Is this the dawn of the cashless society?

Goldex Team

Editorial content

Having a pocketful of change before leaving home used to be as essential as your car keys. Now, all you need is a card or a smartphone. Is the cashless society finally here?

Big numbers

The numbers are certainly going that way: the Nordic countries in particular. In Sweden – which intends to be the world’s first cashless country by March 2023 – cash payments make up less than one per cent of all transactions. And more than 80% of all retail transactions are electronic: a similar percentage to Finland, Norway, Denmark, and Iceland.

Cashless is booming in the UK, too. A recent survey for online marketplace found that 75 per cent of people in the UK choose not to pay with cash. In 2007, the average UK cashless domestic spend per year was £250. Ten years later, that had shot up to £422. In that same time, the number of cashless transactions went from 4,472 million to 12,602 million.

The US has seen a rise, too: recent findings from the Pew Research Center say that 29% of adults don’t use any cash for weekly purchases. That’s a rise from 24% in 2015. China is emulating Sweden in its desire to be cash-free. In 2017, more than three-quarters of Chinese people chose to use digital payments rather than cash – and that number is rising steadily.

In India, the drive to a cashless society has been spearheaded by President Narendra Modi’s government. In November 2016, 500 and 1,000 rupee notes were deliberately withdrawn from circulation in order to force people to use digital payments instead – an ambitious target for a society where 95% of transactions were made using cash.

Cashless advantages

Of course, there are plenty of pros to a cashless society. One aim of Modi’s cashless policy was to stamp out endemic corruption and ‘black money’ by making all payments traceable.

There will still be plenty of opportunity to keep money physical (in gold, for example). Ken Rogoff, Professor of Economics and Professor of Public Policy at Harvard University, says that in the cashless society, gold is the ‘best substitute for paper currency, so it’s hard to imagine its transaction value won’t go up over time.

“As we have less and less paper currency, there will still be a need to store wealth, to have privacy and to carry out transactions between parties who don’t trust one another – gold fills that role.”

Better data

More cashless payments also mean more economic data, which could lead to better and more accurate predictions. “By collecting more extensive data through card transaction histories, consumers will be able to build better behavioural profiles,” David Orme, Senior Vice President at IDEX Biometrics recently wrote in the Fintech Times.

“The benefits here are twofold. Not only are consumers given a tailored shopping experience, but businesses can use this insight to maximise sales and build loyalty by tailoring offers and services that directly address consumers spending habits and preferences.”

Cashless payments bring down street robberies and bank robberies: get rid of the cash and you get rid of the thieves. And cashless payments are quick, efficient and simple: it’s far easier to tap a card than fumble in a wallet. That’s why they’re associated with a healthy economy, and economic growth.

Cashing in

Yet the last few years has seen a note of caution when it comes to cashless societies – and some big predictions haven’t been borne out. Last year, the Financial Times pointed out that “the volume of notes and coins in the world is actually on the increase.”

Many have pointed out that it would suit some governments very well to have an exact record of exactly where its citizens go and what they spend money on.

As campaigner Brett Scott wrote in the Guardian: “States having access to your payments data opens up potential for economic censorship. Want to disrupt a major protest in a country where everyone uses two major payments providers via phone apps that give location data? Order the companies to not process payments from any phone within the protest area.”

Having launched with great fanfare, India’s cashless strategy is faltering. The government was way off its target of 25 billion digital transactions for the year 2017-18, achieving just 15.83 billion – meaning that 95 per cent of transactions are still with cash. As economist Renita D’Souza wrote for the Observer Research Foundation, “Cashless India’ is still a distant dream.”

Cashless risks

And many are concerned that a cashless society would hit the poor hardest. The 2018 Access to Cash report on behalf of Which? found that 47% of British – more than 25 million people – would find living without cash problematic, with 17% believing that it would be impossible.

The report also pointed out risks including the problems that could arise if the tech failed, and how areas without decent internet coverage would suffer.

So, keep your cards and smartphones handy – but hang on to that change in your pocket, just in case.


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Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.