No longer is cash considered as king. As a matter of fact, there are certain economies that are cash-intensive that experience slow growth. There are financial benefits to using digital payment methods as seen by the economies that have made the switch to show an increase in their annual GDP.
Cashless payments such as online payment methods are economic propellers. There are several examples of places that gained the benefits of switching to cashless payment transactions such as Bangladesh that have a mobile payment method for fund transfers.
The upswing does not come from the influx of more money. The economic boom is due to the role of digital payment that has simplified and made faster the process of fund transfers. A couple of advanced economies such as South Korea and Sweden that have chosen to no longer make cash transactions as the preferred payment method did experience the positive effects like fraud reduction and an increase in e-commerce activity.
People do have this emotional connection to banknotes and minted coins with a lack of trust in alternative modes of payment. There little sign that in the near future that the entire world will be using cashless payment methods as the preferred mode. Cash still remains to be the payment instrument that is the most commonly used. In places such as Europe, over fifty percent of the POS payment transactions are still done by using cash.
The slow progress of the various nations toward cashless economies is a frustration to several financial institutions, merchants, and policymakers who will accrue great benefits from payment transactions becoming digital. There are steps that can be done such as implementing regulations, expanding the payment infrastructure, and other strategies.
Non-cash payment systems
There is a need for the increase the trust in non-cash payment systems and to encourage technological innovation in the mobile payment industry. All the financial tools are already in place and it requires the will to act to have more cashless payment transactions to boost the economies. The momentum is already there and with the support of the payment infrastructure, there can be more cashless societies. Several of the developed markets are cash entrenched.
The broad measure is that of the money supply to include that of cash-like instruments, banknotes, and coins. User-friendly, cash is financially inclusive and is a trusted payment instrument. There is no need to use a contactless payment terminal and it will not fail to be used when there is a system failure, cyberattack, or power loss. To spend and receive cash does not require the creation of a data point though it is inherently problematic.
For financial inclusion
Despite the increasing growth in the adoption of mobile devices plus the demand for applications for digital banking and alternative payment methods, a vast majority of nations still do remain quite heavily dependent on banknotes and coins. There are billions of people who do not own a bank account and for financial inclusion, they still need to use cash.