Sunday, 23 January 2022

Plastic Money and Cashless Society

 PLASTIC MONEY & CASHLESS SOCIETY

We all are living in a cashless society now a days. Several powerful forces are behind the idea of a cash-free world, including some governments and large financial service firms. However, no nation has completely converted itself into cash-free society yet. In addition to some challenges, several issues need to be focused upon before the society can give up on cash completely. 

WHAT DOES A CASHLESS SOCIETY LOOK LIKE?

Without cash, all the payments happen digitally. Instead of using paper and coins to exchange value, you control a transfer of funds from your bank account to another person or business. The logistics are still developing. There are some hints as to how a cashless society might emerge. 

Credit and Debit cards: They are among the most famous cash alternatives that are in use today. Cards alone might not be enough to support a totally 100% cashless society. Mobile phones or laptops are becoming a primary tool for payments.

Electronic Payment Apps: Apps like PayPal, Paytm, Google Pay, etc are very helpful for person-to-person payments (P2P payments) Also bill splitting apps are coming that allow friends to split their bills easily and in fair manner. Fintech companies like Stripe, Adyen, and Fiserv support business to consumer (B2C) or they now merge into account to account (A2A) online payments in a efficient and speedy manner. 

Mobile Payment or Mobile Wallets: Like Apple Pay provides secure, cash free transactions. Many nations that use cash sparingly have already seen mobile devices become common tools for payments.

Cryptocurrencies: These are also a part of discussion. They are already being used for money transfers. They introduce competition and innovation that may help keep the prices low. However, there are risks and governing hurdles which make them not so practical for most consumers. That’s the reason they might not yet be ready for widespread use.

EXAMPLES OF CASHLESS SOCIETIES

There are many countries that made moves to discard cash with the push coming from consumers as well as government bodies. Sweden and India are two notable examples with two different outcomes.

SWEDEN: Its not at all normal or common to see the signs which say “no cash accepted” in Swedish shops. According to European Payments Council, cash transfers accounted to just 1% of Sweden’s GDP in 2019 and cash withdrawals have been steadily decreasing by about 10% per year. Customers are mostly happy with this situation but people who struggle to be updated with the technological developments continue to rely on cash. Sweden is gearing up to become the first cashless country on the globe, with an economy 100% digital by 2023.

INDIA: Indian government banned 500- and 1000-rupee notes in November 2016. This is an effort to catch criminals and those people who are working in the informal sector of the economy. The implementation was highly controversial because around 99% of the banknotes were eventually deposited. However, criminals were not punished for hoarding untraceable cash, that had been the intension of this move. The Economic Times cited the Reserve Bank of India as it reported that digital transactions have increased temporarily, but cash came back to pre-demonetisation levels by the end of 2017.

ADVANTAGES OF CASHLESS SOCIETY

Those with technological ability to benefit from cashless society will most likely find it more convenient. As long as you have your card or phone with you, you have instant access to all your cash holdings. Convenience is not the only benefit. Let’s look at some other benefits below:

Lower Crime Rates: Carrying cash makes you easy to target for criminals. Once the money is taken form your wallet and it goes into criminal’s wallet, it will be hard to trace your cash or prove that it is your own hard-earned cash. One study by American and German researches have found out that the crime in Missouri dropped by 9.8% because the state replaced cash benefits with Electronic Benefit Transfer (EBT) cards. 

Automatic Paper Trails: Similarly, financial crime should also get exhausted in a cashless society. Illegal transactions like illegal gambling or drug operations, specially use cash so that there is not record or proof of the transaction and the money is easier to launder. Money laundering becomes much complex if the source of funds is always clearly identifiable. It is tough to hide your income and avoid taxes when there is a record of every payment you receive.

Cash Management Costs Money: Going cashless is not just convenient. It costs a lot of money to print bills and mint coins. Businesses need to store money, get more when they run out, deposit cash when they have a lot in their hands, and in some instances, they hire firms to transport cash safely. Banks hire huge security teams to protect branches against physical banks’ thefts. Spending time and resources moving money around and protecting large sums of cash could become a thing of the past in a cashless future.

International Payments Become Much Easier: Whenever you travel internationally, you may require to exchange your dollars for local currency. However, if you are traveling in a country that accepts cashless transfers, you don’t need to worry about how much of local currency you’ll need to withdraw. Your mobile device handles everything for you.

DISADVANTAGES OF CASHLESS SOCIETY:

It all depends on your perspective that going cash free might actually be more problematic than being beneficial. Here are some of the major drawbacks associated with a cashless financial system. 

Digital Transactions Sacrifice Privacy: Electronic payments are not private as cash payments are. You might believe the organisations that handle your information and you might have nothing to hide. However, the more information you have floating around online, the more likely it is to end up in malicious and fraudulent hands. Cash allows you to spend money and receive funds anonymously.

Cashless Transactions Are Exposed To Hacking Risks: Hackers are the robbers of the bank and muggers of the electronic world. In a cash free society, you’re more exposed to hackers. If you are targeted and somebody empties your account, you might not have any other option to spend money. Even if you’re protected under federal law, it will still be not possible to restore your financial standing after a breach.

Technology Problems Could Impact Your Access To Funds: Glitches, outages, and unintentional mistakes can also lead to problems that will leave you without any ability to buy things when you need. Similarly, merchants have no way to accept payments when systems malfunction. Even something as simple as a dead phone battery could leave you money less.

Economic Inequality Could Become Exacerbated: Unless special outreach efforts are made, the poor and unbanked will find it tough to live in a cashless society. If a smartphone purchases become the only way to transfer, for example, those who cannot afford smartphones will be lagging behind. 


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