Cashless Economy- Is it possible to achieve?
It’s hard to imagine a cash-free world for the entire mankind. Still, after the establishment of the credit and debit card technology and with the growth of mobile payments, about 80% of the money transactions worldwide happens with cash. The global attachment to cash will not be helping some of the countries’ economies all the time. The cash weights heavy and it is also heavier and the most expensive thing to transport and also to store.
By stepping into the world of digital transactions, the reliance on cash would be eventually eliminated from many countries; this information was reported by the research conducted by the Harvard Business Review and experts from the University of Tufts.
Bhaskar Chakravorti, he is the senior associate dean of the international business and finance at the Fletcher school of Law and Diplomacy, which is a part of the Tufts University, said that, to determine the countries, which would be benefited by the payment system, the researchers and the experts have considered the cost of cash from the four major views or perspectives. They are customers, banks, business, and government.
From the consumer’s point of view, those costs include the ATM fees, and the cost of travel to the ATM or the bank branch, where the customers could withdraw the cash and the possibility of losing cash.
At the business view, those costs included the storing cash and keeping that cash secure and transporting the cash in vehicles when needed.
From the government point of view, this money includes the cost of printing and the tax-gap or the amount of money, which the government failed to collect from the unreported or under-reported cash transactions.
The U.S spends about $200 billion per year to keep the cash in circulation.
By moving to the cashless society, the following countries have the highest potential for unlocking the value. They are, the U.S, Japan, Netherlands, Belgium, France, Germany, China, Czech Republic and Brazil.
China has made more progress in transitioning its citizens to the mobile wallets; in this aspect, china has beaten the U.S. and China has also imposed high costs on the citizens, those who use cash. Both the China and the U.S are the ready markets to transform to the digital market and they are ready for the digital money and to unlock the huge savings, both in time and money.
Many countries said that, before entering into the cashless world, still there a large way to travel. And the transactions could become costly for most of the countries because the correct and suitable infrastructure would be needed to support the cashless economy.
The head of the digital banking solutions for ACI worldwide, Mark Ranta said that changing the attitude and the habits of a particular thing or a person is not the easiest thing. Having the cash physically and giving it to someone is the real experience, some people use it for handling their budgets and some use it for the check spending habits.
Swee-May Ngeow, the Managing Director of Accenture Payment Services said that moving into the digital transactions will be the most efficient way of doing the business, because, all the transactions are made visible and it is the transparent way because all the transactions will be tracked. But not everyone will view this in the positive perspective. Some of the people use money for its ambiguity.
Another major obstacle is that the cash transactions happen instantly, but many digital banking transactions will take hours for the transaction to get completed. This delay should be eliminated, then there will be the possibility for some countries go cashless.
This digital banking would require the individuals to have the equipment, mostly like a smart phone, to make the transaction; sometimes the credit or the debit card transactions are required by the retailers.
In the emerging and the developing countries, smartphone ownership has increased rapidly; reports say that about 54% of the smartphone ownership has increased and about 87% people own a smartphone in the advanced economies.
In the world, there are about 2 billion adults, who don’t have the bank accounts. And the adults with the bank account is increasing year by year. From 2011 to 2014 there is a 20% increase in people having the bank accounts.
In the U.S, in a recent study, it was found that about 8% of people don’t have any savings, checkings or the money market account. In most of the cases, people, who don’t have a bank account is considered as the one who doesn’t qualify to be too expensive. In some of the savings accounts, people who don’t have the minimum deposit amount are charged for doing so. In such cases, cash is the last alternative.
Potential problems with the cash-free transfers
Eventually, there are problems and risks that will be associated with the cashless society. In the financial volatile systems, customers have the satisfaction of having the cash on hand, then having their money stored in the digital bank accounts. Additionally, the credit card companies take down the cutoff amount per transaction done with their cards.
There has been an unfavorable response from the Europeans, they wish to go by cash, their governments have some restrictions towards cash. They have the cyber-security concerns.
Privacy in a cashless world
Governments and their recognized agencies love the transactions in the electronic mode. It is harder to hide money from the tax person without cash. The police and government departments prefer trackable records, while that is difficult with the cash mode. The France and Spain framed laws to limit the cash transactions. In France, it is illegal to use the cash more than 1000 Euros.
It is believed that banning cash would put a full-stop to the black markets. Credit card transactions are made trackable and the electronic transactions would bring a lack in the single transaction a person makes.
The digital cash is technically possible. But governments are not taking action to track all the modes of transactions.
Once such system exists, then it will be the focus of the government and police agencies and more importantly, the intelligence services will be tied up with the insurance companies, fraud squads, tax collectors and the even marketers.
Rich and poor
People who are considered rich have the tendency to be better equipped. But for the poor people, the cashless transactions are just a dream. For them, the prepaid credit card is the alternative way. They can use vouchers to buy at grocery stores and also in other places to buy the essential things.
There are many people in the economy who are not bankable and can’t receive credit for the range of seasons.
About 8% of the US population are unbanked, nearly 20% of homeowners are unbanked, that is they have the bank account, but they use the other modes of financial services.
The Sweden is on the front lines to support the cashless transaction. People under low-income category have also adapted to the cashless scenario. Even homeless people have the credit card, which they received by some trust.
With this cashless system, all the products are expected to deliver at the footsteps, same like the online shopping. Still we have a long way to achieve this. And this will be possible in the future.
Anand Rajendran is CEO and Co-Founder of Zoplay.com, best PHP scripts development company located in India. Zoplay is a part of Casperon Technologies a leading social and mobile development company which developed a Zoplay Scripts. I’m a Tech geek, Digital marketing expert, Entrepreneur, and Atheist who loves to write everything about PHP Scripts and mobile application development.