- A cashless society is not just about using less cash; it is a state of society in which advanced payment technologies are widely adopted, and financial services are fully digitised.
- Cashless payment systems can significantly reduce transaction times and the need for physical exchange of cash, while increasing the security of transactions, as electronic payments are often equipped with advanced encryption technologies.
- Challenges to a cashless society include the risk of service disruption due to technology dependence, data security issues, and social and economic inequalities, especially for individuals without smartphones or internet access.
A cashless society is an economic system in which traditional cash transactions are replaced by digitised payment instruments, which involves the full electronic transfer of financial transactions, including consumer payments, payroll and bill settlement.
Also read: China: World’s first truly cashless society?
Definition of the cashless society
A cashless society is one in which a country or region has virtually or eliminated the use of traditional cash transactions and instead relies on digitised payment instruments for economic activities.
In such a society, financial transactions, including consumer payments, payroll and bill settlements, are done through electronic channels. A cashless society is not just about using less cash, it is a state of society where advanced payment technologies are widely adopted, and financial services are fully digitised.
Also read: What is open banking? A short guide
Benefits of the cashless society
Cashless payments reduce transaction time and the need for physical exchange of cash, making the payment process faster and more convenient. For example, electronic payments can be made instantly without the need to wait for change or to verify the authenticity of the cash.
There are costs associated with managing cash, including storage, transport, security and bank charges. Cashless systems reduce these expenses, especially for commercial banks and large retailers.
Cash is susceptible to theft or loss, whereas electronic payments are often equipped with advanced encryption technology, providing a higher level of security. Cases of theft or fraud can be more easily resolved by tracking transaction records.
Cashless transactions can be systematically recorded and tracked, which helps governments in areas such as tax collection and anti-money laundering, and reduces illegal and evasive tax practices in economic activities.
Through technologies such as mobile payments, financial services can be extended to people in remote areas, including those hard to reach by traditional banking services.
Challenges of the cashless society
While electronic payments have improved transaction security, they have also increased the risk of data breaches. Unauthorised access to consumers’ financial transaction data can lead to privacy violations and even property damage.
A cashless society is highly dependent on technological infrastructure, and any technological failures or system downtime could lead to payment disruptions, affecting daily life and economic activities.
Despite the convenience of cashless payment systems, individuals who do not have access to smartphones or the Internet, especially those living in poor and remote areas, may feel excluded, exacerbating economic and social inequalities.
A cashless society requires appropriate legal and policy support, including data protection laws, consumer protection laws, as well as appropriate regulatory mechanisms to ensure that the system is fair and transparent.
In many cultures, cash is seen as a more “authentic” or reliable form of payment. For these communities, the shift to a cashless society may be met with cultural and psychological resistance.
