# Four reasons why SMEs in developing nations should embrace a cashless society
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-14
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Why a Cashless Society is the Future of Economies
Meta Description: Explore the economic benefits of a cashless society in developing nations, including promoting economic recovery, fighting corruption, and reducing costs.
URL: https://financedigest.com/four-reasons-why-smes-in-developing-nations-should-embrace-a-cashless-societyhtml

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_By_ **_Alex Vavilov,_** _Chief Commercial Officer for_ [_Stenn International_](https://stenn.com/)

While no nation has forgone cash yet, it is becoming an increasingly popular idea around the world, with many developed countries making progressive [strides](https://fintechmagazine.com/digital-payments/top-six-digital-payments-countries-about-to-go-cashless) to becoming cashless. In Sweden, for example, less than one in ten were using cash in 2020, with the country planning to go totally cashless by 2023.

Cash is still the widely preferred [payment option of choice in developing](https://www.financedigest.com/payment-community-engagement-in-the-development-of-the-emv-specifications-increases.html "Payment Community Engagement in the Development of the EMV Specifications Increases") countries but there is a shift. One [report](https://www.pwc.com/gx/en/financial-services/publications/assets/pwc-emerging-markets-12-July.pdf) predicts that emerging markets will be at the forefront of the transformation to a cashless society.

I explore how a cashless society can help boost economies and [local businesses in developing](https://www.financedigest.com/southampton-development-continues-to-excite-local-investors.html "SOUTHAMPTON DEVELOPMENT CONTINUES TO EXCITE LOCAL INVESTORS") nations.

**#1 Promoting economic recovery**

While many issues play a role in financial exclusion, individuals and [SMEs running in areas with more of an informal economy find it extremely challenging to access](https://www.financedigest.com/55-of-uk-smes-unable-to-access-all-funding-needed-to-grow.html "55% of UK SMEs unable to access all funding needed to grow") and use formal financial offerings.

The [share of small firms with a loan from a financial institution is smaller](https://www.financedigest.com/ericssons-provision-for-u-s-probe-hints-of-smaller-fine-shares-jump.html "Ericsson’s provision for U.S. probe hints of smaller fine, shares jump") in bigger informal markets, while the use of cash and informal borrowing are more common when the informal economy signifies a larger percentage of the total economy.

Digitisation, or the adoption of digital technologies and approaches – like cashless [payment options – offers a transformational](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation") solution to financial exclusion driven by informality.

Several global examples demonstrate how cashless [payments are economic  style=”font-weight: 400;”>drivers. Bangladesh’s bKash enables mobile phone transfers, which has prompted growth and](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector-2.html "Combatting economic uncertainty in 2023 with the payments sector") [enhanced financial](https://www.financedigest.com/cobots-in-the-financial-workplace-reducing-costs-attracting-talent-and-enhancing-sustainability.html "Cobots in the financial workplace: Reducing costs, attracting talent and enhancing sustainability") presence in that country. The benefits come not from more money but from digital’s role in streamlining the [method of sending and receiving payments](https://www.financedigest.com/freelancer-payments-methods-what-you-should-know.html "Freelancer Payments Methods: What You Should Know").

Another possible benefit of a cashless society is the opportunity this creates for alternate currencies, like hyper-local currencies. These aim to encourage spending in local [markets and are already developing](https://www.financedigest.com/uk-developers-embrace-new-brexit-era-sales-marketing-strategy-by-attending-investorist-live-event-in-tech-hub-shenzhen.html "UK developers embrace new Brexit era sales & marketing strategy by attending Investorist Live event in tech-hub Shenzhen") worldwide, with the likes of TEM (Alternative Monetary Unit) in Greece.

**#2 Fighting corruption**

Physical cash can be unsigned and undetectable, allowing it to play a large role in crime, including [tax evasion](https://www.financedigest.com/tax-evasion-avoidance-and-efficiency-which-are-legal.html "Tax evasion, avoidance and efficiency: which are legal?"), bribery, corruption, and counterfeiting. However, cashless payments [leave behind](https://www.financedigest.com/new-research-reveals-the-countries-leaving-cash-behind.html "New research reveals the countries leaving cash behind") traceable records, making it difficult to disguise income, hide transactions and evade taxes.

Offering a new range of payment [options helps SMEs](https://www.financedigest.com/what-needs-to-happen-to-improve-the-landscape-for-smes-trying-to-access-finance-options-in-the-uk.html "What needs to happen to improve the landscape for SMEs trying to access finance options in the UK") entice a new tech-savvy group of customers and allows them to compete with larger businesses, as their audiences become more familiar with digitised payments.

