digital transactions is increasing exponentially and it’s obvious where this rapid rate of financial innovation is taking us — it looks like soon enough that we’ll be living in a country with a cashless economy.
As online payment technology gets better, we should see less people paying for things in cash. We’re already pretty close, did you know that cash transactions only accounted for 40% of payments in 2012?
It may seem to be hard to imagine what a cashless society looks like but we are pretty much living in it already. However, there are a few things that would drastically change were we to go totally cashless.
A cashless society would depend on power and electricity even more than we do now due to the fact that we need power to run our advanced payment systems!
A power cut or technological fault would cause total havoc for everyone affected as people wouldn’t be able to buy supplies or respond to an emergency. Imagine a blackout without a candle? Better start eating those carrots!
Fortunately, there’s a slew of innovative people devoted to solving the world’s power problems. For example. Elon Musk has invented and manufactured a solar battery which charges during the day and powers the home at night. Inventions like this will make living without cash easier.
Lack of Privacy
If every transaction were to be made electronically, then everything would have the potential to be recorded. This is fairly worrying for people who are already concerned about their privacy and which organisations can observe their online activity.
However, have no fear, because Blockchain is here, providing a completely secure, yet transparent way of exchanging money (or pretty much anything) online. This can help to reduce fraud as well as money laundering. How Blockchain actually works is actually pretty complicated, so if you feel like doing some extra-curricular reading, check out Wired’s wonderful guide.
It Would Impact the Unbanked Community
This is a major sticking point for some as there are still a huge amount of people in the UK who don’t have access to basic financial services such as bank accounts.
This happens for a variety of reasons but the most common one is that these people usually have bad credit. This makes it difficult for them to open bank accounts so they choose to operate cash only.
A few people believe that the credit system is invariably flawed and there’s a small up-spring of companies who are looking to make it easier for people to bypass credit checks in order to gain access to basic financial products such as loans and credit cards.
People Adapt to Change
Never fear, it’s not all doom and gloom, there’s plenty of real-world examples where countries have successfully moved away from cash. Sweden is one of them.
This country has made huge strides in their efforts to evolve and adapt towards a cashless society due to the fact that so many businesses in Stockholm have been robbed over the past few years.
However, they haven’t just left those people who would normally struggle without cash by the wayside. Homeless people are given credit card readers which they can use to collect money.
The New York Times interviewed a homeless person who sells a charitable magazine on the streets and he had this to say, “Now people can’t get away! When they say, ‘I don’t have change’, I tell them that they can pay by card or even SMS.”
Reportedly, sales of the magazine have gone up by 59% since the move to bring in card readers.
Eliminate the Black Market
However, a cashless economy would bring in a huge amount of benefits. One positive would be that the black market would eventually crumble.
This is simply because the majority of transactions that are made on the black market are paid for by cash.
This makes purchases harder to track and enables people to sell and buy items that are either illegal or tax-free.
If you eliminated cash from the equation then you would dramatically reduce the size of the black market which would result in (hopefully) less crime.
Increase the Tax Base
Cash based payments can be used to avoid paying tax such as VAT and income tax and is fairly common. So much so that France has recently banned cash payments for anything over €1,000 in an attempt to prevent people receiving their salary as cash.
An economy that primarily used electronic payments would massively increase its tax revenue which could then be used on paying for public services and improving everyday life.
So, What Happens Next?
A cashless society may seem fairly futuristic but it’s happening now. The way that we use money and financial services has changed so much in the past few years.
Things such as contactless payments, debit cards and innovative new apps that were unthinkable a few years ago are already a part of everyday life.
They’ve completely transformed the way that we see finance and we should expect to see many more over the next few years!