In 2022, nearly half of the US population, roughly 41%, doesn’t use cash at all in any transaction. The number goes up to 59% for those who make more than $100K per year.
With more advancements in financial technology, or FinTech, and decentralized finance (DeFi), society inches closer to a cashless society becoming reality.
Most people will fear what they don’t understand. A cashless society as a concept seems elusive and almost impossible. Can money exist without a physical form?
Let’s answer that very question and talk about what that means for the future.
The Cost of Eliminating Cash
A simple Google search brings up dozens of articles pushing a fear-mongering narrative around going cashless. However, observations by analysts and politicians reveal that the issue is more complicated than deciding if it’s all good or all bad.
Rather, the conversation shifts to whether or not people can adequately adjust to a world where spending cash doesn’t exist. Many developed countries like Sweden, The Netherlands, Japan, and the US seem to be the most prepared to go completely cashless. Over the last decade, these countries continuously shifted towards normalizing contactless payments using credit cards and digital wallets such as Apple Pay or Pay Pal.
Consumers also rely less and less on cash in person-to-person transactions. Platforms like CashApp and Venmo make it easy for people to pay each other through digital transactions, creating more convenience than having to always have cash or run to an ATM.
Does Going Digital Mean Your Money is Less Secure
Many instances of fraud on digital platforms already get reported regularly. Consumers send money through links to hackers posing as businesses or banks. Black and Latinx consumers get scammed twice as often as white people.
Data shows a divide between economic classes as well. Scams tend to be rare for those in higher tax brackets. Twenty percent of lower-income people have reported being the victims.
The Implications of Digital Currency in a Cashless Society
Traditionally, money exists as national currencies backed by large central banks. This keeps the value of money relatively stable. Central bank digital currencies create an alternative to DeFi. Japan and the European Union are already in the early stages of developing their own CBDCs.
Digital currencies make it easier to keep a record of all transactions. This stops criminal transactions, which tend to be cash-only exchanges to avoid detection.
The Biden administration supports a form of cryptocurrency called stablecoin. The value of stablecoins gets attached to gold or centralized currencies. Tether is a stablecoin that backed the US dollar.
This lets the very poor and unbanked have access to normal banking services. While the number of unbanked households has gone down since the 80s, today that number still hovers around 23%.
Go Crypto or Go Home
Cryptocurrencies exist at the forefront of moving towards a cashless society. They run on a blockchain and have no central backing.
Bitcoin, the original cryptocurrency, has a reputation for being volatile. Without government backing, crypto cannot be controlled. Thus bad-faith actors can avoid legal accountability.
But the rise of bitcoin has enabled digital transactions to happen without borders. This helps immigrants and people who send money to people in other countries. Bitcoin ATMs, such as the one here, let people exchange their crypto for cash.
Many naysayers foresee cash remaining a part of society to some degree. They see digital transactions integrating into a cash-based system, but not replacing it completely. Going completely cashless can be possible with tech advances.
Prepare for a Future Living in a Digital Society
Financial technology and government systems still exist in the early stages of development. In the past two or three years, society has shifted towards a cashless society sooner than we realize.
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