Cashless Society and Crypto’s Role in This Growing Trend

Financial systems have evolved massively over the years, and online transactions are taking over the cash payment system. In fact, most people now hold less paper money and prefer cashless pay cards and applications, which are faster, safer, and more convenient.

The emergence of cryptocurrencies, digital wallets and online banking contributed to the phenomenon of a cashless society. Businesses and users are increasingly using online payment gateways, decentralised blockchains and crypto wallets rather than traditional banking methods.

Transacting in a cashless society can be more beneficial, allowing users to conduct payments much faster and minimising pickpocketing. Is this system entirely good? What are the dangers of a cashless society?

Understanding Cashless Society

A cashless society might seem like a distant future. However, we might be closer to it than we think. This concept refers to a world where banknotes and coins cease to exist, and intangible means of payment prevail.

The introduction of the internet in the 1980s, the invention of credit cards and the dot.com bubble are significant events that contributed to the rise of cashless payment systems.

These trends continued developing and experienced outstanding growth when cryptocurrencies and the decentralised economy came into existence at the beginning of 2010 as Bitcoin and blockchain emerged.

Blockchain currencies competed with traditional institutions, offering much-needed services and convenience. This competition led to the foundation of virtual banks, such as Revolut, Monzo Bank and SoFI, which emerged between 2011 and 2015.

The cashless payment system saw massive growth during the COVID-19 pandemic, which started in 2019. When social distancing was enforced, people could only use contactless payments and electronic transactions to conduct business and buy daily products.

How Close Are We to a Cashless Society?

Becoming a 100% cashless society might be far from possible at the moment due to people’s long-term attachment to cash and coins. However, as more financial technologies and cashless payment systems become available, we will become closer to a fully digitalised payment world.

However, there is a declining trend in using cash for payments. In Europe, only 20% of transactions were conducted in cash between 2019 and 2023, expected to drop to 16% by 2027. 

In Latin America, credit cards and cash share the lead with 29% of total transactions’ value, while North America is still the leader in cashless societies. In 2023, cash payments accounted for only 11% of regional in-store payments, while credit, debit, and prepaid cards were used in 73% of in-store transactions.

A cashless society is ideal for businesses and global corporations that engage in international trade and conduct transactions online with employees and clients. Therefore, the rise in cashless transfers benefits the corporate world.

Elements of a Cashless Society

Smartwatches, crypto wallets, and mobile payment applications such as Google Pay and Apple Pay play a major role in facilitating the transition to a cashless society driven by cutting-edge technologies and tools.

Moreover, cryptocurrencies add more value to paperless payments. Here’s what a cashless society looks like.

• Credit/Debit Cards: Bank cards dominate the payment world. Issued by leading companies like Visa and Mastercard, they facilitate payments from bank accounts. These tools are crucial in building a cashless society.
• Electronic Payments: Financial technology (FinTech) plays a significant role in transactions, offering numerous functionalities, such as bill splitting, sending remittances, payroll payments and invoice issuing. PayPal, Venmo, and Stripe are leading FinTech firms that facilitate cashless payments.
• Mobile Payments: Mobile applications are becoming increasingly common for paying for day-to-day expenses and shopping. The integration of Google Pay and Apple Pay makes it easier for users and businesses to pay and receive payments.
• Digital Currency: Cryptocurrencies and digital money have become vital elements of the cashless world. These assets rely on the decentralised ecosystem, such as blockchain and crypto wallets, to send and receive funds.

Bitcoin and Cashless Society

The emergence of Bitcoin and thousands of other cryptocurrencies contributed largely to creating a cashless world, where cash is rarely used, and transactions are conducted over decentralised financial infrastructure or digital transfers.

This transition has definite implications for traditional banking, business and global trade. Let’s explain these influences in the following.

Cashless Banking

Banks have already accepted that cashless transformation is imminent. The industry uses mobile applications, central bank digital currencies, credit/debit cards, and virtual financial assistance to improve financial inclusion and align with the elimination of cash.

A total transition means fewer visits to the bank and lower demand for in-branch services. This means that banks might decrease the number of branches and employees, saving considerable overhead costs.

Keeping funds in digital means might impose significant risks for banks, which must ensure solid security systems and firewalls to prevent hacks and cybercrimes. 

Cashless Business

Cashless means of payment are, in fact, more beneficial for corporations, saving time and effort in sending or receiving transactions, paying vendors, issuing invoices and managing capital. 

All these activities are better done virtually than with tangible assets. This system enables businesses to provide quick and convenient purchasing journeys, user interaction and customer satisfaction.

Integrating crypto payments has elevated business transactions even higher, giving end-users more flexible options to pay for their products and services using more secure methods.

A cashless financial system enables companies to attract customers worldwide and increase their markets with little consideration for holding local currencies and relying on online payments.

Cashless Payments

Cashless payment is a two-edged sword. Cash payments are less traceable, while online financial transactions and wire transfers can be tracked and monitored.

This approach can be used by businesses and individuals who want to analyse their spending for better budget planning. However, this information contains the user’s private and monetary data, which, if leaked or infiltrated, can severely damage the user’s online holdings.

What are Cashless Society’s Advantages and Disadvantages?

Is a cashless society all milk and honey? Or is there any unpredictable outcome from this transition? Many argue that over-reliance on technology can be dangerous, but what if it leads to better financial security and monetary management?

Let’s revise the pros and cons of relying on cashless financial systems.

Advantages

• More Convenient: Using credit/debit cards, digital wallets, and cryptocurrencies is less of a burden than holding cash.
• Facilitating Global Trade: Cashless technologies allow businesses to find strategic partners and integrate any service that improves operations without border limitations. 
• Increasing Market Reach: Businesses can expand their reach and target more customers by facilitating digital payment methods, whether crypto or e-wallets.
• Lower Crime Rate: Businesses, stores, and individuals who rely on cards and online wallets are less vulnerable to thefts, as they do not carry physical cash that can be robbed. 
• Combating Money Laundering: Digital transactions are traceable, and authorities can use this information to prevent financial crimes and illegal financing.

Disadvantages

• Sacrificing Privacy: Payments using online terminals and mobile applications are stored in databases, which can compromise user data if the information falls into the wrong hands.
• Exposure to Hacking: Online payments and gateways require top-notch security to prevent cybercrimes, especially for banks that store millions or hundreds of millions of dollars in cloud databases.
• Increased Costs: Developing and maintaining online services and applications might be expensive, and financial institutions that offer these services may charge additional fees.
• Overreliance on Technology: Relying on mobile applications and online banking requires constant Internet access because downtime or outages can prevent users and businesses from accessing their funds.

Conclusion

The transformation into a cashless society is imminent. Many predict that by 2030, we will no longer use banknotes and coins. However, to prepare for a cashless society, cutting-edge technologies and online services must be developed and used to minimise any possible dangers.

The rise of cryptocurrencies and virtual banks has accelerated the technological adoption of financial services, offering businesses more tools to improve their operations. 

Thanks to digital payments, startups can launch and expand their services worldwide, and corporations can attract clients and employees without worrying about payment limitations.

Written by

Hazem AlhalabiCopywriter

Reviewed by

Tamta SuladzeLead Author