What Is a Cashless Society?

I was on a run in California when I passed a corner store and realized I hadn’t had any water all day despite the hot weather, so I decided to stop. I had almost walked in the door when I looked down and realized I was only holding my phone. I hadn’t brought my wallet or any cash. I had just gotten back to the country and I couldn’t help but laugh. The United States likes to think it’s “so advanced,” but the lack of an integrated phone-banking system felt like a pretty large oversight that day.

Living in a cashless society means your wallet is a place for bank cards and credit cards, not banknotes, and it’s important not to leave your phone at home. In a cashless society, everything is digital. The payer and the payee will either use a phone-based program to send money or a card. Sellers have a point of sale (POS) terminal to accept cards and will transfer funds from one bank account to another or use one of the many other intermediary money-holding partners available. 

When we deposit cash into the bank, our hard currency “turns into” numbers in our account, entitling us to pull cash back out or use it as currency immediately. If your employer direct-deposits your paycheck, and you make purchases using a debit card, it’s not too difficult to see how cash may become obsolete.

If you have funds on your phone (it doesn’t have to be a smartphone), you'll hardly ever find yourself stuck without money for a bottle of water. Your balance is clear, and there’s no change to stuff back into your purse or pocket after a transaction. In addition, cashless options make things like online shopping a reality.

Carrying around money can be scary, as well as dangerous. Even if you are never confronted and asked to turn over your cash, your washing machine may eat some poor waterlogged funds, or you could misplace an envelope or clip of bills. Even if your cards or phone are stolen, you can freeze most accounts within a few minutes. Moreover, fraud detection on debit and credit cards is getting better and better.

.By inserting a card or entering your phone number, it minimizes the back and forth, opening and closing of the cash register, change counting, etc. that accompanies cash transactions. That being said, this doesn’t always work out, and sometimes digital payments take longer than cash. As cashless infrastructures continue to grow, however, the speed of transactions is likely to increase.

Unless you keep all your receipts or write down every time you pay with cash, it's difficult to track your spending when using cash or even a mix of cash and cashless transactions. However, with a phone-based or card-based option, all your transactions with dates, times and information are in a list for you on your statement, making it easy to track your spending and determine if any changes need to be made.

When every vendor, buyer, credit card company and intermediary organization is answerable to the law, it becomes difficult to implement illegal systems of money laundering or tax evasion. When there are taxes directly on transactions, it's also easier for private and public entities alike to track them and ensure everything is in order.  

A lot of things need to be in place in order for a cashless society to work. With a phone-based system, both the vendor and the buyer must have accounts and POS that can charge a phone. If the system is entirely card-based, there's a lot of troubleshooting and work that goes into having a reliable terminal set up that allows the banks and vendors to communicate.

Just moving a few digits over here and adding a zero there — it seems like the stuff of crime fiction, but it does happen, especially in societies where the security measures aren’t as tight. Individuals, companies and even governments can squeeze themselves into digital monetary transactions and take a few cents here and there. Keeping an eye on your personal transactions and making sure that there weren’t double-charges, a few extra cents thrown in or a charge you don’t remember is usually all it takes to prevent yourself from these types of risks.

The infrastructure for a cashless society is expensive, with POS terminals,  card-printing and paying software and system administrators and analysts to ensure everything is working. Printing cash and especially coins is expensive, but maintaining a robust system for cashless transactions is often even more.

Often, cashless transactions require the internet or another running network, and depending on where you live, this can cause a problem. There have been many times I've found myself at the till only to have the internet go down and have to make another plan or wait. Having your phone die while you're shopping is a similar issue that can ruin a trip to the store if you don’t have enough money on your card.

Zimbabwe, where I live, is, if not the closest, as close as any other country to a truly cashless society (yes, even Sweden, the country in the headlines about it). Months have gone by where I haven’t seen a local currency bill, and the only cash that I see is the U.S. currency I take to the bank to exchange into local electronic money since I'm a foreigner. 

In Sweden, only 13% of people reported using cash in 2018, according to a story by NPR. However in Zimbabwe, 96% of all transactions were cashless, according to Zimbabwe’s The Herald.  Of course, when the legality of a country’s monetary system is changing by the month, hyperinflation is in play and the nation in question is in Africa, it is easy to be overlooked in favor of the European counterparts who are "leading the way."

How close a country is to a “cashless society” is a difficult thing to measure. Sweden probably has the lowest number of notes in proportion to total money in the country, but according to The New York Times, vendors are saying they are planning to accept those notes at least until 2025. In Zimbabwe, there may be a higher percentage of notes in relation to total money, but these notes are filling mattresses and not entering the market since they're valued higher than electronic money, meaning no one will put any in a bank or use them to pay for goods. Instead, these notes find their way to the black market or stay snug in bed.

Cashless societies are cropping up all over the world for different reasons. In Sweden, people are discussing the benefits and disadvantages and attempting to slowly steer the country’s monetary system toward one that will work for everyone. In Zimbabwe, our cashless society has developed out of necessity as much as a desire to make transactions easier. Whatever the main drivers are, however, cashless societies are certainly possible and coming quickly.