But how have we moved to a cashless society? What are the pros and cons of a cashless society? And are there any dangers involved in moving to a cashless society?<\/p>\r\n
Some of the reasons behind this move to a cashless society are fairly obvious, as people start to see the benefits of going cashless.<\/p>\r\n
Speed and convenience is chief among these reasons. Digital payments offer a faster and easier way to pay for goods and services compared to cash. No fumbling around for bills or coins, no waiting for change, no needless interactions \u2013 just tap and be on your way. Contactless payments and mobile wallets have further enhanced this convenience.<\/p>\r\n
Another fairly obvious reason for cash transactions being on the way out is security. Many people see digital payments as more secure than carrying cash, which can be lost or stolen. If you have cash stolen, or lose it, that\u2019s it \u2013 it\u2019s gone. It\u2019s not like you can trace it. If you lose a debit card or your phone, you can have them blocked to stop any transactions being made, and fraudulent transactions are usually covered by your bank.<\/p>\r\n
\r\nOnline transactions are usually covered too, such as credit card transactions or payments through platforms such as PayPal, who guarantee a refund if you\u2019re duped or defrauded in any way.<\/p>\r\n
The rise of online shopping has also fuelled the use of digital payments, as cash isn't a viable option for these transactions. You can\u2019t exactly feed a $50 bill into your laptop.<\/p>\r\n
Pretty much anything you could get at a brick-and-mortar store, you can now get online: food, clothing, holiday gifts, electrical goods, furniture, and so on. And all of these e-commerce sites give guarantees in terms of the quality of the items you\u2019ll receive and when you\u2019ll receive them.<\/p>\r\n
Yet another reason for the shift towards a cashless economy is the COVID-19 Pandemic. During this period, which we\u2019d all rather forget, there were obvious concerns over hygiene (particularly with those hand-washing instructions ringing in our ears). The somewhat dirty nature of physical money, given how many people touch it, provided strong motivation for more contactless payment interactions.<\/p>\r\n
The government itself has also seen the direction in which things are heading and has taken steps to encourage cashless transactions such as promoting contactless payments and investing in digital infrastructure.<\/p>\r\n
There is the potential \u2013 more than the potential \u2013 for the US to become an entire cashless society, driven by speed, security, and technological advancements; but, before this happens, certain things will need to be taken into account.<\/p>\r\n
At the moment, there appears to be regional disparities, with cash usage tending to be higher in rural areas and among older generations compared to urban areas and younger people.<\/p>\r\n
The rise of the cashless society also raises concerns about financial inclusion for those who lack access to digital technologies or simply prefer using cash. They may not be accustomed to using a smartphone for \u2018Apple Pay\u2019, for example, or be familiar with e-commerce sites. There may even be a lack of trust when it comes to paying for things online.<\/p>\r\n
This trust isn\u2019t completely misplaced, as there are potential vulnerabilities in digital payment systems that need to be addressed. It\u2019s entirely possible for a website to freeze mid-transaction or for payment to be taken twice\u2026 which wouldn\u2019t happen with cash.<\/p>\r\n
Similarly, it\u2019s possible for your bank\u2019s systems to crash, or for them to freeze your account for some reason, leaving you with no means of paying for something.<\/p>\r\n
With our payment details freely accessible online, it\u2019s also possible for online criminals to get ahold of them and use them for fraudulent transactions. You can clone a card or an account. You can\u2019t clone cash.<\/p>\r\n
Then there are things like phishing scams, which we all need to be aware of.<\/p>\r\n
So, a cashless society is certainly something we\u2019re heading toward, but we need to be mindful of its pitfalls.<\/p>\r\n
We\u2019re now going to dig a bit deeper into just what a cashless society is, the evolution toward a cashless society in the US, and the pros and cons of a cashless society.<\/p>\r\n
What is a cashless society?<\/h2>\r\nDefinition and explanation of a cashless society<\/h3>\r\n
The very definition of a cashless society is, somewhat unsurprisingly, an economy where financial transactions are conducted almost entirely through digital means \u2013 where no physical cash (coins or bills) is used to pay for goods and services.<\/p>\r\n
