A Cashless Society

As the second decade of the 21st-century approaches we are seeing an ever-increasing use of electronic payments in our everyday lives. While utilizing electronic payments is easier than ever in this day and age, consumers are less likely to feel the effect of their spending. 

There are many drawbacks of having a cashless society, but some of the benefits include ease of use, less theft and the ability to transact in different countries. With the ease of use, we are now seeing Apple Pay, Cash App and Venmo take the lead in electronic payment methods. In my opinion with this technology, it doesn’t feel like money so we often find ourselves often spending significantly more. One of my friends mentioned Venmo is essentially “Emoji Money”. Payments are fun and exciting with these types of transactions, there is no pain associated with the transaction so we often spend more. With so much money now in the cloud or stored virtually, many vendors don’t have cash on hand. This has the potential to cause less theft, but there have been numerous times when I have wanted to break a $100 bill with trivial success due to nominal merchant cash on hand. Furthermore, many businesses prefer cash rather than electronic transactions because these vendors need to pay a merchant fee for every single transaction. With large dollar transactions, this leaves the vendor receiving a substantially smaller amount of money. On the flip-side, many vendors need a place to store cash safely which is another large expense too. In both situations, the vendor is paying for transactions directly(fees) or indirectly(cash management).  

Most vendors don’t need to store as much cash in the registers anymore because of the increase in electronic payments. With cash, there is an inherent risk of theft with little protection. Counterfeiting is also a major cause for concern with cash payments. In some South American countries, counterfeiting is very prevalent and the counterfeited bills look very realistic. This is currency risk, massive fraud and ends up negatively affecting many innocent individuals. With a cashless society, this wouldn’t occur anymore. Individuals can still steal someone’s wallet and attempt to max out as many credit cards as possible before canceling, but this isn’t as common and the individual utilizing the credit card won’t be responsible. Some may argue that a cashless society would open up our world for hackers and data breaches. While this is true, there is typically several layers of encrypted protection for the banks. 

The ability to transact in another country with ease is a beneficial game changer. Now we don’t need to worry about spot and forward rates on currencies when exchanging at the airport for a vacation anymore. We can now transact across borders with many credit card companies waiving foreign transaction fees. People today travel internationally more than ever and having an easy payment method across borders is of significant value to most. 

With this transition to a cashless society, there will still be individuals who choose to use cash for numerous reasons. Handymen, waiters/waitresses, and skilled trades often rely on cash in their business. Many people also simply have emotional attraction cash and don’t want to change with the times to the new form of money. Older generations specifically often take comfort in utilizing cash because it is a payment method they have used their entire life and they have grown to know. Just as we have transitioned from gold and silver coins several hundred years ago to paper bills, the transition to a completely cashless society will happen but it will take time. All U.S. denominated dollars are a form of legal tender for public and private debts, so unless this changes, there will always be some individuals utilizing cash across all business. 

-Published 4/7/2019

Nothing stated in this article is a recommendation from Forehand Financial to buy or sell a particular security or asset class. You should wisely consider your tolerance for risk, time horizon, and financial goals before making an investment. With investing, you run the risk of losing money, always read an investment prospectus and make an informed decision before allocating capital to a particular investment.  

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