A cashless society would rely on a complex network of digital systems, which would be vulnerable to cyberattacks. If these systems were hacked, it could have a devastating impact on the economy. Privacy is the third challenge raised. Cash can be exchanged anonymously, leaving no digital trail.
Customers without bank accounts are excluded
A purely cashless society would leave them at a serious disadvantage and increase economic inequality. Those with minimal access to bank cards or digital banking services would be excluded from the economy.
In many ways, cash offers a level of monetary security that a cashless system cannot. Since law enforcement can track digital transactions and/or freeze bank accounts, many criminals—including drug cartels and terrorist organizations—operate in cash. It's an easy way for them to keep their money safe.
Just: The Bible says absolutely nothing about predicting a cashless society, as some people claim. And in fact, if it did, the closest passage to anything that you could call a “cashless society” is not from the Book of Revelation, but it's from Isaiah, Chapter 55.
In a cashless society, all payments are processed through digital networks. Banks keep an electronic record of transactions, and people access their funds through electronic systems.
For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase. In short, getting rid of cash would impose hardships on society's most vulnerable people and could jeopardize our privacy.
As people move toward more electronic or digital forms of payment, it might seem like paper money is on its way toward obsolescence. But experts say that cash will always be around.
While cash isn't disappearing entirely, data from Marqeta shows that both consumer attitudes and habits are shifting towards a less cash-dependent economy. According to Marqeta's 2024 State of Payments Report, nearly three-quarters of U.S. consumers aren't concerned about moving towards a cashless society.
Sweden, the first European country to introduce banknotes in 1661, became the world's first cashless society on 24 March 2023. Finland and the UK are top–ranked to become cashless societies as well. Poland, on the other hand, has scrapped plans to limit cash payments to ensure freedom of choice.
One of the biggest issues is the loss of transactional anonymity. In a cashless system, every digital interchange is recorded and stored, making it difficult for individuals to maintain privacy. Unlike cash payments, which are anonymous, digital methods of payment leave a traceable electronic footprint.
The downsides of going cashless include less privacy, greater exposure to hacking, technological dependency, magnifying economic inequality, and more. Credit and debit cards, electronic payment apps, mobile payment services, and virtual currencies in use today could pave the way to a fully cashless society.
There is also a potential risk to central bank independence. Even if eliminating currency is at least revenue neutral for the government as a whole, the central bank is the one that will lose seigniorage revenue.
Cashless society: disadvantages
Elderly people may be less comfortable with tech and less able to make the switch from physical currency. Rural communities could also be left vulnerable, because of poor broadband and mobile connectivity. People with low income or debt tend to find cash easier to manage too.
Lack of Security: Online payment systems for the internet are an easy target used by hackers for stealing money and personal information. The main problem of e-cash is that it is not commonly accepted because it is necessary that the commercial institution accept it as payment method.
The risks include lost vouchers or cash, potential spending on undesirable items, and transaction costs. Cash transfers are susceptible to corruption which necessitates rigorous monitoring mechanisms.
Inflation Is Eating Away at Your Funds
According to the Bureau of Labor Statistics, the average rate of inflation from April 2023 to April 2024 was 3.4%. If you've been keeping your money in a savings account with a lower yield than the rate of inflation, you should switch over to a higher-yield account.
Why Eliminate Cash? Cash can be used in criminal activities such as money laundering and tax evasion because it is difficult to trace. Digital transactions or electronic money create an audit trail for law enforcement and financial institutions and can aid governments in economic policymaking.
Is the US Going to Digital Dollar? As of June 2024, the US Federal Reserve has not decided to transition to a CBDC or supplement its existing monetary system with one. It is researching the effects a CBDC would have on the dollar, the US, and the global economy.
While it is difficult to measure just how many people depend on cash, older people, particularly, are struggling to pay bills digitally. Some of those we interviewed are homeless or have mental health issues. Others live on a very low income.
Many community financial institutions (CFIs) are in the same boat, trying to embrace tech and digital payments, while still acknowledging that not all Americans are ready to bid goodbye to cash just yet. Cards or cash? As mobile payment apps continue to gain popularity, the trend is certainly away from cash.
The big four banks have reassured customers they will maintain in-branch cash services, following Macquarie Bank's unprecedented move to phase out cash and cheque services entirely. Commonwealth Bank, ANZ, NAB and Westpac all confirmed on Friday that there are no current plans to go cashless.