All over the world, people pay by cash in more than half of financial operations. There is a trend of substitution paper money by electronic transactions on a full-scale basis, and banknotes and coins will be of value only to numismatists. In the last decade, almost all countries have mainstreamed the transition to a cashless payment system. Moreover, authorities take specific steps to push and sometimes force people to refuse cash. The disappearance of paper money from people’s daily lives will probably bring more negative than positive effects.
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Positive Effects of Cashless Transfers
Concerning the most prominent examples of positive results, it is evident that security will increase. People with cash in their wallets are under threat of being thieved by pocket lifters. It is not often possible to find purse-snatchers relatively soon, as, by the time of arrest, the thieves might already spend some of the funds or transfer them to third parties. If a criminal misappropriated a payment card, then he or she would not be able to pay off without knowing the PIN and would face with the bank security system. Besides, a customer can call the bank immediately after the incident, and any transactions will be blocked entirely; the bank itself requires confirmation of big-budget purchases.
Another advantage of non-cash payments is the ease of use. There is no need to carry large amounts of money; at the same time, there is always the opportunity to pay for the necessary purchase domestically and abroad. It makes no sense to take out money every time or exchange large bills. Cardholders are free to withdraw cash from an ATM or to keep money on the bank card; it is enough to pay by bank transfer in a store, for a utility or mobile services. People can receive cash from a card at any service point or make instant money transfers to friends and relatives at a distance.
Thirdly, the number of financial crimes will decline as corrupt actors and white-collar criminals prefer to use cash instead of electronic money. If it is banned, it will become complex for them to run the scam, since each operation will be visible and controlled by authorized bodies. Electronic money is an effective way of corruption control, as it complicates bribery. The commission of offenses such as illicit traffic in narcotic drugs and psychotropic substances, terrorist financing, prostitution, counterfeiting, and others functioning through paper money may be minimized, as financial transactions can be easily tracked. Therefore, whereas it makes difficult the calculations between criminal entities, it cannot solve the crime problem fundamentally this way. Nevertheless, this will make it possible to establish control over the circulation of money of criminal origin.
Furthermore, the central bank might reduce some cash management costs. Note issuing, minting, putting money into circulation, storing, cash-in-transit services, guarding cause high costs, which are ultimately paid by taxpayers and customers of banks. Additionally, by analyzing the information about expenses, citizens will manage their budget properly. Today, alongside the bank account statements, there are many mobile applications and other tools to track a person’s expenses. For example, through SMS notifications, people can easily find out about the balance of funds in their accounts. The end of cash will improve economic consciousness, limiting unnecessary costs.
Negative Aspects of the Transition to Cashless Payments
Despite the benefits of cash disappearance, there are some significant adverse outcomes. Non-cash transactions will draw the line with remnants of financial confidentiality. Even those who honestly earned their capital with nothing to hide would like to keep secret the information about incomes and spending. As soon as information about a financial transaction is recorded, it can come to the attention of authorities and be transferred to companies, tax offices, and marketing departments. Tracking payment transactions leads to the creation of a data system; consequently, financial freedom tends to vanish.
Cashless payments do not guarantee the safety of customers’ money. While the renunciation of cash protects wallets from traditional thieves, at the same time, it puts them at risk of theft by next-generation bank criminals – hackers. The most common crimes are the usage of fake cards, the illegal use of genuine cards, and their data. Cybercrime is not only fraud with payment cards, but also with electronic money on the Internet. The banks monitor such offense as fake bank cards, and a hacker attack on servers is already the concern of payment system operators. The bank also controls card tampering attempt and, for security reasons, has the right to block in case of suspicious activity.
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However, due to spear-phishing, personal data get on the Internet annually, and everyone can find information about individual accounts. Such attacks are rated by the US National Security Agency as one of the most dangerous. The losses they bring are unidentified for weeks or months. The nature of such attacks is compounding; the largest financial institutions find it difficult to resist them. Crackers take under control of commercial servers responsible for the most significant operations of banks.
Besides cyber threats, there are some technical problems, many of which are difficult to anticipate, including power outage and software error. It would be better to create systems that can operate offline to overcome such obstacles, but the issues cannot be wholly excluded. An insufficient technical base provokes inconvenience to citizens and suspends a large percentage of them from the economic system. This category consists of the elderly, as well as citizens with a low level of education. Commercial entities will be required to provide the ability to pay for goods and services with plastic cards or other electronic means.
To sum up, in most cases, the use of bank cards and other modern payment methods is very convenient. However, this is not always more profitable and safer than traditional cash payments, and the fact of the lack of choice contradicts freedom. It might make society more vulnerable and manageable, and the global trend is unlikely to change. So far, it is difficult to say unambiguously whether the advantages will outweigh the drawbacks. The different points of view of state and citizens do not always coincide. Cashless payments are of great importance and even benefit for the government since it will be able to take control of all transactions. The shadow economy and tax evasion will partially disappear; corruption and financial fraud will decrease. On the other hand, this process involves restricting the personal freedom of each person. An ordinary citizen, who decides to make an online payment, cannot count on any anonymity. The end of cash should undoubtedly be accompanied by a change in legislation and reforms in the banking system.