Perhaps one of the most significant aspects surrounding the mass adoption of technology and digital software is how it enables us to remain connected at all times of the day. From the second we wake up to the very last email we send out before leaving the office or logging off—never before have we been more connected than right now.
While technology has allowed us access to a virtual world where we can communicate and share information, it has also created new ways in which we can bank, transact and pay.
For as long as we can remember, cash has reigned supreme, not just in America, but all across the world. Yet, in more recent times, we have started seeing a change in the way people tend to pay for goods and services. From swiping their credit cards to tapping their smartphones and smartwatches—cash has gone digital.
Digital Payments and the Argument for a Cashless Society
Digital payments have taken the world by storm. By 2025, we could expect to see around 1.9 trillion cashless or digital transactions globally, an 80% increase between 2020 and 2025 according to recent estimates by consulting firm PwC. This shift from cash to digital could see more than $7 trillion worth of transactions by next year, and in eight years that number could grow to as much as $48 trillion.
The debate over whether cash is still relevant in the modern era has been a hot topic of conversation for many lawmakers and economists.
On one side of the aisle, some argue that a cashless society would affect millions of people who still budget and transact with paper currency. In the United Kingdom alone, more than 15 million people will be affected if the ‘’dash to digital” is to accelerate even faster in the coming decade.
Then some feel that eliminating cash, and completely shifting to digital payments would help improve global payment systems for both developing and developed nations, increase financial literacy for millions of people, and help to spread accurate information more broadly.
While it is at all completely possible to have a cashless society and see the hyper-adoption of fintech-based payment systems and applications take shape, there’s still a long road ahead before this seemingly cashless utopia can come to life.
From the United States to the European Union, central banks and federal governments are looking to push towards a more tech-savvy nation where citizens are open to the idea of using mobile apps and digital wallets or cards to pay for everyday essentials.
Yet, an argument of a different stature raises concerns over the privacy of data and personal information bringing about a new set of challenges the fintech industry is looking to resolve as mass adoption soars, and cash slowly begins to lose its sheen in the modern world of digital economics.
The Future of Payments is Now
Fintech, or financial technology, was almost unknown before 2011. By 2020, the COVID-19 pandemic which swept across the world, saw national governments issue stay-at-home orders which forced businesses to close and millions to work from home and fintech quickly saw major popularization.
During the time of the pandemic, fintech adoption was perhaps at its peak, with usage growing by more than 72% in Europe alone, while in the United States the industry grew by 39% according to a report by J.P. Morgan Chase.
Even in the developing world, fintech alone could create more than 95 million new jobs, helping emerging economies grow their GDP by 6% or around $3.7 trillion by 2025.
Innovations in the fintech industry have soared in recent years, and although this has helped contribute to the popularity of digital payments or cashless transactions—widespread access to technology and software has created a new generation of beneficiaries.
In the United States, a study found that around 97% of Americans now own a smartphone of some kind. This same study revealed that overall smartphone adoption grew by 85% between 2011 and 2020.
In some developing parts of the world such as Africa, internet penetration has exploded, with around 18% of the continent now having access to the internet. In some countries such as Nigeria, Egypt, South Africa, and Morocco, internet availability and access have surged throughout the last few years. In 2022, Nigeria reported more than 109 million active internet users, 82% thereof accessing the internet through mobile or smartphone devices.
From various corners of the world, the widespread utilization of technology and the internet enabled us to be more innovative, from the way we communicate to the way we pay and send money across multiple platforms.
Just like generations before, cash is everywhere, and money makes the world go round—this time, it’s only digital, and can be done with the touch of a button.
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More than 12 years ago, the best and fastest way to send money from New York to London would be to take a flight from JFK International to Heathrow Airport to deliver it yourself.
This might seem a bit excessive to some extent but if you consider how easy and seamless it has become to send cash to anyone in any part of the world these days, it almost makes logical sense.
Research has found that 73% of Americans believe that digital transactions and fintech-based software tools are now considered their new normal when it comes to their personal finances.
Not only do digital payment platforms make it easier to transact between different people and places, but it also helps to know that there are added features that make the entire process a lot more convenient.
When working with cash, it takes time for a bank or financial institution to process the notes and coins, then only having to verify both the sender and the recipient before clearing it from one bank account to another.
When we look at how technology, deep machine learning and Artificial Intelligence (AI) have almost now replaced several banking systems overnight, it comes as no surprise why so many banks and financial institutions are now making the switch to digital.
Insider Intelligence has found that by 2025, around 216.8 million, or 80.4% of Americans will be making use of digital banking. In 2022 alone it’s estimated that digital banking will reach more than 203 million, or 77.2% of Americans already.
The usability of digital banking is almost endless, but more so, it’s easy and allows anyone to have immediate access to their finances without having to physically visit their bank or print out a statement.
One thing is for certain, being cashless in a figurative sense is a lot more convenient.
The Cashless Society Could Thrive
It is possible that the cashless society could thrive, looking to add more digital payment options to the already existing network, and allowing more users to freely transact on these platforms without having to physically visit their local bank or finance merchant.
The cashless society would perhaps look a lot different than what it does right now, even with the high penetration rates we’re already experiencing around the world.
For small businesses, it could mean that they can sell their goods and products to customers in different parts of the country, or abroad. They can accept payments from various banks, or even a foreign currency without having to wait hours or days for it to clear.
