Is it time for society to go fully-cashless?

Companies like Apple, Google, Samsung, Amazon, and even certain crypto-currencies are leading the way in cashless payments.
13 December 2018

Apple Pay and its ilk have helped drive the cashless movement. Source: Shutterstock

Thanks to advances in payment technology, many countries are increasingly becoming cashless societies.

Driven by the undeniable convenience of forgoing cash withdrawals and pocket change, adoption on the consumer side has been led by tech and electronics giants like Apple, Google, and Samsung, all of which have flocked to the potential of radio-frequency identification (RFID) technology. According to UK Finance, by 2026, cash transactions may only be used for just a fifth of transactions in the country.

Cashless technology has become so commonplace that retailers increasingly see bills and coins as a legacy in currency to be phased out; Amazon’s cashier-less Go stores, for example— which scan customer’s smartphones for payment methods on the way in and charge for items taken on the way out— are cash-free by default— it’s just another hurdle in providing the most seamlessly-automated and efficient retail experience possible.

From a global perspective, cash as a share of total payments is declining from 92 percent to 84 percent in 2016, according to a recent research by McKinsey & Company. So, while there is certainly a marked decline in its use, cash is not leaving the global playing field anytime soon. Instead, the variegated nature of cashless payment uptake between countries seems driven by the culture and attitude of a country’s citizens themselves.

At one end of the scale, for example, Sweden has been regarded as “the most cashless society on the planet”. In 2016, barely 1 percent of payments were made with cash, with many retailers and transport services preferring cards, or otherwise, to minimize the risk of robberies and increase overall efficiency. Just recently, 4,000 Swedes were reported to have implanted microchips in their hands, allowing them to pay for rail travel, food and even enter keyless offices, while the country’s government is looking to introduce its own e-krona digital currency.

Founder of Biohax International, Jowan Osterlund, theorized that Swedes are less concerned about data privacy— one of the more common concerns around cashless payments— as they have a high level of trust for Swedish companies, banks, large organizations, and government institutions. The tougher data privacy rules, as part of the General Data Protection Regulation (GDPR), could also help to expand its adoption with robust laws are tailored towards protecting individual’s data integrity.

Interestingly, however, while China, among other countries in Asia, is one of the most advanced in terms of mobile payments methods— accelerated by firms like AliPay, Tencent’s Wechat Pay, among others— which could soon make cash ‘obsolete’ in some urban areas, for many, cash is still seen as a ‘safe’ option. The People’s Bank of China, meanwhile, recently decided to admonish companies or individuals that ‘refuse or discriminate’ against cash payments.


Financial services by region

Financial services by region. Source: Accenture.

In the UK, driven by the spending habits of its customers which saw just 13 percent paying by cash, a London-based pub was recently one of the first in the country to start refusing cash payments. In New York, on the other hand, the city’s council is looking to crack down on businesses taking the same approach, with certain councilors proposing fines of up to US$ 500 for enforcing cashless policies.

Common counterpoints to the movement include potential discrimination to those who can’t afford or are unable to use cashless technology— such as having no access RFID-equipped smartphones, or even a bank account— as well as questions concerning what would happen in a power outage, if payment provider services failed (such as that of Visa this year), or if systems were subject to hacking.

Nonetheless, the ‘digitization’ of the banking system is relentless; 17 percent of new industry players— new banks (digital and traditional), fintech start-ups like Monzo and Revolut, and companies from outside the banking world— entered the industry over the last 13 years, and have subsequently grabbed one-third of revenue growth in Europe, pressurizing incumbent retail and commercial banks to rethink their ‘North Star’ business models. According to Accenture, most banks today are not prepared for the sustained efforts that will be needed to adapt to new environments. The success of these banks will depend on organizational agility, the ability to deliver change and investment agility

While on a global scale, the cashless movement is smaller by degree, it’s certainly still happening, and while each market is moving at different speeds, going, at least, majority cashless seems to be an inevitability. But it seems unlikely that lawmakers will ever relinquish their grip on bills or coins entirely. While payment technologies will advance to answer some of the existing concerns in security and stability, the question will always remain over what will happen if the lights go out.