Could We Become A Cashless Society?
Within the next decade, 15 countries are set to go cashless, including seven within Europe. In the UK, could we become a cashless society?
What barriers will we be facing? And how do we get there?
The Idea of a Cashless Society
During the pandemic, many outlets became “card only” as a way of trying to minimise the spread of germs. This has then continued through the Russia/Ukraine conflict and into 2023.
There has also been an increase in adults in the UK using a digital bank, with more than a quarter of adults using one.
According to FCA Clea Evagorou, the Risk Advisory Leader at Deloitte Cyprus, specialising in advising clients on the regulatory implications of digital technology, the notion of a cashless society is less imminent than it may seem. Despite the rapid pace of digital advancements, she emphasises that several crucial adjustments must precede its realisation.
Using Digital Currencies
When it comes to financial inclusion, Evagorou highlights a critical concern among regulators. Simply possessing a mobile phone does not guarantee the ability to access money.
According to the World Bank Financial Index database, approximately 90% of adults in high-income nations have bank accounts. This figure drops to about 45% in medium-income countries and just over 20% in low-income countries.
In order to transition to a cashless society, countries must ensure that all segments of their population have access to electronic payment methods and are adequately educated to use them. Achieving this goal necessitates a combination of regulatory and industry initiatives focused on financial literacy, as well as strategies for managing the closure of branches and ATMs.
For adopting digital currencies, Evagorou highlights the need for robust regulation along with the current lack of oversight surrounding cryptocurrencies.
Cross-Border and Currencies
A crucial step towards securely transitioning money into the digital realm is introducing state-issued digital currencies. There are already conversations underway around the use of a digital Euro, which would coexist with physical cash.
Final Thoughts on a Cashless Society
Transitioning to a cashless society would require a substantial technological investment from all stakeholders in the country/ies. This includes banks, payment institutions, and all regulators.
Currently, the existing infrastructure is not designed to handle such a high volume of transactions, nor is it equipped to facilitate real-time payments. It would also require heightened online security and operational resilience to try and combat the ever-increasing cyber-attacks.
Business models, banks and other financial institutions would also require a complete evaluation if they were to invest in a fully cashless society. Currently, they generate revenue through fees applied to customer transactions. In a cashless society, this revenue stream would vanish, changing how we handle our finances forever…
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