All payments would take place electronically and there would be a heavy reliance on technological infrastructure, such as online payment gateways, contactless devices, mobile banking apps, and widespread internet access.<\/p>\r\n
No single country has yet brought in a completely cashless society, but some, such as Sweden, are moving closer to this concept.<\/p>\r\n
Examples of cashless transactions<\/h3>\r\n
Typical examples of cashless transactions include the use, for payment, of debit cards, credit cards, mobile wallets, online bank transfers (BACS and CHAPS, for example), payment platforms such as Paypal and Stripe, and payments on e-commerce platforms themselves, such as Amazon.<\/p>\r\n
As discussed, the payments are often quicker than using cash and involve less personal interaction, they\u2019re often more secure (cash can get lost or stolen, with no reliable method of recovery), and they can offer financial inclusion to those who can\u2019t access traditional banking services.<\/p>\r\n
The evolution toward a cashless society in the US<\/h2>\r\nOverview of the US's journey toward becoming a cashless society<\/h3>\r\n
The question as to whether we\u2019re becoming a cashless society is not a new one. It\u2019s something that\u2019s been discussed for well over 40 years. It\u2019s a journey that\u2019s been marked by significant technological advancements, shifts in consumer behavior, and new policy initiatives.<\/p>\r\n
Here\u2019s a basic outline of how we got to where we are today, where cash transactions are something of a rarity:<\/p>\r\n
- \r\n\t
- The early days:<\/strong> The first move toward a cashless society was the introduction of debit and credit cards. The very first credit card was introduced by Barclays in 1966 (The Barclaycard), but it wasn\u2019t until the 1980s and 1990s that the use of both debit and credit cards became widespread. This laid the foundation for cashless transactions. Both types of card provided a convenient alternative to cash for everyday purchases, and, in the case of credit cards, led to the adoption of the \u2018buy it now, pay for it later\u2019 mentality.<\/li>\r\n\t
- The rise of the internet and the birth of online shopping:<\/strong> It\u2019s hard to believe we ever lived without it, but the rise of the World Wide Web in the 1990s changed how we interact with each other and the world around us, including changing our shopping habits.
\r\nE-commerce behemoth Amazon.com was born in 1994, heralding the future of online shopping, and the first ever recorded e-commerce purchase was likely via the website NetMarket \u2013 a CD.<\/li>\r\n<\/ul>\r\n![\"\"](\"https:\/\/indeedflex.com\/wp-content\/uploads\/sites\/5\/2024\/07\/Cashless-society-in-the-US-Ecommerce-Indeed-Flex-2-scaled-1-2100x1400.jpg\")
<\/p>\r\n
\r\nThen there followed a boom in e-commerce websites in the late 1990s and early 2000s. The auction giant started in 1995. Lastminute.com, was founded in 1998, allowing people to pay for vacation travel online for the first time without the need to visit a brick and mortar travel agent.<\/p>\r\nThen, steadily, through the early 2000s, many other established retail names started developing their own online stores, and the age of e-commerce was thoroughly underway.<\/p>\r\n
- \r\n\t
- Technological advancements - smartphones and contactless payment:<\/strong> The introduction of contactless payments came about probably earlier than you think, in the mid-2000s. That\u2019s when that little four-bar symbol (the one that looks like a wifi signal) started appearing on debit cards, and consumers delighted in the convenience of tapping their cards to pay for things quickly, with minimal interaction \u2013 just tap and be on your way.
\r\n
\r\nAfter that, smartphones came into play, with the first iPhone launching in 2007, and their rise in popularity led to the development of mobile payment solutions like Apple Pay, Google Pay, and Samsung Pay. These platforms pushed us further toward a cashless society by allowing users to link their bank accounts or credit cards to their mobile devices.<\/li>\r\n<\/ul>\r\n- \r\n\t
- Policy and infrastructure changes:<\/strong> The US government and financial institutions have, over the years, brought in various reforms to support cashless payments. For instance, the Electronic Fund Transfer Act (EFTA), passed by Congress in 1978, protected and standardized early electronic transfers. A couple years later, in 1980, the Monetary Control Act was passed and improved private sector competition with the Federal Reserve around bank-to-bank transfers.
