- The majority of payments have become electronic, posing the potential for a cashless society.
- Cashless transactions are secure and help individuals keep better track of their money.
- A drawback of a cashless society is the lack of privacy. All transactions are recorded with no room for anonymity.
Though original predictions of a cashless society date back to the late 1970s when credit and charge cards became a popular means of payment, paper currency still remains an active form of currency in many parts of the world, but its days may be numbered. In fact, experts at MasterCard say that electronic payment technologies have evolved more in the last 15 years than in the past 150 years.
Here’s a look at some of the many ways the world is moving toward becoming cashless.
Benefits of a cashless society
According to the Fintech Times, one benefit of a cashless society is that transactions are faster and more secure. There is also the added protection of not having cash on hand. Less potential is available for crimes such as pickpocketing and bank robberies. Individuals are also able to have better control over their money matters. Tracking how much comes in and out is much easier if you take cash out of the equation.
One of the main drawbacks of a cashless society is reduced privacy. Cash allows for anonymous transactions between parties. There is also the concern that individuals who aren’t tech-savvy will find cashless transactions difficult. The potential for theft is still there with cashless transactions through cybercrimes.
Cards are becoming the new payment preference in the U.S.
According to a 2013 Federal Reserve study that examined payment data collected from 2002 to 2012, payments have become increasingly card-based. Though the popularity of credit cards declined slightly from 2006 to 2009, they returned to popularity in the three years that followed. Debit card transactions (which include PIN-based and signature transactions and prepaid cards) accounted for $47 billion in transaction volume in 2012.
Paper checks have gone electronic
Though checks still serve as a popular form of currency in the U.S., the format has changed dramatically in the last decade. The Federal Reserve study revealed that since 2009, almost all checks that entered and cleared the financial-banking system took place in some electronic format. By 2012, only 1 in 6 transactions involved a paper check.
Social Security checks are no more
As of March 2013, U.S. Social Security benefits are issued by electronic means only. Though paper checks are still an option for a small percentage of the oldest recipients, the government has mandated that anyone born after 1921 must collect social security and supplemental-income benefits electronically either by direct deposit or a prepaid debit card.
Reductions in cash-related crimes provide proof of cashless benefits
Though checks are still issued in some of the world’s most active economies (including the U.S.), countries like Sweden are moving toward a cashless society with much success. CBS News recently reported that only 3% of Sweden’s economy involves physical currency (compared to 7% in the U.S.) and that many of its banks no longer handle cash transactions. As a direct result of the cashless shift, Sweden has seen remarkable decreases in financially driven crimes.
The UN supports electronic payments
The Better Than Cash Alliance is a U.N. initiative (funded in part by the Bill & Melinda Gates Foundation, Visa, MasterCard and Citi) designed to help developing countries transition to electronic payments in order to support a thriving economy and facilitate financial inclusion of those in the community who do not have access to formalized financial services.
Mass retailers have adopted virtual currencies
Overstock was the first mass retailer to begin accepting virtual currency. Bitcoin also accepted virtual currency in early 2014, but was soon followed by other familiar names like Expedia, and Dell. Because the virtual currency allows merchants to transact with buyers in developing nations who may not have access to formalized financial systems, retailers who accept the currency are able to serve new audiences who don’t have access to “formalized” financial tools other than cash.
At the end of 2014, Overstock reported that though its $3 million bitcoin-initiated sales were a bit lower than originally projected, $2 million of those bitcoin transactions were attributed to international buyers. Of this small customer segment, the company reported “unusually high” transaction amounts of about $400 and transaction frequency that averaged about five times a week.