What would a cashless economy look like? We already experience this to some degree. A cashless society means financial transactions are no longer conducted using physical currency, such as paper money and coins. Instead, purchases are made through the transfer of digital currency. One prime example of this is using credit cards. It is an efficient and generally safe payment method and allows for an immediate exchange of currency between two parties.
A cashless economy has been a topic of conversation among economists, business owners, and financial analysts during COVID. Businesses have decided to go cashless to avoid unnecessary physical contact with customers and promote a faster form of payment, which limits exposure to the highly contagious virus. While individuals favor this safe and easy form of payment, it may not have the best implications, economically speaking.
According to an article by Forbes, a cashless economy could increase the rate of fraud and identity theft. Merchants do not always know if the person behind the register is the real owner of the credit card they are using to make a purchase. "The existing processes in place for verifying and protecting identity are tied to outdated financial systems and aren't designed to support a cashless, digitized society," according to Forbes writer Glenn Larson.
People don't just shop online or in-store with their credit card; major purchases such as buying a home or a car are often conducted through a cashless system. People open checking accounts and file taxes online, as well. As we move into a more digitally focused world, what does this mean for underrepresented groups? Those who are without banking accounts may not operate well in a cashless economy, where physical currency no longer exists. They will no longer possess the means to identify themselves if they do not have access to the necessary technology to create an online banking account and a credit or debit card. It will be impossible to create an online identity.
A few other potential disadvantages of a cashless society include:
With the bad comes the good. A cashless economy is not an entirely terrible idea. According to The Balance, there are many advantages to living in a cash-free world.
Carrying cash on hand makes you an easy target for thieves. A cashless economy will prevent that from happening and, in turn, lower crime rates in large cities and all over the world. Financial crime will also become less common, as there is a record of every payment you receive. It will be much easier to catch those who are money laundering.
It costs money to print bills and coins, and businesses need to store the money and deposit cash when they have too much in their register. With a cashless economy, this will no longer be a problem and could lead to a more efficient way of storing and handling your currency. If you are traveling, storing your money will no longer be an issue if the country you are going to accepts cashless transactions. You may no longer need to exchange your dollars for their form of currency.
There are numerous pros and cons to a cashless economy. We will not know the full repercussions until we choose to move forward with one option. During the current economic climate and COVID society, it may become a permanent form of currency, and we will have to prepare for the good and bad that comes with it.