# Going Cashless — The Developing Digital Economy
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-17
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: The Benefits and Challenges of Moving Toward a Cashless Society
Meta Description: Discover the benefits and drawbacks of going cashless, from streamlined personal finances to increased government surveillance. Explore the future of digital
URL: https://financedigest.com/going-cashless-the-developing-digital-economyhtml

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_By_ **_Anil Malhotra,_** _CMO & Co-Founder, Bango_

Moving toward a cashless [society will lead](https://www.financedigest.com/owner-of-leading-discount-dining-clubs-tastecard-and-gourmet-society-appoints-new-chairperson.html "Owner of leading discount dining clubs tastecard and Gourmet Society appoints new Chairperson    ") to a wealth of possibilities for commerce.

Far away from the old days where banking meant long lines, plus sluggish payments, funds clearance, and settlements, we’ll soon be seeing the immediate processing of transactions, [enabling greater](https://www.financedigest.com/iris-acquisition-enables-accountants-to-add-greater-value-to-their-clients.html "IRIS acquisition enables accountants to add greater value to their clients") convenience for businesses and consumers. Many of the mechanics associated with retail banking will become obsolete without physical cash, with people accessing their funds without the need of a [bank account](https://www.financedigest.com/new-legislation-makes-switching-bank-accounts-simples.html "New legislation makes switching bank accounts “simples”"). We may even cease to speak in terms of having two pennies to rub together, or being in for a penny, in for a pound.

But we aren’t there yet. As we move in the direction of a [cashless society](https://www.financedigest.com/four-reasons-why-smes-in-developing-nations-should-embrace-a-cashless-society.html "Four reasons why SMEs in developing nations should embrace a cashless society"), it’s important to consider the pros, cons and challenges.

**The road to going cashless**

Introducing cashless commerce means that physically minted tokens of currency will no longer be used, with Central [Bank Digital](https://www.financedigest.com/digital-experience-and-security-the-crucial-combination-for-banks.html "Digital experience and security – the crucial combination for banks") Currencies (CBDCs) presenting the most significant institutional push towards an authentically cashless society. That said, it’ll take a few generations before we see more than half of [transactions being made digitally](https://www.financedigest.com/igtb-launch-digital-transaction-banking-available-as-saas.html "iGTB launch Digital Transaction Banking available as SaaS").

However, forming an “off the books” alternative to CBDCs will be essential going forward. While CBDCs present a stable option for everyday [currency and trading](https://www.financedigest.com/currency-trading-in-a-spin-after-polish-explosion.html "Currency trading in a spin after Polish explosion"), they’re often seen as providing governments with the means to monitor private finances by providing audit trails of all transactions.

I anticipate that we’ll see several blockchain-based [digital currencies emerge in the future](https://www.financedigest.com/smarter-safer-stronger-cybersecurity-is-now-critical-to-digital-future.html "Smarter, safer, stronger cybersecurity is now critical to digital future"), independently of CBDCs. These will provide customers an alternative [means of transacting digitally](https://www.financedigest.com/making-sure-that-finservs-digital-transformation-doesnt-mean-digital-exclusion.html "Making sure that FinServ’s digital transformation doesn’t mean digital exclusion"), in a way that’s autonomous of central government currencies and the prying eyes of those behind them.

**The benefits of going cashless**

At the risk of stating the obvious, the main advantages to [digital currencies are more streamlined management of personal finances for the average consumer and faster](https://www.financedigest.com/you-cant-get-faster-than-that-spring-statement-update-delivered-digitally-as-it-happens-with-app-driven-technology.html "‘You Can’t Get Faster Than That’ – Spring Statement Update Delivered Digitally As It Happens with App-driven technology") completion of payments for businesses. The majority of financial transactions are already being made in a [way](https://www.financedigest.com/6-ways-to-finance-your-dream-vacation.html "6 Ways to Finance Your Dream Vacation") that’s quasi-digital, because it’s simply more convenient than legacy alternatives.

Throughout most of Europe, Asia and the Americas, employees already receive remuneration through electronic transmissions from employers to banks, while tax is deducted and paid to governments through [digital](https://www.financedigest.com/self-employed-taxpayers-and-making-tax-digital.html "Self-employed taxpayers and Making Tax Digital") tax systems. What’s more, the majority of bills also being paid in a similar manner. Reliance on cash is diminishing by the year, as most can [manage their finances more efficiently](https://www.financedigest.com/iforces-route-genie-to-drive-efficient-carrier-management-for-freestylextreme.html "IFORCE’S ROUTE GENIE TO DRIVE EFFICIENT CARRIER MANAGEMENT FOR FREESTYLEXTREME") without it.

[Consumers are already seeing](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") the benefits of going cashless, but it’s businesses that will benefit most, with financial operations being made more cost-effective. Sizable costs and delays brought on from physical settlements will be significantly lessened, as [digital currencies and electronic settlements will simplify the payment](https://www.financedigest.com/can-i-please-speak-to-someone-why-building-relationships-is-still-crucial-in-digital-payments.html "“Can I please speak to someone?” Why building relationships is still crucial in digital payments") process.

