The race to a cashless society

The term cashless society is being used increasingly often and has the potential to greatly impact the way that consumers pay, leading to a change in shopping habits and lifestyle choices. In this article, we will define what a cashless society is, looking closely at what the UK, Sweden and Canada are doing and analysing whether its adoption is a positive step for communities.

What is a cashless society

A cashless society is a country or region which no longer accepts cash but instead relies on credit and debit cards and alternative payment methods (APM’s). Currently, there are very few places which can be considered entirely cashless; however, many are well on the way.

Based on consumer preference, shopping at a cashless store can either improve or impair the user experience. More traditional consumers may welcome human interaction and object to their inability to use cash. On the other hand, Millennials and Gen Z expect to pay with a quick tap of their card, phone or wearable device and may begrudge any disruption to their consumer journey which prompts them to withdraw cash.

However, the divide is not always generational and economic inequality is a large factor, with those who are unbanked not being able to partake in a cashless society. Although the move towards a cashless society is often a signal of progress, indicating a high standard of technology and related infrastructure, it isn’t always an inclusive process. Below, we will look at the countries involved in the race to become cashless.

Is the UK a cashless society?

The UK is a good example of a country making large steps to reduce the number of cash payments being placed. A recent report showed that if cash’s current rate of decline continues, the UK could become cashless in 2026. A prediction in Business Insider envisioned that the average adult in Britain will make 22 contactless payments, on average, per month in 2027. This number would be a stark increase from five in 2016. Alongside this, APM’s such as eWallets are also set to grow in usage.

Everyday changes, like the Transport for London network encouraging consumers to pay for their journey via contactless or mobile payments and sellers of The Big Issue now having card readers to prevent potential customers from being deterred by a lack of cash, demonstrates that large companies based in the capital are optimising for a cashless future. However, for those living outside of metropolitan hubs like London, it can be a different story, with many still opting for cash. In fact, 2% of the UK's population is unbanked, with 1.5 million people still unable to participate in a cashless society. These figures indicate that the UK is perhaps not in a position to get rid of cash completely just yet.

Is Sweden a good example?

Sweden is out ahead in the race to become cashless. In the decade between 2008 and 2018, there were 11.5 billion fewer cash transactions. Furthermore, ATM withdrawals have fallen by half in four years and even more surprisingly, around 1,600 bank branches do not allow consumers to deposit or withdraw cash. While credit card remains king, APMs such as Swedish native Klarna and Trustly, a real-time bank transfer solution, also continue to grow in popularity. It’s important for merchants who are looking to branch out to territories that are moving away from cash to do their research beforehand and offer payment solutions that tap into shopping and payment trends within the country.

What’s the state of play in Canada?

Canada ranks as one of the world leaders in cashless payments, with CPA Canada reporting that many individuals own more than one credit card. According to Visa, 70% of purchases in the country are made via card and 25% of retail eCommerce contactless payments are made via mobile.

In particular, mobile payments are popular because they’re quick and simple. Visa also reported that seven out of ten customers named convenience as their primary reason for using this payment method. As Canadian society continues to move towards becoming cashless, improving mobile payment offerings, in particular, should be a priority for merchants.

As a merchant, what does this mean for me?

With cash payments becoming less frequent and the trend of Big Tech companies, like Apple and Google, moving into the payments' arena, cashless looks locked in an upwards trajectory. Therefore, merchants across the globe should strive to offer a variety of payment methods.

Examples of innovation could include invisible payments, used by major companies such as Uber, or facial recognition – which could work in a similar way to using your fingerprint to purchase items with Apple Pay. In the case that cash is phased out, merchants that think outside of the box will stay ahead of the competition. If you haven’t already, it is worth investing in POS terminals that accept contactless and mobile payments so that you can offer your customers a wider range of options in-store and be prepared for the cashless revolution. Merchants should continually be working to provide as frictionless and convenient a shopping experience as possible for their consumers.

The benefits of a cashless society

The reasons why countries like the UK and Sweden are greatly reducing the reliance on cash are largely centred on security and convenience. On an individual level, it removes the need for users to withdraw and carry around cash and is believed by many to be more secure as there is no physical money to steal. Paying by card or other alternative payment methods can reduce friction in-store and speed up the payment process. Consumers can also keep better track of their finances with advanced reporting at their fingertips, enhancing their confidence and trust in this payment method. For merchants, this is a benefit as it allows them to work more efficiently and create a seamless shopping experience for consumers.

Alongside this, there are benefits relating to currency exchange as friction is reduced whilst travelling. A global cashless movement would remove the need for travellers to take out currency in each country they visit and instead can simply use their card or smartphone to make payments. An increase in the amount of payments that can be digitally traced would result in more transparency and accountability from businesses and even lessen government corruption.

Wrapping up

Despite the potential associated pitfalls of becoming a fully cashless society, it is difficult and ill-advised to halt the march of progress, especially when the positives outweigh the negatives. Instead, the focus should be on making the playing field for payments level and reducing the number of unbanked people, as well as educating people about the benefits of becoming cashless.