FİNAL REPORT
Umeyra İrem Abit
21TRAD1001
Research question: İs a cashless economy possible in the near future?
Bank transfers started during the mid-19th century. İn 1872, Western Union was
the first to introduce a widely used transfer service. By 1877, the amount of
money transferred through this service was nearly 2.5 million dollars. Slowly,
banks started to give out plastic cards. Later, the first ATM was introduced to the
public in London in 1967. The late 20th and early 21st centuries were when
digital transactions came into the scene and created an evolution.
While digital payments are developing day by day and many experts are trying to
push society into going cash-free, a great number of people are against the loss
of cash and fear what it might cost them.
Although the possibility of a cashless society seems to speed up in several
countries, the disadvantages of digital transactions halt society from going totally
cash-free.
A report by Boston Consulting Group and Google India disclosed that in 2016,
75% of transactions in India were cash-based. İf we compare this to developed
nations like the US and Japan, we see a percentage around 20-25%.
Additionally, a Mastercard study states that 80% of U.S. consumer transactions
are electronic whereas in Sweden only 3% of the consumers transact in
currency. İt is clear there is a relationship between a cashless economy and the
economic growth of a country. A study by Newstead shows that cashless
payment rates are growing twice as fast in developing countries. Furthermore,
Hasan, Renzis, and Schmiedel examined the connection between electronic
retail payment and economic growth, leading to the result that electronic
payments stimulate economic advance, consumption, and trade. Going digital
would make financial transactions effortless, lessen the escape of paying taxes
and end the cost of currency publication. The Reserve Bank of İndia lost 27
billion in currency publications in 2015.
Even though there are several positive effects, the risk of digital payments can be
far more dangerous. The lack of privacy may lead to distrust of the consumers
and being exposed to hackers won’t be anything out of the ordinary. For
example, lakhs of debit card holders' data was hacked in 2016, which led to a
failure of protection of the electronic currency. Not only that, but technology
problems may do you serious harm too. Then a question arises, what if the
internet connection fails or let’s say your phone’s battery is dead, what then?
Most underdeveloped countries have poor internet connections in rural areas.
What if you can’t even afford a smartphone to make transactions?
There is still a high amount of usage of cash in undeveloped countries. To give
an example, according to the World Bank Global Financial İnclusion database,
only 2.7% of Afghans had debit card ownership while just 3.8% made digital
payments in 2017. 21.1% of Afghans had no financial account because financial
services were too expensive and 20.7% had no account because of lack of
necessary documentation. Trust issues are clearly visible since 20.1% also didn’t
want an account because of a lack of trust in financial institutions.
Statistics from YouGov’s Global Banking & Finance Report states that Mexicans
(51%), followed by Germans (46%), and consumers from the UAE, India,
Indonesia, and Spain (39%) are most likely to prefer cash. Going cashless can
also affect people to overconsume. Studies show that digital money leads people
to overspend. Your brain does not record paying with cards as paying in cash
does. Research shows that an average of 4.29% of the customers tip more in
restaurants when they see a credit card emblem on the trays. This shows that
credit cues influence consumer spending. When allowed to spend in the
presence of credit card cues, the speed, amount, and possibility to spend, seem
to increase.
For now, the advantages of a cashless society do not seem to outweigh the risks.
Economic growth and effortless financial transactions are not insignificant, but
apparently, the lack of privacy, lack of trust, and overconsumption cause people
to prefer cash. Gradually, technology advances and may offer different solutions
to these problems. But for now, since we still have 47 countries that are
categorized under the least developed countries, it will possibly still take a long
time till the world will be ready to go cash-free. So, in the near future, we will no
doubt still be using cash in our daily lives.
REFERENCES
[1] Gaba, Madhu, en Manisha Nagpal. “Cashless economy: Problems and prospects”. N.p., n.d.
Web. 28 Des 2021.
[2] “Global Financial Inclusion”. N.p., n.d. Web. 28 Des 2021.
https://databank.worldbank.org/reports.aspx?source=global-financial-inclusion
[3] Hasan, Iftekhar, Tania De Renzis, en Heiko Schmiedel. “Retail Payments and Economic
Growth”. SSRN Electronic Journal (2012): Bank of Finland Research Discussion papers 19.
[4] McCall, Michael, en Heather J. Belmont. “Credit card insignia and restaurant tipping:
Evidence for an associative link”. The Journal of applied psychology 81.5 (1996): 609–613
[5] Moody’s Analytics, ‘The impact of electronic payments in economic growth’, 2012,
http//USA VISA.com
[6] Newstead, S. Cashless payments underpin economic growth. N.p., 2012. Print.
[7] Towards a cashless economy-www.outlookindia.com [7] Cashless India: Challenges and
benefits,www.livemint.com
