Published: Sun 10th Sep 2017
Read Time: 4 minutes
What Is A Cashless Society?
For the first time ever, in 2016, the UK saw cashless payments overtake transactions made with cash. The UK had cashless transactions making up 56% of all payments made by consumers in 2016. But what exactly will a cashless society look like? A cashless society is an economic state in which all of the financial transactions that occur within a country, are conducted in the form of an electric representation of money. In other words, there will be no physical money (notes and coins) in circulation, and all transactions will take place through the plastic of your debit/credit cards and contactless payments through your phones/wearables – which will automatically transfer the money to and from your bank account.
Why Is Cash Becoming Less Popular?
Many say this is because of the convenience of paying with card and due to the evolution of banking, which has led to us using contactless debit and credit cards – as well as the introduction of Apple Pay along with Android/Samsung Pay. Figures show that millennials are leading the way in terms of cashless transactins, with 10% of 25-34-year olds not using cash more than once a month last year. This was compared to 6% of the whole UK population and 2% for 55-64-year olds. More recently, we are seeing a rise in the popularity of cryptocurrency. One famous example would be Bitcoin, the first decentralised digital currency, which consists of digital coins that can be sent through the web.
Advantages of a Cashless Society
The introduction of a cashless society will mean all of the transactions will be accessible via the internet and this will help to stop people from tax evasion, thereby increasing government receipts – which should increase the amount of government spending.
Moreover, it would accelerate the rate of transactions whilst also creating more secure transactions, which would be more difficult to hack. Not only this, but a cashless society can potentially reduce crime rates. If people stop handling cash then crimes such as robberies, drug dealing and extortion will decline.
Disadvantages of a Cashless Society
This will have a negative effect on the low-income earners with a low marginal propensity to consume, who mostly rely on cash. This is because more than half of the consumers who relied largely on cash in 2016 had a total household income of less than £15,000.
A cashless society will also increase consumption and make it harder to save. This is because money will no longer become tangible, this may mean that many households end up spending more than they may intend.
Furthermore, new fees may be raised to counter costs. This is because handling paper cash has virtually no cost, whereas debit cards and credit cards have processing fees. This may cause cost-push inflation, and as a result, the firms may pass on these costs to the consumers.
Experts say the first ‘cashless’ society will be Sweden, with roughly 95% of all retail sales made electronically. However, others argue that Singapore may not be far behind, with two-thirds of their transactions made by credit/debit cards. The government is aiming to go ‘cashless’ by 2025, a target that many experts say will be met.