Cashless economy: pros & cons

The definition of a cashless economy, its benefits and disadvantages

cashless economy

Cashless economy: pros & cons. Source:

Can you guess what a CD player, digital audio tape, beeper, personal digital assistant, floppy disk, classified advertising, landline phone, and other old-school stuff have in common? Yes, you were absolutely right if you said they all are nothing but obsolete tech products, even if each object from this list was a vital part of our lives in its time. Progress does not stand still and time waits for no man. You should remember these simple, maybe sad, but true facts. Every technology solution or product will eventually be replaced by new and more efficient ones. Believe it or not, but a lot of financial experts claim that cash could be the next outdated useless vestige.

PaySpace Magazine would like to explain what the cashless economy is and try to define its advantages and weak points in an impartial manner.

A cashless society describes an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties. Cashless societies have existed from the time when human society came into existence, based on barter and other methods of exchange, and cashless transactions have also become possible in modern times using digital currencies such as bitcoin

What is a cashless economy?

Now we have a definition of the cashless economy, so we can rephrase it. Cashless economy is when the financial system has no physical cash in circulation. Therefore, all financial transactions are carried out electronically, through banking cards, electronic funds transfers, virtual wallets, and even cryptocurrency.

Some countries worldwide have been steadily implementing the cashless society concept. Sweden, for example, is the leading cashless country, having no less than 59% of consumer transactions in a non-cash form (including credit, debit, and mobile banking solutions). The closest competitor of Sweden is Canada, with 57% of transactions being cashless. Moreover, India decided to take its highest denomination bills out of circulation in 2016 (more than 90% of paper banknotes), while the People’s Bank of China claimed that paper money would cease to exist one day.

cashless economy

All financial transactions are carried out electronically. Source:

Advantages & disadvantages

Now we have reached the most controversial, consequently, the interesting part. Obviously, this issue, as well as any questions of a contentious nature, has plenty of both advocates and rejectionists. And it is natural since almost any phenomenon or solution somehow related to technology or finance has its evident weak and strong points.


  • Increased efficiency. Furthermore, it would not be wrong to say that the cashless economy is able to increase efficiency for both merchants and customers. Let’s start with an obvious: is it handy to carry around messy piles of banknotes? What would you choose – a pocketful of heavy coins, or a little piece of plastic with a magnetic strip, or even a mobile phone payment option? Millions of people are used to paying for purchases with their mobile devices and credit cards, and after all, it makes sense. It is expected, that contactless payment solutions like Apple Pay and Google Pay will have no less than 450M users all around the world by 2020.
  • Cost Reduction. The fully cashless system eliminates the need for cash printing, storing, and transporting. In case you didn’t know, producing money is not that cheap, with the average lifespan of a $1 bill in the US being only six years. If a government has no need to print money and mint coins, it will save millions in taxpayers’ funds.
  • Tracking spends. When you spend cashless, you can easily track your spending through a mobile device, or computer app, with one click. The new (not that new, to be honest) technology gives you the ability to keep a track of all your spending, which in its turn can significantly help you to manage your budget in the most efficient manner.
  • A mechanism of combating the parallel economy. We’ve just mentioned tracking spends in the previous point, and it is worth saying that this “tracking principle” applies to the economy of a larger scale as well. It is possible to track black money and illicit transactions if the economy is entirely cashless. This can take the AML to the next level. A cash-based economy can’t properly control whether all the funds come into the banking system. However, if all transactions inside the system are digital, it will be much easier to track and detect suspicious ones. In addition, merchants and small and medium-sized businesses sometimes use cash in order to avoid taxes and fees. But a cashless economy eliminates the ability to avoid taxes since all transactions are carried out through organized channels (banks and other financial institutions) in digital form.
  • Theft prevention. Having no cash in your pockets will reduce the chance of “good old-fashioned” robbery, as well as confound even an experienced bandit.

Let’s not forget about hackers. Source:


  • Inequality. You don’t even need to conduct a lot of studies to find that still there are tons of unbanked households worldwide. Unbanked is an adult citizen or family who doesn’t use a bank or financial institution in any capacity. This concerns mainly low-income individuals, since there is a big probability for them to remain unbanked. Thus, in a cashless future, unbanked citizens would struggle to purchase even the basic necessity goods, such as food or medicine.
  • Hacking, or the flip side of theft prevention. In the “benefits” points we’ve mentioned that muggers are no longer a big deal for you if you don’t have cash. However, let’s not forget about hackers. “Evil geeks” and computer geniuses who have chosen the dark side are able to clean out your account faster than an eye can blink. And it doesn’t matter whether it is a bank account or cryptocurrency wallet. You should also keep in mind that this situation is compounded by the fact that in the conditions of a cashless society you don’t have any alternative ways to spend.
  • Technology problems. We are merely not ready for this. Glitches, outages, and occasional mistakes can cause big problems. Just imagine, what if something like a power outage happens? You will not be able to buy even basic essentials, while merchants will not be able to accept payment if their, let’s say, POS has a malfunction. Paying with a cell phone is convenient, but what will you do if you need to buy something very important right away, but your phone battery is dead, and you don’t have a powerbank? That’s why some industry experts claim we are not technologically prepared for a fully cashless society.
  • Privacy. This is another significant issue. If all transfers are going to be digital, it means less privacy. Maybe you trust the institutions that process your data, but it might end up in the wrong hands. Cash allows you to spend money and receive funds anonymously, even if you have nothing to hide. After all, it is your sovereign right.
  • Overspending. A lot of studies have shown that usually, consumers spend much more when they make cashless payments. Maybe it is just a psychological trick, but when you hold paper money in your hands, you feel something tangible.


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