A cashless society
The idea of a "cashless society" has been making the rounds for years, but what does that even mean? And are we actually moving toward one?
On the surface, it might seem like a logical next step in our ever-evolving digital banking landscape. After all, as more and more customers demand convenience, digital payment systems have become an integral part of our lives. But when we take a closer look at what it means to be a cashless society, it begs the question: Are we ready to make this leap? And is that a good thing?
What is a cashless society?
A cashless society is a concept that suggests that people would no longer use physical forms of currency, such as coins or bills, in their day-to- day lives. Instead, they would rely on digital payment systems, including credit and debit cards, electronic money transfers, cryptocurrency, and online or mobile payment services.
How close are we to becoming a cashless society?
Over the past decade, there has been an increasing push to move toward a cashless society in many countries.
Sweden, one of the most technologically advanced countries in the world,1 is also considered to be the most cashless society in the world. This doesn't mean there are no bank notes or coins left, but the proportion of Swedes using cash had fallen from about 39% in 2010 to just 9% in 2020.2 So while cash is still accepted as legal tender, it's primarily used by the elderly or limited to small payments.
Cash is falling out of favor in the U.S. as well. According to a 2022 Gallup survey, six in 10 adults said they make "only a few" or no purchases with cash,3 nearly double the percentage from just five years ago.
That shift may have come, at least in part, from the COVID-19 pandemic.
Square, the digital payments company, estimates the number of cashless businesses in the U.S. doubled from February 2020 to the end of February 2021.4 However, cash remains an integral part of the economy, and many people still rely on it for everyday transactions.
The pros and cons of going cashless
Going cashless has its advantages, but it also has some downsides. So let's take a closer look at both sides of the coin.
Six in 10 adults said they make "only a few" or no purchases with cash— nearly double the percentage from just five years ago.
Advantages of a cashless society
Here are some of the benefits of going cashless.
- Convenience. One of the most significant benefits of a cashless society is convenience. With digital payments, customers can make purchases almost instantly, using any device with an internet connection. People would no longer need to worry about having enough change or carrying large amounts of cash.
- Security. Another advantage of a cashless society is security. Today, if someone steals your wallet, you can cancel your credit and debit cards to prevent thieves from accessing your accounts. But any cash in the wallet would be gone. In a cashless society, consumers would be less likely to be targeted for street crimes5 because criminals would know they're not carrying cash.
- Reduced costs. A cashless society could potentially reduce the costs associated with printing and distributing paper currency. This, in turn, could save governments money that can be used for other important investments.
- Stability. Some cryptocurrency enthusiasts predicted digital currencies would replace fiat money. However, the wave of bankruptcies in the crypto industry and sharp declines in the price of most cryptocurrencies6 highlights why crypto isn't necessarily a great replacement for cash. A dollar today is still worth a dollar tomorrow—even if inflation reduces that dollar's purchasing power over time. With cryptocurrencies, the market value is very volatile, and their worth can go up and down quickly.
Disadvantages of a cashless society
In addition to the benefits of a cashless society, there are some distinct downsides. Here are a few:
- Privacy and security. Two of the primary concerns with digital payments are privacy and security. Digital payments leave a trail that can be tracked and monitored. This means that customers have less control over their financial information, potentially leading to data breaches or other security issues.
- Inequality. Not everyone has access to digital payment systems, especially those who are unbanked (don't have a checking or savings account) or underbanked (have a bank account but regularly use alternative financial services, such as check-cashing outlets and prepaid cards).7 This means that people who are already struggling financially may have even fewer options for making purchases.
- Accessibility. A cashless society could make it more challenging to protect yourself in the event of an emergency or natural disaster. Cash can be quickly and easily accessed, if necessary. With digital payments, you're at the mercy of your credit card network or digital payment platform.
Should you start preparing for a cashless future?
A cashless society is not just an idea existing in theory—we're already seeing countries move toward this goal. But there's no need to go fully digital just yet.
In fact, a "less cash" society is the more likely scenario8 for the foreseeable future. In a less-cash society, many individuals and business owners will opt to go cashless, but others will continue to use cash.
In the meantime, if you're interested in integrating more digital payments into your finances, it's a good idea to become familiar with digital payment systems and other forms of electronic payment. This includes researching different payment methods—including credit and debit cards, mobile wallets like Apple Pay and Google Pay, mobile payment apps like Venmo and PayPal, digital banking features, and even cryptocurrency—and the risk of fraud or identity theft when using digital payment systems.
By familiarizing yourself with digital payment methods, you can ensure that you are prepared for any eventual move toward a cashless society.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- Marc Gatzoff, “Most Technologically Advanced Countries in the World 2022," Global Finance, published May 4, 2022, accessed January 12, 2023. Back
- Sweden Institute, “In Sweden, technology is close to making cash a thing of the past. All aboard with a cashless society?" updated November 25, 2022, accessed January 12, 2023. Back
- Jeffrey M. Jones, “Americans Using Cash Less Often; Foresee Cashless Society," Gallup, published August 25, 2022, accessed January 12, 2023. Back
- Square, “Making Change," 2021, accessed January 12, 2023. Back
- William Alex Pridemore, Sean Patrick Roche & Meghan L. Rogers, "Cashlessness and Street Crime: A Cross-National Study of Direct Deposit Payment and Robbery Rates," published 2018, accessed January 14, 2023. Back
- Wayne Duggan, “January Crypto Market Outlook," updated January 2, 2023, accessed January 12, 2023. Back
- Federal Reserve Bank of St. Louis, "Banks and Alternatives," accessed January 14, 2023. Back
- Shelle Santana, “Is the U.S. on Its Way to Becoming a Cashless Society?" Harvard Business Review, published July 23, 2019, accessed January 12, 2023. Back
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