There are countries like Sweden moving towards cashless economy extremely fast. Which issues do they face? Which issues can any society experience while heading to being cashless? Can we get rid of cash entirely? And how can FinTech help governments in this situation?
A lot of conditions urge the economy and society forward certain changes. One of the key modifications is switching to digital payments only and excluding any cash flows. Sounds a kind of idealistically, but this has already begun.
Here are just a couple of examples how far we are now:
Amazon has recently launched its Amazon Go and Just Walk Out Shopping. It’s a real store in Seattle where you check in, grab whatever you need and just walk out!
No lines, no cashiers, and no cash of course: simply walk in, shop and go. Amazon used AI, computer vision, sensor fusion and Deep Learning algorithms to develop this project. View how it works in Amazon’s video presentation:
Cashless Experience of Sweden
Currently, Sweden is the most cashless country. ‘No cash accepted’ signs are rather common in shops and restaurants. Banknotes and coins account just about 1,7% of GDP. Even churches in Sweden were the earliest adopters of mobile donations. And Central Bank is currently considering to issue their own cryptocurrency.
Of course, there is a number of issues need to be resolved before diving into cashless reality. Here are the most obvious:
- Governments could take control of people’s financial life, so it could not only affect privacy aspects but also banks might leave anyone without a dollar literally.
- There is still a high risk of cyber attacks, which also could lead to irreparable damage or even loss of all digital assets.
- For poor people from developing countries being cashless may become a kind of unbearable situation: they spend cents on their food in local stores and even can’t afford to buy a mobile device for digital payments.
- It might be harder to adopt the totally new concept for aged people.
- The overall infrastructure is not ready yet for such fast switching, so it’s not really possible to get rid of cash at once. Obviously, it will take some time.
Here’s what Amanda Billner (Bloomberg, Stockholm) says about Sweden’s progress and issues in moving toward cashless society:
Nevertheless, there are also pros of switching to digital economy:
- For governments, switching to the cashless economy would make it easier to fight against tax evasion and drug trafficking.
- Businesses would save a lot on transaction costs, plus benefit if easy payment process led customers to buy more.
- Also, economists suppose that cashless approach would empower central banks with fighting recessions effectively by imposing negative interest rates.
Here’s what experts say about a cashless society benefits, risks and issues:
FinTech helps cashless concept go live
FinTech could play the leading role in the process of switching to a cashless society. The core of this concept is the opportunity for different digital payments and other financial services, like insurance, managing digital assets etc.
It’s the known fact that FinTech products and services related to digital payments and transfers are the most popular and adopted by users (50% of customers used money transfer and payments in the last 6 months). Insurance-related FinTech products take the 2nd place (24%).
Given all of that, the most forward-looking governments take the necessary steps to grow FinTech sector. A few days ago, on March 22, 2018, the Chancellor of the Exchequer, Philip Hammond (UK) spoke at the International FinTech Conference in London. The main points of his speech were:
- Creation of a Cryptoassets Task Force: “The government will also establish a Cryptoassets Task Force consisting of HM Treasury, the Bank of England, and the Financial Conduct Authority to explore further the risks of cryptoassets and the potential benefits of the underlying distributed ledger technology, as well as to assess the future response of the appropriate authorities, including around regulation.”
- Launching the new strategy for the FinTech sector. “As part of which, I’m pleased to announce that the FCA and Bank of England will take the first steps towards automating regulatory compliance reducing costs for financial services firms, and removing a key barrier for fintechs as they enter financial services markets. A new code of industry standards will make it easier and cheaper for fintechs to partner with established financial service providers both boosting the ability of banks to offer new services, and helping fintechs to find a ready market for their products.”
- Establishing UK-Australia FinTech bridge: its aims to “open up a new important market for UK FinTech firms wanting to expand internationally”, and help both countries to coordinate policies and increase regulatory co-operation.
A great deal of changing to a cashless society is not done yet. But the leading countries are moving forward every day, making complying regulations easier, helping FinTech sector to grow and then help them with the new financial system establishment, facing and resolving the arising issues, cooperating with other governments to make this process global.
Yes, we cannot get rid of cash in just one moment. It’s necessary to adapt the existing infrastructure for the new conditions. Obviously, there is a strong need for both enhancing privacy, safety, security of new technologies and developing the smooth process of adaptation for the most vulnerable segments of the population.
And we are ready for changes!