Moving Towards a Cashless Society

This article was written by Alessandro Ravanetti, the co-founder and CMO of Crowd Valley, a global fintech company.

The transition towards a cashless society seems inexorable. The incredible rise of fintech payment companies like Square, WePay and TransferWise, along with the increased popularity of Bitcoin and Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, are making traditional banks and old payment systems obsolete, with cash becoming less important. It might not be too long until cashless societies become reality.

In Europe the Nordic countries are leading the way. Sweden, where even homeless magazine vendors are equipped with card readers to take donations, and Denmark have the highest rate of credit card Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term per inhabitant. Credit Suisse says the rule of thumb in Scandinavia is: "If you have to pay in cash, something is wrong."

Sweden was the first European country to implement paper money and now could be the first to eliminate it. Denmark is not behind, as the government has proposed that retailers should no longer be obligated to accept cash payments, allowing them to ban cash altogether, and set a 2030 deadline to completely do away with paper money.

Britain as well is moving pretty fast. 2015 was the first year that cash was used for less than 50% of all payments by consumers, with contactless payments growing by three times in the past year with more than a billion transactions. The UK Cards Association reported that in the first half of 2015 the amount of fraud on contactless transactions was extremely low, about the equivalent of 2p for every £100 spent.

In the infographic above (created by Racounter) it is possible to see the huge differences present from country to country. While for the countries of Northern Europe, and also in other part of the world (eg. Singapore), around 60% of the consumer payments transactions are cashless, in Italy it is just 6% and in Russia 4%, while the average for the African continent is 1%.

The general idea behind moving towards a cashless society is that transaction costs and crime will go down by eliminating physical currency, curbing tax evasion and simultaneously reducing the shadow economy.

But there’s more, according to a study by Moody's Analytics, analyzing the impact of cashless transactions on economic growth, the higher use of electronic payments in the UAE helped the GDP to increase by US$3.7 billion and created an average of 14,170 jobs per year in the period between 2011 and 2015.

Opponents are generally concerned about loss of liberty. Carl-Ludwig Thiele, German central banker, is one of those against it saying that “abolishing cash would hurt consumer sovereignty - the free choice of citizens about their payment instruments”.

"Government agencies do not have the right to tell citizens how they should pay," he added, citing Russian novelist Fyodor Dostoyevsky who said in 1861 that “Money is coined liberty.”

Like it or not, the payments sector is evolving and is undergoing a complete change. Even if it’s still not clear how long it will take and how exactly things will evolve, it is now already pretty clear that the trend is towards a cash-free society, with all its pros and cons.