Cashless Society

What is a Cashless Society?
The term "cashless society" loosely refers to the fact that in the future it is expected that cash, in the form of coins and notes, will not be required to finalise payment for the sale and purchase of goods and services.

The term “cashless”, however, is not quite correct because it is expected that the future will be a “paperless” society rather than a totally “cashless” society. What that means is that the use of smart cards, credit cards, digital cash and instant electronic transfer of money will gradually overtake paper currency and cheques. The paper currency used by banks at present, will become redundant and be phased out.

The use of electronic money, or digital money, is happening so fast that banks are having trouble keeping up with changing their systems and procedures to this new technology. We can expect the future to hold less paper cash and coins and more smart cards where digital cash will be the main currency used. It’s not a matter of whether this is where commerce will go, but when it will all happen.

A Cashless Society has been Talked about for a Long Time
People have been talking for years about the elimination of physical cash and our society becoming totally cashless. Some groups feel this will issue in a new era where we lose control of our transactions, which will be taken over by computers. Others see it as a big step forward where efficiencies will come to the fore because of the speed of the electronic medium and supposedly will make fewer errors than humans. The main argument against digital control is because of the loss of personal control and that many people’s lives and dealings will come under the eye of “big brother” and be subject to scrutiny.

Benefits as well as Problems Involved
There will be benefits as well as concerns. Some benefits could include the reduction of the theft of cash (could become almost impossible except by those running the electronic system), with bank robberies and bank employee thefts minimised, or in some cases, eliminated. Attacks on those handling money, e.g. shop owners and cashiers, would come to an end. The streets would be a lot safer. The cost of security and insurance would drop because of reduced risks and some crimes could diminish and disappear altogether.

There would also be improved collection of tax, or payment for government fees, as well as debt collection  between various parties. The transactions would be immediate and  the parties able to check online whether a transaction has been finalised and all the details are as agreed. While people are happy with the advantages a paperless currency would bring, many are still very concerned about the loss of freedom and privacy that could ensue.

Money in a Cashless System
Many feel that there will never be a total cashless system because people will still need cash if they don’t have a bank account or where a card reader or ATM machine is not available. While this is a strong point of view, it is suggested that once the government of any country introduces a cashless system, the convenience or inconvenience of citizens will not be a priority by that government. The government will want people to get in line and use the system that has been approved in that country.

A modern system involves two types of money – the monetary base, which is issued by the bank of a country, and credit money, which is issued by private banks when they create deposits or loans to customers. If there is no cash in circulation, then the base money exists only as a reserve with the bank of the country (usually the Reserve or Central Bank).

The public has no direct contact with base money because the supply of money consists mainly of bank deposits. What happens is that all financial transactions within a country will cause changes in these bank deposits. All transactions between a government and its people will involve the transfer of base money. Transactions between banks are also settled in this way. If the two parties involved belong to the same bank, then the transaction simply involves the transfer of deposits within that bank.