Mobile Banking A Cashless Society: The Pros and Cons


A Cashless Society: The Pros and Cons

cashless society"Cash or credit?" Is that statement becoming a phrase of the past? New technology and tools that support cashless payment options such as tapping a smartphone, waving and paying with a card, or sending an online P2P payment have hastened this process along with changing consumer preferences. It feels as though we truly are on our way towards a cashless society.

However, if you consider this potential more in depth, this breaks down along generational and class lines. Younger, more prosperous consumers are much more likely to prefer cashless payment approaches. Older consumers with limited resources and are possibly less enamored with technology, are more likely to use cash.

No matter where a consumer falls in this spectrum, the overall trend leans towards cashless payment methods. In fact, according to the Pew Research Center, 41% of Americans don't use cash at all during a given week to buy any regular purchase. And card payments are increasing in both value and number.  

In short, a cashless society may be on the horizon. Is this a good or a bad thing? Let’s take a look at both sides of the issue. 

Pros of going cashless

Here are some of the key benefits of a cashless society.

  • Simplicity and Convenience: The most obvious benefits of a cashless society are simplicity and convenience. What can be easier than sending a P2P payment or tapping your phone? There’s no need to visit a credit union branch or ATM to obtain cash or worry about not having enough cash on hand to make a purchase.

  • Cost savings: The manufacturing of bills and coins is expensive--and cash handling is even more so. Think about everything that a retail business needs to do with cash--store it, withdraw it, deposit it, etc. And, in the case of credit unions or other financial institutions, consider the cost of security, gasoline, truck maintenance, etc. when transporting large sums of cash between locations. 

  • Less crime: How many movies have you seen that involve an armored car heist where the criminals run off with the cash? In a cashless society, that cannot and would not happen. Consumers would be less likely to be targeted for street crimes if they aren't carrying cash as they do today. For example, crime in Missouri declined by close to 10% when the state implemented the use of Electronic Benefit Transfer (EBT) cards instead of cash welfare benefits. 

  • Paper trails: Cash is notoriously difficult to track and trace. But, when there’s an electronic record of all transactions, crimes like money laundering become much more difficult. It’s also a lot harder to conceal your income from the I.R.S. and evade taxes when every payment you receive is recorded. 

  • Easier international travel: In the past, it was necessary to exchange dollars for the local currency when visiting a foreign country. But in a cashless society, it’s possible to make purchases anywhere in the world just by using a mobile phone or card.

Cons of a cashless future

In addition to these clear benefits of a cashless society, there are some distinct disadvantages. Let’s explore them.

  • Lost privacy: With cash payments, you can send and receive funds safely and anonymously. But that’s not possible with electronic payments, which leave a digital trail behind them with a wealth of information about both your transaction and you. 

  • Security risks: Electronic payments are fat targets for hackers whose goal is to obtain and use transferred funds for their own malicious purposes. At the same time, a cashless payment is like an open door to identity theft since so much information about individual consumers can be stolen.

  • Technology issues: Making a cash payment is a simple, low-tech act. There’s no need to worry about buggy software, bad network connections, service outages, limited server space, or other technical glitches. But in a cashless society, where even a dead cell phone battery can cut a consumer off from access to his or her funds, such technology issues can be quite challenging. 

  • Economic inequality: In a cashless society, the poor and underbanked would likely face serious issues. For example, how do you pay for a product or obtain funds if you can’t afford a cell phone? This can deepen class rifts and leave the less fortunate disenfranchised. It might even lead to a black market where cash is sold at a premium and poorer people are taken advantage of because they have no other recourse. 

  • Ease of overspending: It’s a lot easier to overspend in a cashless society than when using cash. All you need to do is tap, swipe, or click and you’ve made a purchase. It isn’t until the bills come due that you might realize how much you’ve actually spent. 

The future is already here

The cons of a cashless society are clear but so are the benefits. Realistically, the future is already here and the steadily increasing use of cashless payment methods means that one day cash may become obsolete. Meanwhile, greater security and enhanced technology will help support the ongoing growth of cashless payment approaches. 

A credit union that seeks to thrive in this rapidly changing world must combine the best of traditional cash-based services with a range of cashless payment approaches. One key is the right credit union core platform partner so that it’s possible to meet member needs with a seamless, secure, efficient digital banking platform and full card services suite. FLEX credit union core software technology can help you get there. 

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Preston Packer

Written By: Preston Packer

Executive Vice President | CMO at FLEX Credit Union Technology
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