Cashless economy is often defined as a situation during which the flow of cash within an economy is non-existent and every transaction must be carried through electronic channels like debit and credit cards, and payment systems like Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS).
Although this concept might sound fictional, it’s already underway. Some governments and large financial services companies around the world are on the move to a cash-free world. However, no society has managed to get totally cash-free yet.
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Aside from logistical problems, many social issues must be addressed before a society can completely abandon cash. The advantages and drawbacks mentioned below can help you understand the wide range of consequences that going cashless can have on money, banking, and most importantly on us.
Advantages of a cashless economy
– Since there will be no real money for criminals to rob in a cashless country, crime rates will drop. A study by American researchers concluded that the crime rate in Missouri dropped by 9.8% when the state replaced cash welfare benefits with electronic benefit transfer cards.
-Although there is no real cash, there is still a paper trail. Financial crime should also dry up in a cashless society. Crimes such as money laundering and tax evasion will be minimized because the source of funds is always clearly identifiable in a cashless transaction.
-When traveling overseas, a cashless society makes currency exchange simpler. If you are traveling in a country that accepts cashless transactions, your handset will handle everything for you.
-Another advantage is that consumers may use behavioral analysis to monitor their buying patterns and preferences by gathering comprehensive data from digital transactions.
-Additionally, handling, storing, and depositing cash will no longer be a concern.
Disadvantages of a cashless economy
-All of the companies in which you transact have access to your payment records. Hence, personal details may be exposed to data breaches. Cash allows you to spend and receive money anonymously.
-Outages and downtime caused by technical issues will make it difficult to access your money. Similarly, traders have no way to accept payments when systems crash. People from lower socioeconomic groups, especially those without bank accounts can also face problems.
-Meanwhile, for digital transactions, many banks, companies, and other organizations charge an overhead fee which eliminates the savings that should come from fewer cash transactions.
– It is quick to swipe, press, or click without realizing how much we have spent on electronic payments. This increases the temptation to overspend. On the other hand, when you spend in cash we physically consider the financial effect by taking the cash out of your wallet.
Although there are many benefits to a cashless society, the drawbacks must be overcome first. The effect of a cashless society can already be felt around the world, and this may be what the future holds for us. However, it is only fair to say that a completely cashless society is still a long way off as of today.