Cashless society coming soon?
The use of cash has slowly been dying due to the rise of Fintech and digital payments, but could it be the coronavirus that puts the final nail in the coffin?
Due to the outbreak of coronavirus we’ve seen a few examples of organisations and countries encouraging people to avoid the use of cash. The World Health Organisation has advised against the use of banknotes. While China and Korea have even begun isolating and disinfecting cash.
What do both examples recommend as an alternative to using cash? Using contactless payments is of course amongst the recommended suggestions.
Money changes hands so often, that it picks up all kinds of germs and viruses. Contactless payments are a much more hygienic solution as they are only ever touched by one individual.
When you add on top of that that the use of physical money is at an all time low in many countries around the world, it paints a pretty bleak picture for cash.
How will the coronavirus now impact Fintech?
The coronavirus could affect revenue for Fintech firms who make their money on cross-border payments and payment related revenues as everyday consumers restrict their spending, due to the fear around coronavirus plaguing consumers spending habits.
However, long term, as people start to avoid using physical cash, it will only further benefit the Fintech industry. More and more people will now desire to utilise digital payments because of this outbreak, resulting in the use of digital payments growing at the expense of physical cash.
The virus could also cause governments around the world to ease regulation on Fintech firms. A good example of this is South Korea. South Korea is now easing regulation this month on Fintech firms, in order to try and revive the economy and repair the damage the coronavirus has had on the Korean economy.
Why going cashless is better for society
The coronavirus has only reiterated the need to move towards a cashless society. The long-term benefits outweigh any negatives, some of these benefits include:
1: Less cash related crimes
Digital payments offer much-added security for individuals and businesses. By people not carrying cash and businesses not storing cash on their premises, it reduces the risk of a potential robbery.
The ability to launder money also becomes more difficult as all payments and transactions are trackable, making it easier to discover any potential wrongdoing.
2: Reduced costs
The production of coins and notes can be expensive, the switch to digital payments would reduce this cost.
Digital payments are significantly more convenient than cash. The convenience of paying and transferring money with devices such as a smartphone, makes it far quicker and easier than using cash. You’ll no longer even have to carry your wallet around!
4: Transactions become fast
Transactions are executed very quickly. According to Visa, it only takes an average of one to two seconds to process a contactless transaction, where as cash can take 6 to 7 seconds.
5: Easier to track spending and manage finances
By using digital payments you can easily track everything you spend your money on. This makes it easier for individuals and businesses to track and optimise their spending.
What does the future hold for cash?
Global demand is ever-increasing for digital payments and the use of cash payments is clearly starting to fade, whether it’s coronavirus or another factor that causes cash to die, it’s only a matter of time before it happens.
There are countries who are already moving towards cashless societies. In Sweden cash payments now only account for 15% of retail sales. There’s also countries such as China who are now looking at launching their own digital currency, which will also encourage people to move away from cash.
Of course not everyone will be receptive to the idea of a cashless society. There will always be people who don’t want to adopt technology and would rather carry cash around in their pocket. It’s more than likely these people will defend their right to use cash until the very end.
There’s also the issue of reliable internet, which is a key component to utilising Fintech. However the positive benefits associated with Fintech, completely outweigh the negative downsides of Fintechs.
The sooner that the issues surrounding Fintech can be addressed to stop people being left behind, and the quicker we can educate the wider population about the benefits of digital banking and payments, the sooner we’re likely to move towards a cashless society.