It’s inevitable — We are headed toward a cashless society

It’s inevitable — We are headed toward a cashless society

August 24, 2017

cashless societyPaying for goods and services the old fashion way, with cash, is quickly becoming a thing of the past. An increasing number of customers and businesses find cash to be an inefficient way to do business.

When a business collects cash there is a fair amount of important work that goes on in order to deposit it into its bank account. Lots of issues need to be addressed that include both staff and management —counting paper bills and coins, monitoring that process, and keeping up-to-date and accurate records. Plus, there are security issues to consider, including theft.

A cashless transaction eliminates these extra steps and allows management to spend more time focusing on operating and improving the business, as opposed to overseeing clerical functions that cost time, effort, and money.

Another upside for businesses, according to a survey conducted by VISA in the U.S., switching from cash to digital transactions can also increase revenue.

From the customer’s perspective, carrying cash is often the least attractive option. Many customers prefer to use plastic cards or smart phones. In 2015, the Bank of Canada noted that Canadians were using cash for fewer than half of their transactions.

Tap-and-pay methods are becoming increasingly popular, especially among younger Canadians. During the second quarter of 2017, tap-and-pay transactions increased to almost 40 per cent, which is an increase from just over 30 per cent a year earlier.

Digital wallets, made possible through smart phones, are also going to help cash become obsolete. At the end of May, Google launched its Android Pay. Apple Pay has been available for more than a year.

Even with all the new technology, there are still some people who would prefer to use cash.

Parents often give their younger children a cash allowance.

Some consumers prefer using cash for privacy reasons. Cash transactions don’t leave a paper trail.

Then there are those who feel cash transactions keep their spending in check. Behavioral economists have shown that consumers tend to spend more when they don’t have to physically hand over cash.

Despite some of the drawbacks, the trend towards new forms of payment, as opposed to cash, is undeniable.

A cashless society would also benefit the government.

One of the principal concerns of governments is to collect taxes, which is critical to the financial side of running a country and providing for its citizens.

Cash transactions are very difficult to monitor and as a result can make tax evasion and other money fraud easier to perpetrate. For example, the underground economy, which costs the government billions in unpaid tax dollars, couldn’t function without cash transactions.

Any form of modern payment using technology is much easier for the government to monitor.

It may not be an easy transition for some, but all signs point to the fact that we are most definitely headed toward a cashless society.

Watson Investments
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