\r\n
\r\nIn 1998, the technological landscape changed with the creation of Paypal, then named Confinity, and their concept of the digital wallet. This allowed fast, almost effortless payments between business and their customers.<\/li>\r\n<\/ul>\r\n- \r\n\t
- Online banking and the new \u2018challenger banks\u2019:<\/strong> Online banking itself isn\u2019t exactly new. Nationwide launched the first truly online banking services in 1997, offering services like account management, bill payments, and even money transfers. The Royal Bank of Scotland soon followed suit.
\r\n
\r\nBut it\u2019s been the rise of the mobile first banking platforms, with no physical branches, that has seen online banking truly take off, with app-based banks such as Varo, BankMobile, and Sofi.<\/li>\r\n<\/ul>\r\n- \r\n\t
- The impact of the COVID-19 pandemic:<\/strong> This global catastrophe significantly accelerated the move toward a cashless society. Concerns about virus transmission through physical cash, whether bills or coins, and the increased reliance on e-commerce during lockdowns (both for necessities, like food shopping, and \u2018retail therapy\u2019, to cheer people up during difficult times) led many consumers and businesses to prefer cashless payment methods.
\r\n
\r\nAnd that\u2019s how we\u2019ve ended up where we are today with cashless payments far outweighing those paid for in traditional hard currency, and it\u2019s hard to see this trend ever being reversed.<\/li>\r\n<\/ul>\r\nSome statistics and trends to highlight this shift<\/h3>\r\n
The above information is compelling and exciting, but what is there to back it up? Well, here are a few interesting stats and trends:<\/p>\r\n
- \r\n\t
- According to the Federal Reserve\u2019s 2023 Findings from the Diary of Consumer Payment Choice<\/a>, cash usage in the US dropped from being used in 31% of all payments in 2016, to only 18% in 2022. This trend is expected to continue.<\/li>\r\n\t
- Digital wallets, online banking, and other electronic payment methods have become increasingly popular, particularly with younger generations. The rise of purely online\/app-based banks has only seen this trend move forward, with Varo, BankMobile, Sofi, Chase, and others all coming to the fore. The convenience and security of these methods, over and above the use of cash, is what\u2019s making them so popular.<\/li>\r\n\t
- Contactless payments have surged, particularly during the COVID-19 pandemic. Currently, more than half (51%) of Americans prefer using contactless methods<\/a>, reflecting a growing preference for quick and convenient transactions where consumers enjoy a more hygienic way of paying, with less need for physical interaction.<\/li>\r\n\t
- The COVID-19 pandemic showed us something;\u00a0 we don\u2019t need to leave our homes to purchase goods. Online shopping accounted for 22.0% of total retail sales in 2023<\/a>, up from 21.2% penetration in 2022. Moreover, this metric has grown at least 0.2% every single year since 2000. This strongly supports the trend toward cashless transactions as more consumers opt for online payment methods\u200b.<\/li>\r\n<\/ul>\r\n
We could type out a million and one stats which prove that the US (and the world) is moving toward a cashless society, but you get the gist \u2013 a cashless economy is, without doubt, what we\u2019re moving toward.<\/p>\r\n
Pros of a cashless society<\/h2>\r\n
The benefits of going cashless<\/h3>\r\n
Obviously, there are both pros and cons of a cashless society, but in this section we\u2019re going to deal specifically with the benefits of going cashless, of which there are many. So, we\u2019ll try and summarize them the best we can:<\/p>\r\n
- \r\n\t
- Convenience:<\/strong> Digital payments are generally faster and more convenient than using cash. Transactions can be completed quickly with a tap, swipe, or scan, so there\u2019s no need to carry cash or fumble for change in your pockets or your wallet.<\/li>\r\n\t
- Security:<\/strong> Digital payments can be more secure than carrying cash. Cash can be lost or stolen, while digital transactions can be protected with PINs, passwords, facial recognition, encryption, and other security measures. Credit card transactions and payments through platforms like Paypal are also protected; for example, you can get a refund if a product simply doesn\u2019t arrive or you\u2019re defrauded in some way.<\/li>\r\n\t
- Reduced levels of street crime:<\/strong> With people withdrawing and handling less cash, street robberies\/muggings, bank robberies, and burglaries all see a reduction. As cash is pretty much untraceable, it\u2019s useful for criminals, whereas digital currency is less easy to exploit; cards and accounts can be frozen or shut down in minutes if their legitimate owner thinks they\u2019ve been compromised in some way.<\/li>\r\n\t