It would allow some entrepreneurs to have immediate access to the finances they require to either initiate a new project or launch a new service online. Investors could also play a massive role, as VC-backed funding can now go from loans and checks to Initial Coin Offerings and bank wire transfers.
Additionally, it also creates a digital paper trail, which works in favor of both government officials and law enforcement. In the event that fraudulent activity is flagged or detected, the digital trail left behind by the scammer can then be traced, adding a layer of security that benefits both the system and the consumer.
Then there’s the possibility of accessing foreign currencies in places where it once seemed impossible. Employers can now pick from a global pool of talent for their company and pay them in the employees’ origin currency, or vice versa.
There are so many of these opportunities that already exist within our daily lives, as we inch closer each and every day to a cashless society.
Digital Safety and Fraud Protection
When it comes to protecting your personal information, especially when that information is linked to your finances and digital cards, digital can sometimes be a letdown, and in most cases, it can rank up a costly bill.
In 2021, the Federal Trade Commission announced that consumers lost more than $5.8 billion due to fraudulent activities such as trade and investment scams, romance scams, and identity theft. That’s quite a hefty amount considering that around 25% of reported scams resulted in consumers losing around $500 each.
Yet, with the scope of digital practice, it’s become increasingly difficult for many consumers, especially those who are relatively new to the fintech space to differentiate between a legitimate transaction and a scam.
Scammers posing as government officials to falsify information sees thousands, if not hundreds of thousands of consumers paying legitimate cash into fraudulent bank accounts each year.
Yes, consumers can become victims of scammers reaching deep into their pockets, even in this hyper-digital and supposedly secure online world.
In 2021, Amazon, perhaps one of the world’s largest eCommerce platforms saw more than 96,000 consumer report being victims of an Amazon-related scam which during this time saw the scammer steal more than $27 million.
This is one of many such cases, and as the adoption of technology and fintech grows bigger, we’ll be seeing a lot more of these stories come to life in the coming years.
Information and Data Protection
For some people it might be about the money they lose when they’re unknowingly dealing with scammers or fraudsters, for others, it’s perhaps their identity and personal information that’s more valuable than a couple of dollars a scammer got away with.
Data and information protection has become a main concern for many consumers, and it’s not just when we’re talking about online and digital banking. Across various platforms, social media networks, and mobile applications, every day, more and more users are falling victim to their personal and private information being stolen or misused.
A report published by Aite-Novarica Group found that around 47% of Americans were victims of financial identity theft in 2020.
Even in our highly digital era, we’re still victims of crimes that have been around since we could remember. Although it’s not possible to eliminate digital cybercrime or identity theft from our financial systems, as these issues are only looking to become more prevalent, consumers are urged to be more cautious and meticulous when conducting online transactions and payments.
The Digital Divide
While online transactions and banking have given some consumers more peace of mind when it comes to their finances, some are still trailing behind, as the digital divide has grown the gap between those who can access online financial tools and features.
Some 1.7 billion people globally still depend heavily on physical cash as their way of living. Not just this, but this nearly 2 billion people see cash as their go-to when budgeting, spending, or transacting.
While cash still carries a universal need, it sometimes goes unnoticed that our thirst for digital innovation in fintech has overshadowed those individuals who still heavily rely on cash as their basis of daily operations.
Interestingly enough, more advanced economies in the European Union have in recent times seen to be more favorable of cash than countries in Asia which have now fully embraced the cashless transactions.
Spain (87%) and Italy (86%) had the highest percentage of full cash payments, while Japan (82%), Germany (80%), and France (68%) filled the remaining top five positions.
Yet, cash in these countries may seem like the go-to when having to pay for a bill at a restaurant, or buying something at the local produce market. Nonetheless, these countries remain some of the most developed nations in the world, where access to internet connectivity and mobile phones are somewhat quite natural.
Evidence has shown that around 33% of African adults have access to digital payments and banking systems, while European nations including Norway (96%), Denmark (95%), Iceland (95%), Finland (93%), and the Netherlands (90%) are the top five European countries with the highest online and internet banking penetration.
It’s quite interesting nonetheless to see how the digital divide has not only gone from basic things such as mobile phones and the internet, to broader concepts such as cashless transactions and fintech tools.
Although adoption thereof may still be slow in some parts of the world, finance-focused activities remain a strong player in the global consumer market.
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Cashless Has Good and Bad
By now, we see that going completely cashless is a possibility, as it unlocks a whole new world of financial activity on a global scale. It invites a fresh wave of consumers that can now tap into foreign markets, shop abroad, transact with foreign companies and grow their financial literacy.
Yet, these activities and innovations aren’t without risks, as the rise of cybercrime and cyber-related fraud have become a slow burn for the fintech industry. More so, it’s increasingly worrisome how much of users’ personal information and data are either being used for fraudulent activities without someone being able to pick up on it.
The Bottom Line
What we can take away from this is although fintech has both good and bad, we can’t ignore how extremely convenient it has made our lives. We are now able to pay for anything and almost everything without having to hackle for notes and coins.
There is however the fact that a cashless society has a great deal of loss when not regulated or monitored by the appropriate authorities. It raises a lot of questions over who has access to your finances, and how are you able to protect yourself?
Cashless or not, we should remember that both these come at a steep price to pay.
Do you think there will always be a need for cash? Let us know in the comments below.