Cashless society, be smart and benefit from it

Several years ago when my daughter was 3 years old, once at the mall, she asked for a toy. I told her that I could not buy it because I don’t have money. Then she said, “Mommy, but you have a card!” Even though I was “cash less”, I was able to buy the toy.

Without cash, payments happen electronically. Instead of using paper and coins to exchange value, you authorize a transfer of funds from a bank account to another person or business, using a card, mobile, or other payment instruments.

Variety of new options

These days, cards are among the most popular cash alternatives. An important role in building the cashless society has the mobile payment and payment apps that support business-to-consumer (B2C), business-to-business (B2B), or what they now merge into account-to-account (A2A) online payments in a reliable and speedy fashion.

Furthermore, there are mobile payment services and mobile wallets like Apple Pay that provide secure, cash-free payments. Last but not least there are cryptocurrencies as a part of the discussion with all risks and regulatory hurdles.

A cashless society might sound like something out of a science fiction movie, but it’s already on its way, and in order to experience all the advantages it brings, we should understand the full picture of this way of payment and develop new behaviours and habits in it.

Fear of the new and unknown

We will start with debit and credit card payments as the most commonly used cashless instrument in the present time and a good fundament for future electronic and digital payments.

Probably one of the biggest advantages is the perception of the plastic, as an equivalent of money. Even if we see it as a plastic object, we must take care of it with the same caution as with our wallet with money. Using the card, and related card data as PIN, expiry date, CVV2, we are authorizing the money to be deducted from our account. As we treat paper money i.e. cash on the account as our possession, the same means for the card and its data. This means that we should avoid sharing the card and its data with others, and be very careful where we leave and store this data. Try to avoid giving your card to your relatives, don’t share the PIN with the lady at the cash register, be careful where you shop online and don’t store your data in web browsers, don’t write your PIN on the back of the card.

These days’ debit and credit cards get digitalized in mobile phone apps, so the necessity of the card no longer exists, but what we have learned for the card, and the cautions we are making, relates to the phone also.

Except for the aspect we have discussed, there are facts that we should understand and be aware about the electronic and digital payments of the new era.

Electronic payments aren’t as private as cash payments. They are always tracked and recorded in the systems where processed, banks, payment operators, payment gateways, payment schemes. All these entities must fulfill the highest security standards, guarantee safety that our information won’t end up in malicious hands. Except for being reliable, these entities should offer continuous service and prevent technology problems that could affect our access to funds or ability to make purchases and receive payments.

We should be aware that it’s easy to swipe, tap, or click without noticing how much we spend. Research shows that the temptation to overspend is higher in cashless purchases.

One of the biggest challenges is to understand and learn how electronic payments work and develop related behaviors, the same we are doing with cash in the physical world. Once we understand, we will enjoy the commodity, comfort of the new digital era of payments, and explore all the benefits it brings.

From convenience to lower crime rates

The generations with the technological ability to take advantage of a cashless society will likely find that it’s more convenient. As long as you have your card or phone, you have instantaneous access to all your cash holdings.

Convenience isn’t the only benefit. We could expect a lower crime rate since if there is no tangible cash to be stolen then you are not an easy target for criminals. Money laundering becomes much harder since Illegal transactions typically use cash so that there isn’t a record a paper trail of the transaction but if the source of funds is always clearly identifiable it is harder to hide income and evade taxes when there’s a record of every payment you receive.

A cashless society also means saving time and costs associated with handling, storing, and depositing paper money.

International payments and travel become much easier since we don’t need to exchange in local currency our mobile device handles everything for us.

Sweden is already way ahead with some cashless solutions

Every individual will have contact with some cashless instruments and an opportunity for adoption. The big influence for the variety, learning, and support is the bank, financial system, and regulation.

There are logistical challenges and social issues to overcome, financial and banking system adjustments on the road to becoming a cashless society. It is understandable that some countries and banking systems are more prepared than others and some people are more open to change than others.

Sweden is a very good example of a cashless society and is expected to have a 100 percent digital economy by 2023. In Sweden, it is not uncommon to see a sign “No Cash Accepted”. According to the European Payments Council, cash transactions accounted for just 1% of Sweden’s GDP in 2019.

Consumers are mostly happy with this situation, but those who struggle to keep up with technological developments continue to rely on cash.

Countries that are highly digitally evolved are best positioned to unlock value by focusing on migrating to digital alternatives to cash.

Apart from Sweden, western European countries have the great potential for unlocking value by policy and innovation-led migration to a cashless society. Countries in the region and our country still need to work on their digital readiness.

Author:

Filomena Pljakovska-Asprovska

CEO and President of the Board of Directors of International Card System Inc. Skopje — Casys, the only payment card processing processor and personalization bureau in N.Macedonia. She holds a bachelor degree from the Faculty of Electrical Engineering & Information Technologies and a master degree from the Economic Faculty of Skopje, University “Ss. Cyril and Methodius”. She is also an alumna of Schulich School of Business, York University Toronto CA and a scholar from Kellog School of Management USA. As an expert, she is also a member of the National advisory group for payment systems in the National Bank of N.Macedonia and in the Committee for stimulating the cashless payments.