- Transparency and traceability:<\/strong> Digital transactions leave a clear record which can be helpful for tracking spending habits, managing budgets, and identifying fraud. They can also be used to assess your ability for credit from certain lenders, as they clearly show your spending history. With cash, unless you keep physical receipts, it can be hard to know what you spent your money on and when, but digital transactions show the company you\u2019ve paid and when you made your transaction(s). There are also the legal implications. Cash can be withdrawn and used for money laundering purposes, to hide the trace of funds. This isn\u2019t the case with digital or cashless transactions.<\/li>\r\n\t
- Efficiency:<\/strong> For companies, cashless transactions can streamline business processes and record-keeping. Digital records of transactions simplify accounting and financial management for businesses and individuals, making it much easier to keep track of things and accurately file taxes.<\/li>\r\n\t
- Financial inclusion:<\/strong> In theory, a cashless society should offer greater financial inclusion for those who might not have access to traditional banking services. Mobile wallets and other digital payment systems provide an alternative way to access financial services beyond having to physically go to a bank branch or cash machine.<\/li>\r\n\t
- It makes international travel safer:<\/strong> Instead of having to go to a bank before a vacation abroad, take out a stack of bills, then carry them in an anti-theft satchel or purse (which practically advertises to everyone that you\u2019re carrying cash), you can now pre-load a card with money, simply use debit or credit cards, or use platforms like Apple Pay.<\/li>\r\n\t
- Hygiene:<\/strong> During the COVID-19 pandemic, we all became much more conscious of hygiene concerns and minimizing contact with strangers. This led to a rise in contactless payments, as cash potentially carries germs given all the hands it\u2019s passed through.<\/li>\r\n<\/ul>\r\n
So, those are the pros of a cashless society, but it would be remiss of us to produce such a post without looking at the other side of the coin (pun intended) \u2013 the cons, or disadvantages, of a cashless society.<\/p>\r\n
Cons of a cashless society<\/h2>\r\n
The potential dangers and disadvantages of a cashless society<\/h3>\r\n
We promised we\u2019d discuss both the pros and cons of a cashless society \u2014 well this is where we discuss why we\u2019re not quite ready to dispense with cash entirely just yet. While cashless transactions offer speed, convenience, and efficiency, here are some potential drawbacks to think about:<\/p>\r\n
- Security:<\/strong> Digital payments can be more secure than carrying cash. Cash can be lost or stolen, while digital transactions can be protected with PINs, passwords, facial recognition, encryption, and other security measures. Credit card transactions and payments through platforms like Paypal are also protected; for example, you can get a refund if a product simply doesn\u2019t arrive or you\u2019re defrauded in some way.<\/li>\r\n\t
- According to the Federal Reserve\u2019s 2023 Findings from the Diary of Consumer Payment Choice<\/a>, cash usage in the US dropped from being used in 31% of all payments in 2016, to only 18% in 2022. This trend is expected to continue.<\/li>\r\n\t
- The impact of the COVID-19 pandemic:<\/strong> This global catastrophe significantly accelerated the move toward a cashless society. Concerns about virus transmission through physical cash, whether bills or coins, and the increased reliance on e-commerce during lockdowns (both for necessities, like food shopping, and \u2018retail therapy\u2019, to cheer people up during difficult times) led many consumers and businesses to prefer cashless payment methods.
- Online banking and the new \u2018challenger banks\u2019:<\/strong> Online banking itself isn\u2019t exactly new. Nationwide launched the first truly online banking services in 1997, offering services like account management, bill payments, and even money transfers. The Royal Bank of Scotland soon followed suit.
- Policy and infrastructure changes:<\/strong> The US government and financial institutions have, over the years, brought in various reforms to support cashless payments. For instance, the Electronic Fund Transfer Act (EFTA), passed by Congress in 1978, protected and standardized early electronic transfers. A couple years later, in 1980, the Monetary Control Act was passed and improved private sector competition with the Federal Reserve around bank-to-bank transfers.
- The rise of the internet and the birth of online shopping:<\/strong> It\u2019s hard to believe we ever lived without it, but the rise of the World Wide Web in the 1990s changed how we interact with each other and the world around us, including changing our shopping habits.