**The disadvantages of going cashless**

Going [digital necessarily means](https://www.financedigest.com/lloyds-goes-digital-but-what-does-that-mean-for-loyalty.html "LLOYDS GOES DIGITAL – BUT WHAT DOES THAT MEAN FOR LOYALTY?") governments, their agents, and their advisors, will be more able to scrutinize an individual’s private activities and possibly exert greater control. That’ll be the main drawback for many, given trust in governments hitting a low point in democratic societies with open economies, with [privacy and security](https://www.financedigest.com/privacy-vs-security-is-the-cybersecurity-information-sharing-act-beneficial.html "PRIVACY VS SECURITY: IS THE CYBERSECURITY INFORMATION SHARING ACT BENEFICIAL?") concerns around agencies gaining insight into personal affairs more generally.

So while it’ll be more difficult to lose funds in a basic sense within a cashless regime (no more money down the back of the sofa), it’s likely that we’ll be more [vulnerable to data breaches or electronic fraud](https://www.financedigest.com/why-your-business-is-vulnerable-to-supplier-fraud.html "Why Your Business is Vulnerable to Supplier Fraud").

Cash is also still essential for [financial inclusion in developing](https://www.financedigest.com/financial-services-technology-development-in-2023.html "Financial Services technology development in 2023") economies, at least in the short term. This applies to particular demographics across all societies, such as the elderly. So abandoning cash could lead to unintended consequences, with certain groups being unable to participate in mainstream economic life.

**The challenges of going cashless**

Previously, changing [consumer behavior](https://www.financedigest.com/behavioral-biometrics-simple-and-secure-way-to-authenticate-consumers-digital-identities.html "Behavioral Biometrics: Simple and Secure way to Authenticate Consumers’ Digital Identities") has been the most significant obstacle for societies looking to go cashless. However, the pandemic presented us with a series of lockdowns which highlighted the convenience, and necessity, of [moving away from cash payments toward](https://www.financedigest.com/investment-advice-moving-towards-a-new-model.html "Investment advice – moving towards a new model") electronic ones. This trend will likely be irreversible.

But while the transition [towards digital](https://www.financedigest.com/the-journey-towards-a-digital-bank-five-major-stages-to-successful-banking-digitalisation.html "THE JOURNEY TOWARDS A DIGITAL BANK – FIVE MAJOR STAGES TO SUCCESSFUL BANKING DIGITALISATION") currencies is already in motion, it should be noted that this isn’t the result of carefully crafted government policies. Without a pandemic to expedite the process, governments will need to consider the best means to incentivize the formation of a [fully cashless](https://www.financedigest.com/is-it-time-for-smes-to-go-fully-cashless.html "Is it time for SMEs to go fully cashless?") society.

Popularizing digital currencies can only be achieved by fostering greater confidence, which likely won’t happen without central [banks embracing](https://www.financedigest.com/rethinking-retail-banking-embracing-a-customer-centricvalue-proposition.html "Rethinking retail banking: Embracing a customer-centricvalue proposition") them. Financial services may lead the [way by experimenting with business](https://www.financedigest.com/6-ways-how-to-create-great-tiktok-videos-for-your-business.html "6 Ways How to Create Great TikTok Videos For Your Business") payments and settlement, but we probably won’t be seeing widespread adoption in the short term.

Mass adoption is likely five or more [years away](https://www.financedigest.com/heathrow-airport-says-return-to-pre-pandemic-demand-years-away.html "Heathrow Airport says return to pre-pandemic demand years away") and will only be achieved when the level of consumer familiarization surmounts security and privacy concerns.

**Will we ever achieve a cashless world?**

It’s inevitable that we’ll embrace a largely cashless economy within the next couple of decades, with the momentum behind [digital payments](https://www.financedigest.com/italys-nexi-signs-digital-payments-deal-with-tims-olivetti.html "Italy’s Nexi signs digital payments deal with TIM’s Olivetti") and settlement speeding up the transition towards this state of cashless-ness.

Physical currencies will still be available, but they’ll function like an amusing relic, at least at first, where they’re accepted for curiosity’s sake, much like using CDs to [play music](https://www.financedigest.com/dont-play-second-fiddle-how-disruptor-banks-can-leverage-music-and-audio.html "Don’t Play Second Fiddle: How Disruptor Banks Can Leverage Music and Audio")!

However, [banks will eventually](https://www.financedigest.com/asia-shares-bank-on-eventual-china-opening-oil-gains.html "Asia shares bank on eventual China opening; oil gains") stop accepting cash, or make it more expensive to process, which means it’ll all but disappear. That means we’ll need to prepare by embracing the [digital currencies](https://www.financedigest.com/minding-the-gap-the-importance-of-inclusive-financial-strategies-as-digital-currencies-rise.html "Minding The Gap: The importance of inclusive financial strategies as digital currencies rise ") which make our lives more convenient.

By moving away from CBDCs toward blockchain, [businesses and consumers](https://www.financedigest.com/citigroup-says-will-close-russian-consumer-commercial-business.html "Citigroup says will close Russian consumer, commercial business") also stand to enjoy greater privacy alongside streamlined finance, making this transition all the more welcome.


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