The cashless society concept has existed since the invention of physical money and all the challenges that came with it. Nowadays, with the growing number and emerging power of FinTech startups that are focusing on virtual currency and cashless transactions between individuals and businesses, we probably have never been closer to the moment, when we won’t need to carry cash anymore. In fact, a recent report from Bankrate shows that 49% of Americans carry less than $20 of cash on a daily basis including 9% that do not carry cash at all. While it varies from state to state, it is a matter of time before people will stop carrying cash at scale. However, despite the potential benefits that cashless operations may bring to society, there are always hidden rocks that may not be obvious right away behind the great ideas. Some of the challenges that may come up in a cashless future are security, privacy and governmental control.
Since 2014 J.P. Morgan Chase, European Central Bank, Home Depot, Anthem, Target and many other institutions from a variety of sectors have experienced major breaches with information being lost, stolen or exposed. About 76 million clients in case of J.P. Morgan Chase and 80 million of Anthem clients were affected. Information breaches happen at a different scale in different industries and the security issue does not lose its relevancy over time even with major technological improvements. With all monetary transactions moved to the virtual sphere, there is a risk of more sensitive and impactful information being hacked and exposed. Security is an immense challenge that any FinTech company has to address when building an alternative for real currency and cash based transactions.
Another sensitive topic to cover is privacy. The Internet is connecting more than 3 billion people all over the world. As a thread, it goes through every aspect of our lives and provides access to information about other individuals and institutions. Lack of privacy had not been considered as a major issue until recent years with all the breaches and very private information being sold, bought and stolen. If we were to apply the concept of privacy to transactions (purchases, money transfers to relatives, friends, personal lending) it appears that no activity would be possible to be kept private. The transparency inherent in the activities requiring cashless transactions will eventually reach an absolute, which is a scary thought indeed. The concept of a completely cashless society compromises the concept of personal privacy and also privacy of any organization.
3. Governmental Control
Last but not the least comes a long-term opportunity for governments to dip their hands in all operations of businesses of any scale and in any sector. With 100% virtual transactions among individuals, businesses and other institutions, the regulator is able to enforce any new rules much more effectively and at a speed we have probably never seen before. It looks like innovators themselves are giving local governments the tools and almost complete power to force businesses to play by any rules they would create.
Certainly, the idea of cashless interactions between individuals and institutions has its benefits. Major innovations are being introduced in that sphere by FinTech startups in collaboration with banks (an example here is Citigroup) in order to improve the speed and cost of transactions. However, as we can see, there are certain challenges that cannot be ignored in order to create a better alternative for a physical money and existing currencies.