When Will the World Be Ready to Go Cash-Free?

The use of coins and banknotes has been declining worldwide over the past years. In 2021, cash payments accounted for only 18% of the global transaction value, and their share is expected to drop even more - down to 10% already by the end of 2025.

Such a major shift could not go unnoticed and is affecting the payment industry in every corner of the planet. In this overview, we’ll uncover the details about the current state of physical money, explain which payment methods are outperforming it, and answer the big question: is the world ready to go cash-free?

Growing Gap Between Cash and Consumers

Just a couple of decades ago, it was hardly possible to imagine the world without physical currencies. While bank cards and digital payment methods have been around for quite some time, cash remained king for many years.

However, the coronavirus outbreak that started in 2019 has turned the world upside down. The social distancing and hygiene measures that were introduced to prevent the infection’s spread have changed the way businesses operate and payments are made.

During the peak of the pandemic, the majority of businesses were mainly accepting orders and processing transactions online, with bank cards and eWallets stepping up as the top payment methods.

Benefits & Challenges of Transitioning to a Cashless Society

The changes accelerated by the COVID-19 pandemic have brought society closer to the concept of a cashless economy than ever before. But is it a shift for the better?

Let’s take a look at the potential advantages and drawbacks of living in a cash-free society:

Pros

According to payment industry experts, the key benefits of getting rid of hard cash include:

• A reduction in crime rates - Cash is an easy target for criminals, so getting rid of tangible money is sure to decrease criminal instances. Studies conducted by US and German researchers in Missouri prove this point: once the authorities started paying out welfare benefits with Electronic Benefit Transfer (EBT) cards instead of cash, the crime rate in the state dropped by 9.8%.
• Decrease in illegal transactions and money laundering - Transactions related to illegal actions are mostly conducted with cash so that they cannot be traced easily. An environment where only digital payments exist gives less space for such financial crime, alongside tax evasion and money laundering.
• No cash management costs - Printing bills and minting coins takes a lot of time and resources, and so does their handling, storing, and depositing. The transition to a cashless society would eliminate this issue.
• Optimized international payments - When traveling internationally, you typically face the need to exchange your cash for local currency. However, when using digital payment methods and bank cards, you don’t have to worry about it at all.

Cons

Regardless of all the benefits, there are certain challenges a society that decides to go cash-free would face:

• Less privacy - Electronic payments don’t offer as much privacy as cash transactions do. The absence of cash might mean that you wouldn’t be able to receive and spend money anonymously.
• Vulnerability to data breaches and technical issues - A cashless society is more exposed to hackers. Besides, if your account gets drained, you may not have any alternative money sources until the issue is resolved and your funds are recovered. The same could also happen in the event of technical problems.
• Likely increase in economic inequality - The poor and unbanked parts of the world’s population could have significant difficulties entering the cashless society due to the inability to afford the hardware or software required.
• Potential fees from payment providers - When some apps become the standard payment software, the companies that offer them might start charging fees, which would eliminate the savings that were supposed to be made by going cash-free.

As you can see, the shift toward a cashless society has its complications. However, as practice shows, they are not weighty enough to stop some countries from the decision to leave tangible money behind.

What Will Be the First Country to Go 100% Cashless?

In 2023, Sweden will become the first cashless society in the world, with its economy going 100% digital.

What’s more, the whole population in Sweden has mobile coverage, which allows for a smooth transition to digital payments for all the country’s residents.

In 362 years, Sweden has made its way from being the first country in Europe to adopt banknotes in 1661 to becoming the world's first cash-free nation in 2023.

The Future of Payments: When Will the World Become Cashless?

At the moment, the top five countries that are the closest to going cashless, following Sweden, are:

1. China
2. Norway
3. The Netherlands
4. Finland
5. United Kingdom

The pandemic has already played a decisive role in opening up the payments landscape and boosting the presence of digital transactions. Thus, it's critical for businesses not to underestimate the likelihood of further changes in the foreseeable future and aim to diversify the number of cash-free payment methods they offer.

At Payneteasy, we are here to help you to maximize your payment processing capabilities and get you ready for any major shifts in the industry from a technological and regulatory perspective. Our tailor-made solutions provide you with the flexibility to accept local and international payment methods on a one-time or recurring basis so that you never lose any business opportunities.

Reach out to us today for a custom payment solution!