With technologies like voice and face-recognition, being inbuilt into [payment technologies](https://www.financedigest.com/from-the-experts-5-payment-technology-trends-to-look-out-for-in-2016.html "FROM THE EXPERTS: 5 PAYMENT TECHNOLOGY TRENDS TO LOOK OUT FOR IN 2016"), transactions also have the potential to become more secure, while payments can be guarded by end-to-end encryption and fraud-preventing technology.

**#3** [Reducing costs](https://www.financedigest.com/finnair-to-cut-costs-reduce-fleet-to-return-profitable.html "Finnair to cut costs, reduce fleet to return profitable")

[Reducing cash payments eliminates the costs](https://www.financedigest.com/durham-county-council-reduces-data-log-analysis-costs-by-50-with-real-time-analysis-and-security-tool.html "Durham County Council reduces data log analysis costs by 50% with real-time analysis and security tool") associated with handling and transporting cash.

For one thing, counting cash can take time, both for the customer and the employee. Research shows that cashless businesses report benefits like faster transactions with approximately [5 to 15 percent](https://www.frbsf.org/cash/publications/fed-notes/2019/august/cash-me-if-you-can-impacts-of-cashless-businesses-on-retailers-consumers-cash-use/#_ftn8) more transactions recorded per hour. Faster, cashless transactions [mean fewer employees are needed to count and manage](https://www.financedigest.com/senior-managers-regime-what-does-it-mean-for-the-industry.html "SENIOR MANAGERS REGIME – WHAT DOES IT MEAN FOR THE INDUSTRY?") register balances during the day, so staff can spend more time helping customers instead.

Costs for transporting and handling cash decline too as cashless businesses are not required to pay bank fees to deposit and process cash, nor do they need to pay for armoured carriers to transfer [money to and from the bank](https://www.financedigest.com/marketmind-banks-are-leaking-money.html "Marketmind: Banks are leaking money").

**#4 Remaining competitive**

The growth in digitised [payments is likely to be uneven across continents and will depend on infrastructure readiness](https://www.financedigest.com/ready-for-the-new-eu-payments-value-chain.html "Ready for the new EU payments value chain?"), e-commerce and mobile-money penetration, and regulatory changes among other factors, in each emerging market.

To find competitive financial service rates businesses in developing countries [need to understand which payment mechanisms are available for their expenditure types and intentionally re-balance payment processes towards digital structures which will deliver the desired benefits for a reasonable](https://www.financedigest.com/5-reasons-why-women-need-to-get-into-property-investing.html "5 Reasons why women need to get into property investing") cost.

Digital invoice-related [services open new revenue streams and cost saving opportunities for SMEs](https://www.financedigest.com/hermes-bolsters-sme-service-with-significant-investment.html "HERMES BOLSTERS SME SERVICE WITH SIGNIFICANT INVESTMENT") hoping to remain competitive. These [businesses need easy-to-use products for their day-to-day financial administration and management](https://www.financedigest.com/national-world-launches-new-ad-manager-platform-powered-by-danads-empowering-businesses-to-take-control-of-their-advertising.html "National World launches new ad manager platform, powered by DanAds, empowering businesses to take control of their advertising") like issuing customer invoices, processing, and payments of supplier invoices.

Such services can be a real-time and single source of information for the SME owner about payables, receivables, and forecasted cash-flow position of the company, which increases efficiency and reduces [credit risk](https://www.financedigest.com/aon-assists-freddie-mac-to-reach-5bn-risk-transfer-milestone-for-u-s-mortgage-credit-business.html "AON ASSISTS FREDDIE MAC TO REACH BN RISK TRANSFER MILESTONE FOR U.S. MORTGAGE CREDIT BUSINESS"). Digital invoice-related services also save time and money, by eliminating potentially costly [mistakes by using automated](https://www.financedigest.com/5-common-mistakes-around-accounts-payable-automation.html "5 Common Mistakes Around Accounts Payable Automation") processes.

As we move through 2022, financing for small [businesses in developing countries will be transformed by digital](https://www.financedigest.com/3-reasons-why-businesses-get-stuck-at-the-starting-gate-of-digital-transformation.html "3 Reasons Why Businesses Get Stuck At The Starting Gate Of Digital Transformation") practices that continue to grow in importance.  By promoting global economic recovery and making it easier for these [places to embrace the future](https://www.financedigest.com/future-cheque-clearing-model-places-emphasis-on-speed-and-innovation.html "FUTURE CHEQUE CLEARING MODEL PLACES EMPHASIS ON SPEED AND INNOVATION") of a cashless society, local businesses will move from surviving…to thriving.


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