The Benefits and Drawbacks of Implementing a Cashless Society
In the past few years, the topic of a cashless society has sparked debates among citizens and policy-makers. Some people support it, some are against it. In this article, we’ll take a look at what actually is a cashless society, how does it work as well as the pros and cons that come with it.
Technology is made to make life easier. Uber is created to make it easier for people to order a taxi. Airbnb is founded to help people book hotels and rented properties. And the cashless payment is introduced to speed up the transaction process.
However, it doesn't mean that technology is perfect. It has its fair share of drawbacks as well. In this article, we’ll take a look at the benefits and drawbacks of implementing the cashless payment system in our society.
But before we go any further, let’s take a closer look at the definition of a cashless society first.
What is a Cashless Society?
A cashless society is a society where the cashless payment system is fully implemented. It means that banks don’t produce cash anymore. Every transaction is done digitally, using cards or smartphones.
The cashless payment system itself was invented in 2007. It quickly garnered people’s attention and achieved mainstream popularity because it introduced an easier and faster way of paying. Initially, a cashless payment could only be made by either tapping or waving a card or a smart phone over a reader.
But today, the facial recognition payment technology has been introduced. It means that nowadays, people could pay only by scanning their faces.
How Does Cashless Payment Work?
The technology used in cards is similar but slightly different from the one used in smart phones. Cashless cards use radio frequency identification (RFID) technology. So basically, a chip that produces radio waves is planted inside the card. Then, an antenna is built to ensure a connection with a reader.
To make a payment, all you have to do is to place the card near a cashless terminal. The terminal will then pick up the radio signal from the chip and transmit the data from the card to a card processing network like Master Card or Visa. The network then proceeds to do a fraud analysis. If it’s clear, a confirmation will be sent to the card issuer.
The card issuer then will confirm whether the card is stolen or not and whether it has sufficient funds. If all is clear, the card issuer will send a signal to the terminal to carry on the transaction. Your payment is approved and all of this process is done in just 2-3 seconds.
It works a little bit differently though if you use a smartphone or any other electronic device. Mobile phones use near-field communication (NFC) technology to conduct a cashless payment. NFC itself is a branch in the RFID technology family. Other than that, it works exactly the same.
The Benefits and Drawbacks of a Cashless Society
Like any other thing in life, creating a society where cash doesn't exist sparks debates among citizens and policy-makers. Some people believe that it’s the right step towards the future and some people are against the idea.
Before we jump into any conclusion, let’s take a look at the benefits and drawbacks of a cashless society first.
The Benefits
- Say goodbye to long queues. In a cashless society, people just need to wave or tap their card or smart phone when buying something, speeding up the transaction process significantly.
- For business owners, the cashless payment system means no more missing coins, miscalculations, and money stolen by the employee. All payment goes straight to their bank account, making it easier to monitor their cash flow.
- In a cashless society, crime rates will go down. Crimes like pickpocketing will no longer exist because people don’t carry around cash anymore. Sherman Powell, a career pickpocket, claims he made around $5,000 (equals to $12,000 today) a month in the 1980s. But his income dwindled in the 2000s because people carried less money.
- It will be easier for the police and government to track money laundering and crime syndicate activities. With no cash around, cartels couldn’t pay for their drugs with a briefcase full of cash anymore. They have to transfer the money, making them more likely to get caught in the act.
- For people who travel abroad a lot, a cashless society will surely help them a lot in exchanging currency. It means no more going to the local bank and waiting in line, every exchange will be done digitally.
The Drawbacks
- People will lose track of their spending easily. When we pay with cash, we can physically count the money we have. That’s not the case with cashless payment. The convenience of using the system might backfire and cause people to overspend.
- Not everyone has access to a bank account. Around 1.7 billion people around the world remain unbanked, although the reasons vary. Some people just can’t afford it, some live in areas without a bank, and some just prefer to keep their cash in their pocket (usually the older generation).
- Technology will never be perfect. In a cashless society, people will be under constant threat of system failure, hackers, data selling, and other security issues. When a system breakdown occurs, the economy will completely stop. People can’t make payments and merchants can’t receive it.
Wrap Up
Although a cashless society offers a lot of benefits that make people’s life easier, the drawbacks are still hard to overcome. What we can do is to maintain the current system where people have multiple options to make payments, from cash, cards, smartphones, and even stickers and faces.
Want to find out more about cashless payment? Check out this infographic the folks at Milkwhale whipped up.