If you are living in India, you might know the concept of a cashless society is not a possibility rather it is actually happening. Starting from small food stalls to famous restaurants, we just have to do a UPI transaction without having a load of cash. While we consider the international market, the digital payment methods of credit cards, debit cards, online banking, mobile wallets and so on have been found.
However, as we are talking about a cashless society where physical currency or coins are completely replaced by digital currency, a question still arises, can the world truly achieve a completely cashless society? Or is it just a myth?
What is a cashless society?
In a simple word, we can define a cashless society as a society where digital currencies have been used for the majority of transactions rather than physical currencies. Some examples of societies that adopted cashless payments are Sweden, India, China, Finland, the UK etc.
Although we call the cashless society a modern idea, this idea was actually introduced in the mid-20th century in the United States. In the 1950s and 1970s, people started to adopt informational technologies in different financial transactions through credit cards, electronic fund transfers and so on. In that era, people learned to not be over-dependent on the physical currency and adopt the new concept of digital currency.
The cashless society became able to be in the trend, because of the introduction of different types of digital payment modes. As technology is becoming advent, we are seeking more convenient and seamless transaction systems for our daily lives. Previously we had digital wallets like PayPal, Alipay, Venmo and so on, now in the digital currencies race, cryptocurrencies also become a trend.
As this trend is increasing, the number of cashless American consumers has increased by 13.1%. In the UK, 39% of people live on cashless payments. Similarly in Japan, the cashless payment ratio was around 39.3% as of the data of 2023. India makes around 10 to 12 billion cashless payments per year in contrast with the US where 4 billion cashless payments have been completed in a year.
What benefits is society gaining from being cashless?
The trend of a cashless society has become famous because of lower crime rates. A study adopted by American and German researchers shows that the crime rate in Missouri reduced by 9.8% because of the adoption of cashless wallets. When someone has been carrying cash in their wallet and criminals steal that money, it becomes highly difficult to recover. But with digital currency, it is impossible to steal money except in the case of cyber fraud.
Digital payment options have eliminated the need to visit ATMs or banks again and again and carry extra cash which makes the cashless payment more convenient. The payment modes have become so convenient today that people have to scan codes or click to make a payment within seconds. Even in some countries like Japan, China and others, fingerprint authentication has been used to just make a payment at a mall, at food stalls and so on.
Transparency became one of the main benefits of cashless payments. Nowadays, in banks, payment getaways are fully encrypted and authenticated to ensure the security and safety of every transaction we do. Debit cards, credit cards and more are protected under federal law to reduce fraudulent purchases.
If you ever travel internationally, you might know how time-consuming it is to exchange currencies and pay an additional fee for that. Well, with cashless payment mode, you just have to ensure that you have a credit card or debit card that is without foreign transaction fees to make a payment. In this way, our time and efforts both got saved with a cashless society.
What are the challenges and limitations?
Although we used to make payments through digital payment methods for activities like buying coffee, grocery shopping, paying bills and so on, our society still has not fully adopted this idea. In the rural and semi-urban areas, people still use to make transactions through physical currency. This happened because of limited infrastructure, low internet activities and lack of literacy.
Lack of internet access is also a limitation in many countries where people are not aware of the digital payment method concept. In India, around 650 million people live without an Internet connection. With a second rank, China contains 612 million people who are not connected to the internet. Pakistan scored 3rd where 136 million people do not have access to the Internet.
From these figures, we can make an estimation of why there is still a cashless society in the progress stage in semi-urban and rural areas in spite of the development of the technologies. Limited internet connectivity not only restricts people from direct engagement with cashless payments but also affects their exposure to digital literacy.
The threat of cybersecurity also became a concern to fully transform into a cashless mode. We are often exposed to such news as credit card scams, bank account scams and so on. Why this happened?
Well, all these happened because of the increasing ratio of cybersecurity frauds. As fast as people are taking steps into the digital world, cybercriminals created sophisticated techniques so that they can exploit vulnerabilities in digital payment methods. In 2023, around 53% of cyberattacks were increased in the digital banking system as compared to 2022, in which a total of around 4,414 cyberattacks were recorded worldwide.
Is a truly cashless society realistic?
We are exposed to the advantages and challenges of a cashless society, henceforth, it might be easier to explore the reality of this concept. From the mid-20th century to the present, the world has observed a gradual growth in technological advancement and cashless payments. The worldwide internet penetration rate is captured to be around 67.5% creating a better scope for the advancement of digital payment methods.
Established companies like Visa, Mastercard, PayPal, Apple etc. are highly investing in cashless payments to make our future fully cashless society. These leading firms have been solving the problem of limited infrastructure through investment in digital payments. People are getting used to contactless payments with the expanding offerings of Visa and Master cards. Even, a great awareness of cybersecurity frauds has been spreading by these firms.
However, the increasing trends of QR codes, blockchain technologies, contactless cards and so on have played a significant role in simplifying the digital transaction methods. To promote sustainability and reduce corruption, government officials are also promoting cashless payment methods to enhance payment efficiency.
However, as we explored different challenges, we understood that there are still some limitations to fully making this idea realistic. Several countries have a considerable number of people who belong to rural and semi-urban areas and are not able to maintain a connection with the Internet.
Henceforth, as of now, it might be a topic of possibility rather than reality. But for the future world, we can imagine that we might be fully digitalized in payment options by addressing the cybersecurity risks, poor infrastructure and so on.
FAQ
1. What is a cashless society?
In simple words, we can define a cashless society as a society where digital currencies have been used for the majority of transactions rather than physical currencies.
2. Which countries have adopted cashless payments?
Some examples of societies that adopted cashless payments are Sweden, India, China, Finland, the UK, etc.
3. When was the concept of a cashless society introduced?
Although we call the cashless society a modern idea, this idea was actually introduced in the mid-20th century in the United States. In the 1950s and 1970s, people started to adopt informational technologies in different financial transactions through credit cards, electronic fund transfers, and so on.
4. Why has the trend of a cashless society become famous?
The cashless society became famous because of lower crime rates, convenience in transactions, enhanced transparency, and elimination of the need to visit ATMs or banks frequently.
5. What are some examples of digital payment methods?
Some examples include credit cards, debit cards, online banking, mobile wallets, and digital currencies like cryptocurrencies.
6. What are the challenges to achieving a cashless society in rural and semi-urban areas?
This happens because of limited infrastructure, low internet activities, and lack of literacy.
7. How many people in India do not have internet access?
In India, around 650 million people live without an Internet connection.
8. What is the impact of cybersecurity threats on a cashless society?
The threat of cybersecurity became a concern to fully transform into a cashless mode. As fast as people are taking steps into the digital world, cybercriminals created sophisticated techniques so that they can exploit vulnerabilities in digital payment methods.
9. What percentage of cyberattacks increased in the digital banking system in 2023 compared to 2022?
In 2023, around 53% of cyberattacks were increased in the digital banking system as compared to 2022.
10. What is the worldwide internet penetration rate?
The worldwide internet penetration rate is captured to be around 67.5%, creating a better scope for the advancement of digital payment methods.
