The Future of Cashless Societies

The concept of Cashless societies is attracting a lot of discussions across the globe, with some speaking in favour and some having serious concerns regarding the same. To some, it might look like just a futuristic vision, but with fast-paced technological development, it doesn't look that far. A lot of governments are working on CBDCs, and some countries have already started their pilot programs. Although it comes with a lot of benefits, but it also has some concerns like data privacy and inclusion. Lets check these in detail.

What is a Cashless Society?

A cashless society is the one where people are not dependent on physical cash. Every financial transaction is conducted digitally, like card payments, mobile banking, UPI payments, payment links payments, QR code payments and even cryptocurrencies. This will provide faster, safer, and transparent financial transactions.

Current State of Cashless Transactions

Key Players in Cashless Payment System

Many technological giants like Google, Apple, and Samsung offer mobile wallets, and financial companies like Visa, and Mastercard provide contactless cards. As well as the central banks and IMF, working on CBDCs.

Global Adoption Rates

Globally governments are pushing towards digital payments. In some countries like Sweden, the majority of transactions are taking place digitally. Even in bigger countries like India, around 147 billion digital transactions were recorded in FY2023-24 as per RBI, of which UPI transactions hold 80 percent share.

CBDCs have been launched by governments as a safer alternative to cryptocurrencies. CBDCs are backed by central banks and have the same value as that of the traditional currency of the country, hence are not volatile like cryptocurrencies but have other benefits of digital currencies, are secure, faster, and traceable making them more transparent and a means to curb issues like money laundering, fake currencies and corruptions.

Moreover, more than 130 countries are working on their digital currencies (CBDCs), of which 68 countries are in the advanced stage . Few countries have already launched their CBDCs, while some are running pilot projects. While Russia is planning to use the digital ruble for cross-border transactions from the second half of 2025.

Technological Advancements Driving Cashless Societies

Mobile Wallets

Mobile wallets have played a major role in making digital payments as popular as it is today. Different payments like QR code payments, payment with pay-by-link and UPI payments are executed seamlessly with the help of mobile wallets like Google Pay, Apple Pay and Samsung Pay. QR Code scanning can be done through these wallets, they utilise mobile cameras for the same. These wallets can save card and account information, making the whole payment process faster. Biometric scanning and two-step verification are utilised to make the wallets secure.

Contactless Payments and NFC Technology

Contactless payments powered by NFC technology have gained popularity due to the convenience it offers. Near-field communication (NFC) technology allows communication between devices when in close proximity. Hence you can pay for the product and services with just a tap on the payment terminal with your NFC-enabled device. NFC enables debit and credit cards, mobile phones and smart watches are available in the market with which one can do payments in a fast and secure way.

Blockchain and Cryptocurrencies

Cryptocurrencies backed by blockchain technology are decentralised digital currencies like Bitcoin and Ethereum, which can be used to do payments in a fast, secure and anonymous way. They allow fund transfers at a potentially lower transaction costs and complete transactions in a very fast way, even in the case of cross-border transactions. Hence ideal for businesses, that need cross-border fund transfer in a fast and secure way. Cryptos have a negative side though, they are very volatile in nature making it very risky for the common man.

Central Bank Digital Currencies (CBDCs)

CBDCs are the digital currencies launched by different governments across the globe. CBDCs are supposed to be a stable alternative to cryptos. They are backed by central banks and hence are not volatile like cryptos and carry the same value as that of the traditional currency of the country. CBDCs can provide more secure and transparent financial transactions, and have the capability to prevent activities like money laundering and corruption.

Benefits of a Cashless Society

Convenience and Speed

Digital payments are pretty fast and convenient. No need to carry cash and no more waiting in long ATM queues. Digital transactions are extremely fast, and allow real-time fund transfers, making online shopping as well as in-store purchases a breeze.

Reduced Costs of Cash Handling

Cash handling usually involves a lot of expenses like transportation, security and storage expenses. Digital payments and digital currency can considerably reduce these expenses.

Financial Inclusion and Accessibility

Digital transactions can done in remote areas where traditional banking infrastructure isnt available. You just need to have access to internet connections to do conventional digital transactions. Governments are working to facilitate offline digital transactions, although its available with UPI payment systems but offline UPI payments are not much utilized currently. Germanys Giesecke+Devrient has unveiled a secure offline payment system, the company says instant payments can be done offline and hence this technology can provide financial inclusion for 1.4 billion unbanked population globally and that too without using any expensive smartphones, as per finextra.

Enhanced Security

With modern security features like encryption, tokenization and biometric authentication, digital payments are very secure and the risk of fraud and theft is very low. Moreover, digital payments especially digital currencies are completely traceable, which minimises the chances of fraud activities.

Increased Transparency and Reduced Corruption

Digital transactions leave digital traces which makes tracing much easier. Moreover, digital currencies are built in such a way that they can be completely tracked for movement, making illegal works like money laundering and corruption very difficult.

Challenges and Concerns

• Privacy and Data Security

• Digital Literacy

• Dependency on Technology and Technological Infrastructure

Digital payments come with its own challenges like data privacy and security, data need to be prevented from reaching the wrong hands. It needs a technological infrastructure and internet coverage to conduct digital activities. Moreover elderly peoples might find it difficult to understand new technologies, hence it could be a challenge to educate everyone on how to use digital payment systems.