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Advantages and Disadvantages of Cashless Economy

Cash currency is becoming less and less popular due to numerous technological and sociological shifts toward digital and virtual financial transactions. Only time will tell whether currency still has a special place in the world, as the move toward a fully cashless world has numerous potential pitfalls..


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RITESH SHARMA

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Unstop Igniters Glim

2 years ago | 4 min read

A world that doesn't use paper or coin money for transactions is known as a cashless world. The only form of payment is by electronic means, such as PayPal, Apple Pay, Zelle, or credit or debit cards. Although many nations are headed in this direction, it is difficult to predict which will phase out cash.

Before a community can completely give up on money, several social issues must be resolved in addition to practical difficulties.

You may get a sense of the numerous impacts becoming cashless can have on the economy as we know it from the benefits and drawbacks listed below.

The Advantages of a Cashless World

People who have the technological means to benefit from a cashless world will probably find it more practical. But this is not the only advantage of using. As you have access to your credit cards and debit cards, cash is at your convenience. 

  • Lower Rates of Crime

You become a convenient target for crooks if you carry cash. Once the cash is removed from your possession and transferred to a criminal, it will be challenging to locate it or establish your ownership. In one study conducted by German and American experts, it was discovered that Missouri's crime rate decreased by 9.8% when the state switched from cash welfare handouts to Electronic Benefit Transfer (EBT) cards.

  • Paper Trails Automatically

Similar to this, a cashless world should also see a decline in financial crime. Cash is usually used in unlawful activities like gambling or drug dealing so that there is no record of the transaction; hence laundering is easily possible. If the source of money is traceable, then it's very tough to move money around. When every payment you receive is documented, it becomes more difficult to conceal income and avoid paying taxes.

  • Cash Management Is Expensive

Going cashless is more than just practical. Both minting coins and printing currency are expensive. Businesses should hold the cash, replenish it when it runs out, deposit it when it exceeds it, and occasionally hire firms to move the cash securely. To safeguard branches against actual bank robberies, banks use sizable security teams. Moving big amounts of cash around could become things of history within a cashless world.

  • Making international payments is now much more straightforward.

You should not be concerned about the amount of local currency you will be withdrawing if you are going to a nation that recognizes cashless transactions. Instead, everything is taken care of by your mobile.

The Drawbacks of a Cashless World

Going cashless can also create some problems, depending on your viewpoint. Here are a few of the biggest drawbacks of a cashless world.

  • Digital Transactions Give Up Privacy 

Digital transactions are less private than cash transactions. It's possible that you have nothing to conceal and that you trust the companies handling your data. But the more you are presentable online, the chances of falling into the wrong hands are also high. You can send and receive money anonymously using Cash.

  • CashlessTransactions Pose a Risk for Cyberattacks

Hackers are the robbers in the cashless world. You are more susceptible to hackers in such a world. You might not have any other means to spend money if someone targets you and empties your account. 

  • Technology Issues May Affect Your Ability to Access Funds

You may experience issues, like not being able to make purchases when you need to due to glitches, outages, and unintentional errors. Likewise, when systems fail, businesses are unable to take payments. You could feel "penniless" if something as basic as a dead phone happens to you.

  • Economic inequality may increase

In a cashless world, the impoverished probably struggle more than they now do unless special outreach initiatives are taken. For instance, those who cannot purchase a smartphone will be left behind if smartphone purchases become the norm. The UK is coming up with contactless methods of giving to charities/the homeless, but these initiatives might not be ready to take the place of cash donations just yet.

  • Payment Service Providers May Assess Fees

The businesses that create these services might not provide them for free if the world is forced to pick from only a small number of payment methods and even if a single tool becomes the standard for payments. Payment processors can charge fees to profit from the large volume, which would negate any savings that may result from reduced cash handling. 

  • Tendency To Overspend Might Get Stronger

When you make a cash purchase, you physically remove the money from you and hand it to the recipient to acknowledge the financial impact. Alternatively, it's simple to pay with electronic payments without realizing how much you're spending. Consumers might need to reconsider how they handle their finances.

  • Customers Might Be Charged Negative Interest Rates

Negative interest rates might have some noticeable impact on consumers once all money is electronic. Switzerland, Denmark, and Japan are just a few nations that have tried out negative interest rates.

Conclusion

Cash currency is becoming less and less popular due to numerous technological and sociological shifts toward digital and virtual financial transactions. Only time will tell whether currency still has a special place in the world, as the move toward a fully cashless world has numerous potential pitfalls.

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RITESH SHARMA

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Unstop Igniters Glim


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