Future without cash: the advantages and disadvantages

Steve Hoffmann explains: Cashless Society may seem like something out of science fiction, but we are already on the way. Several powerful forces are behind the move to a cashless world, including governments and large financial service companies. 

But we are not there yet. In addition to logistical challenges, we need to address several social issues before giving up money entirely. The benefits and drawbacks below can give you an idea of ​​the myriad effects that cashless can have on money and banking, as you know it.

Benefits of cashless society

Less crime: With traditional system, it is relatively easy to steal cash, whether the amount is large or small. In addition, illegal transactions (drug trafficking, for example) usually take place in cash, so that there is no record of the transaction.

Money monitoring: It is more difficult to hide income and evade taxes when there is a record of every payment you receive. Money laundering becomes much more difficult if the source of funds is always available.

Zero cash management: it costs money to print bills and coins. Companies need to save money, earn more when they leave and deposit money when they have a lot on hand. Moving cash and protecting large sums of cash can become a thing of the past.

International payments: When you visit a foreign country, you may need to purchase local currency. But payments are easy if both nations can handle cashless transactions. Instead of discovering another currency, your mobile device handles everything for you.

Disadvantages of the world without cash

Depending on your perspective, living without paper cash can really be problematic.

Privacy: electronic payments mean less privacy. You can trust the organizations that handle your data and you may have nothing to hide, but your payment information may appear in ways that are impossible to predict. Money allows you to spend money and receive funds anonymously.

Piracy: Hackers are bank robbers and burglars in the electronic world. In a cashless society, the consequences are greater if someone empties your account because you have no alternative way to spend. Even if you are protected by the law, you face significant inconvenience and other consequences after a breach.

Technology problems: Failures, interruptions and innocent mistakes can also cause problems, leaving you without the ability to buy things when you need them. Likewise, merchants cannot accept payments from customers when systems malfunction. Even something as simple as a cell phone battery can leave you penniless.

Inequality: The poor and bankless will have an even harder time in a cashless society. They do not have expensive devices for making payments, and those operating in the informal economy would have no way of receiving or receiving aid. 

Fees, Fees, Fees: If we are forced to choose only a few payment methods, can we expect financial institutions to do us a fantastic deal? Payment processors can only profit from high volumes, eliminating the savings that must come from less money handling.

Excessive spending: when you spend money, you feel the “pain” of every penny spent. But with electronic payments, it's easy to swipe, touch or click without realizing how much you spend. Consumers will need to renew their efforts to manage spending.

Negative interest rates : when all money is electronic, if the government charges banks a negative interest rate, they can pass it on to customers (in the form of fees), who will no longer have money to protect themselves. Dropping the interest rate is typically a move to stimulate an economy, but the result is that money loses purchasing power.

About Steve Hoffman

Steve Hoffman is a founder of next generation payment transfer solution Newt for individuals and local closed loop systems, that focuses on using new methods for money transfers.