12 Feb The pandemic has accelerated the path to a cashless society, but is that a good thing?
The COVID-19 pandemic has changed many things in our everyday lives, everything from standing close to someone from paying in cash has become heavily scrutinised as a risk and a potential way to spread the virus. A move towards contactless payments and away from cash payments has been slowly progressing for some time, and, it appears, the pandemic has only acted as a catalyst.
Contactless payments are a great technological advancement but what does this mean for people who yet to embrace digital finance?
“Sorry, we don’t accept cash”
A recent study by the consumer group Which? found that one in ten people were refused by retailers when trying to purchase essential items with cash during the pandemic.
Although there has been no instruction by the government or the World Health Organisation to avoid cash during the pandemic, some retailers (large and small) made the decision to only accept card payments.
This may not seem like an issue for many of us; however, there is still a sizeable segment of people who don’t regularly use debit or credit cards to purchase goods. For these people, this move, particularly during a pandemic, has proved disastrous.
Many were left behind
There are approximately 1.2 million people living in the UK who are unbanked, which means they don’t access to a bank account. As the economy switched to ‘contactless only’ in a matter of days, these people, as well as some elderly people, those on benefits, and low incomes found themselves unable to purchase essential items at some shops.
The pandemic has been terrible for many of us, and it is unacceptable that the most vulnerable in our society should have this negativity compounded by retailers branding cash a virus-spreading hazard.
A cashless society gives rise to other potential issues
Depending on your perspective, going cashless could prove a problem. There are some potential major downsides to a cashless society, some of which we are already familiar with.
Hackers and fraudsters prey on people with digital bank accounts, phishing for login details and passwords, hacking email addresses, and posing as fake organisations, convincing people to send money to their accounts.
A cashless society would also be heavily reliant on the technology that underpins the whole system. Glitches, outages, or cyberattacks could cause significant problems for people; likewise, merchants would have no way to accept payment for goods if digital payments technology were to fail.
Privacy is also an issue that is important to many people. All digital transactions can, in some way, be tracked and recorded, which in turn means more chance of your data falling into malicious hands.
It’s not all bad…
Naturally, there are also many potential benefits to a cashless society, not least a potential for less crime. Although hacking and fraud are possible, they are considerably more complicated than stealing cash. Any cash that is stolen is also almost impossible to track. This is not always the case with digital financial crime.
Organised crime would struggle in a cashless society; money laundering becomes much harder if the source of funds is always clearly identifiable. It is also harder to hide income and evade taxes when there is a record of every payment made and received.
Holidays would also become a lot easier, assuming the country you are visiting is also operating a cashless system. There is no need to worry about visiting a currency exchange and therefore get stung by the often all too high rates of commission. There are already digital banks that offer the exact currency exchange rate to their customers who make purchases abroad with their debit card. It is more likely this would become the norm in a cashless society.
Some countries are already well on their way
In Sweden it is not uncommon to see signs that say ‘No cash accepted’. The European Payments Council noted that cash transactions accounted for just 1% of Swedens GDP in 2019, with cash withdrawals steadily declining by 10% a year.
Although the COVID-19 pandemic has no-doubt accelerated a move towards a cashless society for our beautiful island nation, the reactionary nature of it has highlighted some of the worrying drawbacks, particularly for the most vulnerable and ‘unbanked’ in our society.
If a cashless society is the future, then it is clear that there needs to be structured and well-planned transition from what we currently have, ensuring that nobody is left behind.