Pros and cons of cashless society

A society without paper money might be a less equitable society. Those lacking digital connectivity would suffer.

What will be the result of the transition to cashless society and how will this trend affect the global economy?

In Sweden cash payments represent only 1% of the country’s gross domestic product. According to preliminary estimates, the country will fully switch to cashless payments by 2023. In China, more than 90% of transactions are made through payment applications WeChat and Alipay. It would seem that the abolition of coins and banknotes is just a matter of time, but it is not quite so.

Cashless society is a phenomenon that cannot be forced overnight. In addition, digital versions of ordinary currencies are perceived by many as an invasion of personal freedoms, because thanks to digital currencies the state will be able to track the cash flow of people.

A cashless society may also discriminate against the poor. This conclusion was reached by Vlad Totia, a payment analyst at analytics and consulting firm GlobalData:

“A digital society requires people to at least have access to a device and an internet connection in order to manage their personal finances.”

Another problem is possible psychological barriers. People have been using cash for a very long time in the history of the economy and it will be very difficult to refuse it.

However, the COVID-19 pandemic has significantly accelerated the transition of society to cashless payments, Totia noted:

“Lockdowns, temporary of businesses, people not going out of their homes, ordering groceries at home. All of these aspects have pushed people into using online banking and payment methods more because quite simply you can’t use cash much in these times.”

That is, modern trends, just like bad hygiene of banknotes (they can cause the transmission of germs and viruses), force governments to take a course on cashless society.

Many accept at face value the proposition that a cashless society would be a less crime-ridden one. Friedrich Schneider, a professor emeritus at Austria’s Johannes Kepler University, has conducted extensive research on this issue. He concluded that getting rid of cash in circulation would reduce the shadow economy by just over 20 percent. Many analysts also note that banknotes alone are not the cause of the rise in economic crime.

So, the conclusion is that the transition to cashless society is not an unequivocal solution. It has its pros and cons, including the impact of this trend on different segments of the