Cashless Economy – Where Do We Stand?

Are we heading towards a cashless society or is it just another myth?

From bartering homegrown potatoes for meat to using coins and cash for centuries, we have now entered the age of virtual money. A cashless economy is one in which the exchange of hard currency is minimal. Most transactions take place via electronic devices in the form of:

  • Credit card
  • Debit card,
  • Mobile wallet
  • Point of Sale (POS)
  • Internet banking
  • Mobile banking, etc.

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With advancement in technology, there are drastic changes in the way consumers and the industry are handling finances. The common need for both is a system that is quick, efficient, clean, secure, and convenient. A cashless economy does seem to be the solution.

The Growth in Cashless Payments

Development of online social communities, gaming, peer to peer networking have all been the drivers in the development of the concept of digital money. According to the report by GlobeNewsWire, the Global Digital Payment Market is forecast to reach $10.07 trillion by 2026. With the advent of 5G technology, access to the internet is increasing, especially in developing countries.

The spread of internet access propels the growth of e-commerce, which in turn drives cashless payment services because consumers need paperless payment methods to participate in online transactions with retailers and remote transactions with other individuals. The advances in instant payment technologies have further raised the expectations of both consumers and sellers; both parties expect to transact payments quickly, which further drives the economy towards a cashless society.

Cashless Economy in Developed & Emerging Economies

In developed countries like the UK, the amount of physical cash present in the economy is actually increasing year-on-year, according to the Bank of England. And banknotes in circulation in the country have increased from around £56 billion in 2014 to £69 billion today. According to the Federal Reserve, there were 41.6 billion notes in circulation in 2017, which increased to 43.3 billion notes in 2018. What’s the explanation of this conundrum?

In a recently published Asian Development Bank Institute study (Shirai and Sugandi 2019), movements in cash demand was investigated by focusing on 11 advanced economics and 11 emerging economies for the period 2000–2018. The advanced economies included the Eurozone, Japan, Republic of Korea, Singapore, the United Kingdom, and the United States, Australia, Canada, Demark, Norway, and Sweden.

The emerging economies include Mexico, Philippines, Poland, and Thailand, the People’s Republic of China from the early 2000s and Turkey since 2017. The results were that the low-interest-rate environment generated by massive monetary easing, as well as age-related factors, contributed to increasing demand for cash.

Myths about Cashless Economy

Quite a few myths exist about the cashless economy, and here we will deal with some of the most popular myths.

Myth 1: Cash is going away in the United States

The notes in the US economy are already increasing, as explained earlier. Total $1 through $20 bills in circulation grew by 2.6% last year to a new record of $238.8 billion. Since this growth approximates the sum of population growth (0.7%) and inflation (2.0%), it would appear that transactional cash usage remained constant last year.

Myth 2: Cash Demand is Declining

We know about the UK, and the US, not far behind, with the same trend is the Reserve Bank of Australia showing an increase in cash in circulation. While it may decline in a few countries, overall, cash demand continues to grow.

Myth 3: Getting Rid of Cash would stop Crime & Violence

In the UK alone, over 500 cases of fraud are reported on a daily basis. The digitization of the economy has made the occurrence of theft far worse. And the process of mugging a resident for his or her smartphone has no reason to be any less violent than stealing a wallet or a purse.

Myth 4: Cash costs more than electronic payments

No. cash costs less than digital payments as it does not require any infrastructure, electricity, and the workforce behind to maintain that infrastructure.

Myth 5: Sweden is basically cashless

While leading at the helm of a cashless economy, Swedish banknotes and coins in circulation rose 7% last year, to 62.2 billion krona ($6.5 billion), according to the European Central Bank. It was the first yearly increase since 2007.

Pros and Cons of Cashless Economy

As with most things in life, there are pros and cons.

The Pros of a Cashless Society

  • Money laundering and tax evasion are reduced because there is always a paper trail
  • Ability to pay the exact amount every time
  • Potential tool in the fight against modern slavery
  • The convenience of having all of your money at hand, all the time
  • A cashless society facilitates easier currency exchange while traveling abroad without any need for currency exchange rates
  • Financial patterns allow for behavioral insights to enable consumers to manage their spending habits and preferences.
  • The risk of handling, storing, and depositing cash is eliminated.
  • Cashless transactions make the exchange and generation of black money difficult. Therefore, it curbs corruption.

The Cons of a Cashless Society

  • Inability to give a change to the homeless
  • Older generations might struggle with unfamiliar technology
  • Complete reliance on technology and the internet
  • Increased risk of cyber attacks
  • The financial information is digitally accessible and vulnerable to data breaches. If hacked millions can be siphoned off in seconds leaving nothing behind
  • Power outages and downtime can hinder easy access to your money.
  • It’s challenging to keep track of money spent by those who are comfortable with cash handling

Can Pakistan Achieve Trust in Cashless Payments

Only about 21% of Pakistan’s adult population has formal access to financial services. At present, in Pakistan, 75% of the non-banked population have primary education or less. On the other hand, cashless transactions require a certain level of basic reading skills & financial literacy. The vision for a cashless society is there for Pakistan. Still, with 60% of people in rural areas, public expenditure on education a mere 2.4 percent of GDP in the fiscal year 2018-19, power outages, and lack of technical expertise, the dream of a transparent cashless society is a long-hindered process.


The pace of digital advancement is increasing, and the traditional financial transaction models need to embrace the cashless society phenomenon for the benefit of all.


Fiza Khan
the authorFiza Khan
Fiza khan is a tech-prodigy with a knack of writing on niches such as cyber-security, mobile platforms, social media, and AI. Besides writing, Fiza has a keen eye on current affairs of politics around the globe. She is a bibliophilic girl who is on her path to achieving great dreams. Aside from the tech niche, Fiza is interested in Food blogging and aims to set up her own Food blog one day.

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