Considerations For Cashless

Questioning the gradual, global abandonment of cash

The creation of cashless societies is well underway. According to a 2014 Pennies survey, one third of people living in the UK never carry cash. A later Mastercard study suggested that around half of the people who carry cash don’t have more than a fiver in their pockets. 

Cashless isn’t just a Western phenomenon. Outside of the Occident, China and India have also moved towards digital transactions, and the high mobile saturation of African countries has encouraged the same trend. What has enabled the move away from money, and what considerations need to be made in a cashless world?

A notable development

When it comes to cashless, it’s worth thinking about the relationship between consumers and institutions. Are customer preferences driving the evolution of payments, or are organisations nudging customers away from their wallets?

In India, the government is certainly pushing new payments. In 2016, as part of a government initiative to drive digital transactions, the National Payments Corporate of India launched its Unified Payment Interface (UPI). Through UPI, a customer of one bank can send funds to a customer of a different bank via their mobile. The only thing they need to do is share their mobile numbers or virtual IDs – they don’t even need to use the same transfer app. 

UPI is now used by over 140 Indian banks, as well as Google and WhatsApp. However, cash still rules… In 2017, there were 22 per capita digital transactions in the whole of India, compared to 782 in the city state of Singapore. The Indian government wants to become ‘faceless, paperless, and cashless’, and while there’s a long way to go, the popularity of UPI is a strong start.

UPI signals the maturity of new methods for mobile money exchange. Chinese company Xiaomi has launched Mi Pay, a UPI app, and WeChat plans to release WeChat Pay in India to compete with existing digital wallets like Paytm, MobiKwik and PhonePe. Much like in India, the Chinese government is highly supportive of cashless initiatives. It’s easy to see why – the big companies that are linked to the Chinese authorities can gather customer data from transactions, and become more effective marketing platforms. Bringing more people into the digital sphere means more information about those people and how they spend their money. The adoption of mobile payments in China is so high – amounting to $9 trillion in 2016 – that it’s possible to transfer money to homeless people using Alipay and WeChat Pay.

Can we count on cashless?

There is still debate over the security of cashless payment solutions, regardless of the number of steps in the verification process. Mobile money transactions may require a one time password (OTP), a mobile banking personal identification number (MPIN), some form of biometric passkey, a range of other private information, or perhaps a combination of all. But, even if the transaction itself is watertight, things can still go wrong.

Imagine that the world has transitioned to a cashless society, in which the vast majority of people use digital payment options like apps and contactless cards instead of physical money. Now imagine that the servers of a major digital payments processor are hacked or simply break down. Cashless customers would be stranded until the issue was resolved.

This is exactly what happened in 2018, when Visa was hit by a freak blackout that left customers unable to carry out any card based transactions. The system crash lasted for six hours, disabling Visa card payments and leading to mammoth queues across Europe. Anyone with a few quid in their pockets could at least get themselves home. Cash, on the other hand, doesn’t crash.

The cashless question has implications surrounding surveillance capitalism, too. UPI transactions rely on an ID number. Some western countries already use ID numbers, but for many the idea of having a personal identification code is somewhat intrusive… Especially if that code provides access to their entire life savings.

A mixed monetary model

Cashless is becoming more common thanks to consumer adoption and trust in technology, ranging from mobile apps to blockchain. Today, most parts of the world operate on a hybrid system that merges cash and cashless without difficulty. Card, mobile, and online payments are popular, but there’s still something reassuring about having that emergency fiver close to hand.

All the same, cashless societies are developing quickly. China is the obvious example, with far higher cashless adoption than anywhere else in the world. This is due to a combination of factors, including the government’s stake in major tech companies like WeChat and Alibaba, and the country’s position as a technology powerhouse. But even in less technologically saturated locations like India, the enthusiasm for cashless is clear. Despite concerns over security and surveillance, the convenience of cashless often justifies the risks.

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