Illustration by Esmile Studio.

What We Talk About When We Talk About Cashless Society

Dropping coins or handing over dirty paper money is getting old and out of date. Apple Pay, Venmo, Zelle and other digital wallet technologies are popping up more and more. Anyway, many consumers are sticking with credit cards because they just don’t trust money made of bits. Will it ever gain full acceptance?

Over the course of history, there have been many different forms of payment systems, including barter, gold and paper currency. Ever since the first general-purpose charge card debuted in the early 1950s, pundits have been predicting the “cashless society”. We may finally be getting close to that vision and, as new payment systems are introduced, researchers have critically examined their costs from both private and social perspectives.

What are Digital Wallets?

Digital wallets are a type of electronic card which is used for transactions made through a computer, smartphone or wearable. Its utility is the same as a credit or debit card. A digital wallet usually needs to be linked with the individual’s bank account to make payments. These contactless payments with credit cards, phones and watches is hastening the long-predicted death of coins and paper bills.

These payments are slowly becoming the new tap-and-go consumerism, making fiscal transactions seamless, transparent, safe and incredibly convenient at least for millennials. In 2015, a study conducted by Linkedin and Ipsos found out that 32% of millennials already envisioned a cashless society where currency was no longer needed for transactions and 27% of millennials believed primary financial institutions were going to disappear.

Affluent Millennials Infographic by Linkedin and Ipsos.

Digital wallets give users the ability to check their bank accounts and credit card balances, create budgets, track spending, send money to other users, split restaurant tabs, pay for an Uber or Lyft ride and even pay their bills directly from their mobile device. All these transactions, in most cases, occur in real-time. Instead of waiting for change or inserting card into an EMV-enabled terminal users can simply scan their phone or wearable device.

Digital wallets are often associated with smartphones. And, it’s easy to understand why. PayPal, Google Wallet and Apple Pay offer digital wallets that come in the form of a mobile app. However, digital wallets can come in plastic form, such as the Coin. This is a physical card that stores all of your payment.

There are also other wearable trends. Concerts such as Lollapalooza have been pioneers on cashless methods. At the 2016 edition at Chicago, Lolla Cashless debuted. It used radio frequency identification (or RFID)-enabled wristbands for payments. They delivered concertgoers bracelets that could be linked to credit card info for buying food, drinks and merchandise: tap and pay.

Lolla Cashless.

As technology continues to advance, digital wallets will be stored and accessed on more wearable devices and maybe even eventually connect to the Internet of Things (IoT).

Users Need to Feel Secure

As with any new technology, there’s definitely a lot of concern over the security of digital wallets. Digital wallets may replace credit and debit cards in millions of checkout aisles but this may not be convenient enough for some people to break the old habit of paying with credit, debit or cash.

Mobile banking, real-time notifications and educational content that help users build their credit or save for the future are very much needed services. If tech companies and banks are willing to embrace these new technologies and challenge the status quo, they have to talk with people and let them know how it works. Users shouldn’t feel as these new kind of spending is imposed to their ways of living. Digital wallets should be simple and secure.

Unlike credit or debit cards, which can be canceled, there’s little hope for recovering stolen paper currency. Digital wallets have already taken several security measures. This includes everything from biometrics like Apple Pay’s fingerprint ID, two-factor authentication, real-time notifications, and tokenization, which means that sensitive information should be concealed and scrambled but sometimes this tech concepts aren’t that clear for users. Some may need to learn what biometrics are!

This does not mean fraud doesn’t exist anymore. It’s money and money can be stolen. As with every tech invention in the world, someone will try to come and hack it.

Cash-free Spending

A world without cash offers a number of benefits, that’s clear. Governments and taxpayers can avoid the costs to produce coins and bills and it makes it easier to collect taxes if individuals and businesses cannot avoid reporting cash income or secretly fund an offshore bank account.

But there’s a major concern: credit cards have already taught us how lack of purchasing friction encourages us to spend way more. Consumers feel the loss of physical currencies but have trouble picturing invisible money. In a cashless society the only distance, if any, between users and purchases is a smartphone.

According to a 2011 study published in the Journal of Consumer Research; with cash, people become more budget-conscious. The study suggests that overspending might become more of a problem as more Americans go cashless.

Cash-flow Examination

Each and every financial choice is reflected in a cash-flow examination. That’s a map that integrates time and money and reveals the topography of our own personal economy. In a world without cash, it’s easier to monitor our cash flow. Adopting this practice can come really handy when facing this cashless future.

There are tools such as Coin Keeper and Mobills that may help you aggregate data feeds from credit cards, bank accounts and loan providers and help slice the data with nice reports.

A survey by Accenture shows that almost half of 4,000 survey respondents in both the U.S. and Canada said they were “interested in real-time and forward-looking spending analysis”– and that’s easier to do with electronic wallets.

Who Holds the Power?

As society goes cashless, wealth disparity and the digital divide become more salient. People without bank accounts, smartphones or Internet access or with informal works are prone to become unable to participate in certain establishments and economic activities and catching up is really tough. That is one of the societal challenges that we have to deal with.

From a macro-economic perspective, electronic transactions are quicker and cost less in general and make the payment system more efficient. As with all moves towards uncharted territory: who keeps the power? If tech companies don’t develop services that compete with commercial banks, we might end up in a situation where a few banks have a lot of power.

Payments and Privacy

With an increase in digital transactions, the question of data security also comes into play. As we succumb to digital currency, who has access to our information? Government and regulators need to act really fast if they want to plug the data breaches all across the world .


The implications of the shift toward a cashless society are hotly debated. Both social costs and social benefits need to be considered when comparing payment instruments for policy decisions. Economic welfare seems to improve while this does not imply that all parties are, in fact, benefited.

There are countries like Canada, Sweden, the UK and France that are already on the run to becoming cashless. This means, there’s a rise on the amount of credit and debit cards per person, there are more cards in issue with contactless functionality, there’s a growth of cashless payments over 5 years and payment transactions made using non-cash methods and people are more aware of users what mobile payment options.

With more consumers opting to pay for things digitally rather than with cash, retailers are removing the option of cash transactions entirely — with Amazon going so far as to remove in-person payments altogether with their app Amazon Go. This technology is prone to evolve really fast and we really don’t know how it will impact on society until it’s actually implemented.

Elevate is a publication by Lateral View.


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