Evaluation of the Benefits and Risks of Cashless Economy

In a world where cybersecurity concerns are growing, the road to a cashless society is an inflection point. With countries across the world embracing digital forms of commerce and connectivity, the need for physical currency could soon become obsolete. But despite the increasing use of digital platforms, living in a completely cashless society will bring more harm than good.

In a cashless economy, all financial transactions are executed digitally without the use of physical cash. This medium of exchange otherwise known as “cashless payment”, is a cost-effective alternative to generate business efficiency and mitigate financial crimes. According to Henley (2016), Swedish traders and business owners witnessed a 30% increase in sales, following the initiation of Sweden’s cashless system. Furthermore, the use of digital transactions also rid the anonymity and intrackability of cash, making illegal acts conducted by paper currency harder to facilitate and conceal (Orme, 2019).

However, amid the benefits, the cashless economy is not without risks. Marria (2018) warns that the increase in volume of digital transactions creates more points of exposure to hacking risks. As such, the switch to a completely cashless economy would, in fact, spur vulnerability to cyber-attacks. Sources also forewarn that the absolute reliance on technology and inexistence of physical cash, would render many financially impuissant in the event of network failures. Marria (2018) cautions that power glitches and outages would leave many in destitute as they have no alternative access to financial support and thus, handicap in potentially crucial moments.

There is also substantial support that going cash-free impairs societal and economic well-being. According to Sivabalan (2017), India’s ban on banknotes not only cause detriment to the majority that relied on physical cash for daily activities, it also led to a two-year economic slowdown. Similarly, a study reported that moving toward a cashless society, poses risks for the poor, mentally disabled, and elderly who rely exclusively on cash (Reid, 2018). On top of that, those living in rural conditions may lack the technology and are thus unable to make purchases and or receive payments (Marria, 2018). Thence reducing the financial power of the disenfranchised community and further crippling the economic livelihood of billions in developing countries as they depend on physical cash to survive.

With the growing popularity of digital, mobile and card payments, digitalization is inevitably surging. However, cash remains a highly valuable and intrinsically pragmatic payment option and is not bound to be removed anytime soon. Though an economy without cash is increasingly a reality, its transition will require a gradual process in integrating and implementing systems to support social security, technological failures and provide for those who may struggle to access the technology.