Here are a few things to note:
- Many countries (Sweden and India) and regions (EU) are adopting cashless habits or policies. Driven by “contactless” pay technology, increasing digital penetration, costs of using cash, and policy initiatives, the idea of a cashless society is no longer a figment of the imagination.
In the near term, we are likely to witness a transition to less-cash societies, rather than a switch to cashless societies. Cash still accounts for 85% of total consumer transactions globally. Among established alternatives to cash, cards are the fastest growing payment instrument.
Cashless economy pros: increased scope for monetary policy, reduced tax evasion, less crime and corruption, savings on costs of cash, and accelerated modernization of citizens.
Cashless economy cons: potential violation of privacy, increased risk of large scale personal and national security breaches, and technology-dependent financial inclusion.
Migrations to a cashless economy include considerations ranging from the purely financial, to those social in nature. Consequently, a country’s specific technological, financial, and social situations will inform its specific benefits, drawbacks, and approach to such a transition.
Two case studies in the transition to cashless are 1) India, driven by a governmental digitization and demonetization measures, and 2) Sweden, driven by a high-tech culture and digital consumer habits. In Sweden, the government and central bank play facilitatory roles.
Countries best positioned to go cashless include the US, the Netherlands, Japan, Germany, France, Belgium, Spain, Czech Republic, China, and Brazil.