From barter to cash to checks to online banking, money is an evolving technology that has been part of human history for thousands of years. While cash is expected to remain a significant payment instrument in the near future, Melissa Lin, Finance Editor at Toptal, believes factors such as “contactless” pay systems, increasing mobile penetration, and high costs of cash (ATM fees for individuals, cash storage for businesses, currency printing for governments, etc.) are prompting society to reconsider its ubiquity.
She states as an example, the case of countries like Sweden and India, as well as the EU region, which are adopting cashless habits or policies. "Driven by “contactless” pay technology, increasing digital penetration, costs of using cash, and policy initiatives, the idea of a cashless society is no longer a figment of the imagination." She says.
Lin believes that in the near term, we are likely to witness a transition to less-cash societies, rather than a switch to cashless societies. Cash still accounts for 85% of total consumer transactions globally. Among established alternatives to cash, cards are the fastest growing payment instrument.
As cashless economy pros she identifies the increased scope for monetary policy, reduced tax evasion, less crime and corruption, savings on costs of cash, and accelerated modernization of citizens. While listing as cons: potential violation of privacy, increased risk of large scale personal and national security breaches, and technology-dependent financial inclusion.
Migrations to a cashless economy include considerations ranging from the purely financial, to those social in nature. Consequently, a country’s specific technological, financial, and social situations will inform its specific benefits, drawbacks, and approach to such a transition. In her opinion, the countries best positioned to go cashless include the US, the Netherlands, Japan, Germany, France, Belgium, Spain, Czech Republic, China, and Brazil.
"We are likely approaching a less-cash future, not a completely cashless future. And, while progress has been made in this transition, it has hardly been universal or uniform. A migration to a cashless economy includes considerations ranging from the purely financial to those social in nature. Consequently, a country’s specific technological, financial, and social situations will inform its specific benefits, drawbacks, and approach to such a transition." She concludes.