The Surge Towards a Cashless Society
The Surge Towards a Cashless SocietyToday there are 500 billion banknotes and trillions of coins in circulation. According to a recent report from G4S, which manages cash distribution systems, physical money now accounts for 9.6% of global gross domestic product, up from 8.1% in 2011. A completely cashless economy is hard to imagine any time soon. In an age defined by technological advance, that is odd. It feels downright primitive that most of us still walk about with coins jangling in our pockets, much as ancient Anatolians did nearly three millennia ago when minted coins first appeared. We have barely advanced since cowry shells were the currency of choice in ancient China. Digitalizing all finance might sound like something out of science fiction, but we’re already on our way. Several powerful forces are behind the move to a cash-free world, including governments and large financial services companies. Even critics of the mainstream financial system and government-issued currencies favor doing away with cash.
Benefits of a Cashless Society
Less crime: With cash, it’s easy to steal money, whether the amount is large or small. Also, illegal transactions (drug trade, for example) typically take place with cash so that there’s no record of the transaction—and so that the seller can be certain about getting paid. Businesses with a shop-front will benefit from having no cash held on premises, potentially protecting them from the dangers, costs and general nuisance of break-ins and with making errors in cash calculations.
Paper trails: Financial crime should also dry up. It is harder to hide income and evade taxes when there’s a record of every payment you receive. Money laundering becomes much harder if the source of funds is always available.
Point of sale convenience: Removing the ‘no cash on me’ objection, merchants can make it easier for people to pay quickly, bringing more clients and a leaner business model.
No cash management: It costs money to print bills and coins and handle its movement. Businesses need to store the money, get more when they run out, and deposit cash when they have too much on hand. Moving money around and protecting large sums of cash could become a thing of the past.
Business can pay staff through a digital system, making it quicker and seamless with full simple auditing and accountability.
International payments: When you visit a foreign country, you may need to buy local currency. But payments are easy if both nations can handle cashless transactions. Instead of figuring out another currency, your mobile device handles everything for you.
Speed of transactions: Due to blockchain technology implementation transactions are quicker and brings a new paradigm to money management to even the unbanked.
Cost of transactions: If you have ever had to use Western Union instant service you will have felt the pain of the fees for this service, either the sender or the receiver will pay for the right to get access to the cash in another country instantly. Banks have always been chastised for their excessive charges and just plainly ignored the criticism because the profits are in their fees.
But it’s not just that cash has downsides. The middlemen who facilitate card payments are out there promoting card payments and trashing cash. And payment processing is a great business to be in. The total value of processing fees paid by American merchants last year—$97 billion—actually exceeds the estimated $55 billion annual costs of cash (theft, transportation, etc.) Find a hedge fund analyst who owns Visa or Mastercard and they will tell you why payments processing is maybe the greatest business ever!
With cash, virtually no one has an incentive to promote it. Yet when you describe it in basic terms, cash is amazing: “It can be given by anyone, accepted by anyone, settled and cleared instantaneously,” University of California at Irvine professor Bill Maurer told Grabar.
Refusing to accept cash excludes some people, but for certain stores, it won’t necessarily exclude any customers. That’s another way that fintech is replicating the pitfalls of traditional finance: The well-off and the well-banked are paid to make cashless purchases, while the poor and underbanked pay dearly for things like money orders.
Sweden is at the forefront of the transformation towards a cashless society, with only 13 percent of payments being made using cash, according to Sweden’s central bank, Riksbanken.
This development has been rapid. The number of notes and coins in circulation fell by 30 percent between 2012 and 2014. It has more than halved in the past decade. Over the next five years, the fraction of payments involving cash could become zero, according to scientists at the Royal Institute of Technology in Stockholm. Riksbanken is a bit more cautious in their estimation and considers it more likely that a cashless society could become a reality in a little more than a decade.
As for Facebook, McKenzie noted that David Marcus, ex-Paypal and formally in charge of Facebook Messenger, is now heading up a new blockchain team at the company. McKenzie thinks Facebook will eventually enable digital payments over Messenger using their own token.
“These sorts of tools will simplify digital wallets,” he said, “which in turn will drive the desire to trade with tokens.”
I agree with McKenzie that consumer adoption of cryptocurrencies for retail will be driven by a mix of a breakout digital wallet (much like Paypal was the defining e-commerce system a decade ago) and big companies adding tokens to their core communications products.
I think all this will happen despite the current skepticism of central banks around the world.
There is no denying the waves being made right now and any savvy investor will be investing something in cashless and global digitized payment technology.
One such company is at the forefront of this revolution is WinstantPay, headed by executives with many years in the banking industry and more recently in financial software who have developed an effective, user friendly, mobile application for the mass market including the unbanked 2 billion odd people who do not have access to basic banking services.
WinstantPay is a mobile app that brings fintech and the traditional banking system together, enabling everybody to make and receive instant payments, in any currency, including commodities such as Gold and cryptocurrencies like Bitcoin, and Ethereum.
Sign up for your wallet today here.
WinstantPay is a global payment network providing merchants and individuals a reasonably priced global final payment in an instant, in any currency, anywhere, anytime, with integrated anti-money laundering (AML) compliance that reduces time, costs, risks associated with payments. Serving financial institutions of all sizes for the last 18 years with financial services, software development, and business support, WinstantPay is also a founding member of WorldKYC-AML. For more information on how WinstantPay can deliver cutting edge business, visit our website and follow us on Linkedin, Medium, Twitter, Facebook, Medium, and Github.