Global Top Cashless Economy Trends, Worldwide 2024; The Next Payments Era and Future Opportunities For Banks

Cashless Economy: Overview & Defination 

Cashless Economy Is a system in which all money transactions are done digitally, such as with debit cards, electronic funds transfers, mobile payments, internet banking, and mobile wallets. Economists, entrepreneurs, and financial analysts talked on the potential for a cashless society at COVID. Companies have made the decision to go cashless in an effort to limit their exposure to the highly contagious illness by promoting a quicker method of payment and avoiding needless physical contact with consumers. Even if people choose this safe and practical payment option, it could not have the best long-term economic effects.

 

In a cashless economy, traditional payment methods like cash or coins are replaced with digital transactions like net banking, mobile banking, digital wallets, debit cards, and credit card payments. In international finance, "cashless society" is the newest buzzword. There are currently just 15% to 20% of global currency in the form of currency notes. Nonetheless, a large number of governments and central banks worldwide have promised to completely eliminate the cash proportion. This implies that gold might be exchanged for the original banknotes. This functioned as the benchmark. Currency notes were the standard paper because they could be exchanged for other currency notes in the future.

 

Related Reports: 

 

1. "The number of cashless payments in Asia-Pacific is forecast to be higher than transactions in Europe and North America combined. This is according to research from Spherical Insights & Consulting. In 2022 - the most recent year estimated by the source USD 440 billion in non-cash transactions were carried out in Asia-Pacific. Europe and North America followed, with USD 254.6 and USD 204.4 billion in transactions respectively. From 2022 onwards - which are all forecasts - the source predicts a significant growth in Latin America due to the implementation of instant payments."

 

2. The Global Digital Banking Platform Market Size is expected to reach USD 220.1 billion by 2030, at a CAGR of 29.7% during the forecast period 2021 to 2030. This is according to research from Spherical Insights & Consulting. The digital banking platform market has been growing owing to the widespread digitalization in the financial sector and is expected to drive the demand for Digital Banking as it enables users with tech-enabled analytics offered by Digital Banking for investment consultations.

3. The Global Self-Checkout Systems Market Size is expected to reach USD 13.76 billion by 2030, at a CAGR of 15.0% during the forecast period 2022 to 2030. The expense of shop space is rising, and the length of consumer lines to place orders or pay is lengthening. Other factors driving the market's expansion include the lack of experienced personnel in emerging countries, growing labour prices, and a preference for individualized shopping experiences.

 

Different Cashless Economy Types

• Mobile Wallet:

Mobile phones can store cash, which may use to make payments both offline and online. These wallets are offered by a number of service providers via mobile apps that need to be downloaded to the phone. Users can use Net Banking or credit/debit cards to add money to these wallets. This suggests that there is no need to enter credit card information each time people use the wallet to pay a bill or complete an online transaction. These can be used to pay bills and shop online.

 

• Plastic Money:

Cards that are prepaid, debit, and credit are types of plastic money. The latter can be issued by banks or non-banking entities, and it can be virtual or tangible. These can be presented as gift cards or used to make online or point-of-sale (PoS) transactions. They can also be bought and refilled online through Net banking. The three main uses of cards are to make online payments, withdraw cash from ATMs, and swipe cards at point-of-sale (PoS) terminals at establishments including restaurants, retail stores, and gas stations to make purchases or make payments.

 

• Net Banking:

With net banking, users can transfer money online without using a wallet from one bank account to another, credit card, or third party. Users can use a smartphone or a computer to accomplish this. To transfer money online from the bank account, use immediate payment service (IMPS), real-time gross settlement (RTGS), or national electronic funds transfer (NEFT). These options all have very low transaction costs.

 

Although different measurements of cash-lessness result in different rankings of nations along a "cashless continuum," most experts concur that Sweden is now the nation that comes closest to the ideal of becoming cashless. In that nation, less than 18% of transactions are currently made with cash, and the amount of cash in circulation has drastically decreased in the twenty-first century, making up only 1.02% of GDP at the moment. In Sweden, almost half of all bank branches no longer accept cash, and businesses are now allowed to refuse payments in cash simply by putting a sign. In many nations, central banks have incorporated digital currencies backed by the government to ease the shift from physical banknotes and coins to cashless transactions.

 

Advantages of Cashless Economy

• Taxation:

The government is not allowed to impose an unjustified level of taxation under the current setup. People can choose not to pay these taxes because they have the means to do so. Therefore, taxes need to be made more sense. However, it is inevitable that taxes will need to be increased in one way or another if these economies are to survive given the massive debt that all governments worldwide are confronting. In the event that all money is digital, banks are the source of all of it. This makes taxing earnings at the point of origin feasible, easy, and very handy. First, it will start off as a moderate tax that the public will accept.

 

• Negative Interest Rate:

Western economies have maintained interest rates near zero for an extended period of time. This suggests that going into negative territory would be the next phase. This would also suggest that bank cash holders will lose some of their funds. This is the opposite of receiving interest income. It's highly likely that negative interest rates will soon arrive. But only once all money is digital can they be imposed. Those without digital currency can just take it out to get around this tax.

 

• More Practical:

Contactless and mobile payments have made it easier for customers to spend money than in the past. Going cashless relieves consumers of certain burdens that could otherwise be avoided, such as having to locate an ATM and take out cash, find the closest branch of their bank and stand in line, or worry about having enough change to make a modest transaction.

 

• International Payment Made Simple

Currency exchange is a difficult task for many people who go abroad. They find that paying cashless is a far more practical choice. Exchange rates are not a worry; all that is needed is a mobile device that is connected to a bank account.

 

Cashless advocates contend that a cashless society will reduce several illegal activities and that digital transactions are more convenient for both consumers and companies. Additionally, they contend that, given the expanding digitization of economies and customers' increasing propensity for using mobile devices for daily business transactions, the trend toward cash-lessness is unstoppable. Nonetheless, banks have been driving this trend by purposefully making cash transactions less easy for their clients (by, for example, withdrawing ATMs and closing branches) in order to promote the use of more lucrative digital services. The rise in touchless and cashless transactions was also significantly influenced by the global coronavirus epidemic that started in 2020.

 

Disadvantages of Cashless Economy

• Low Literacy Rate:

A low rate of literacy is one of the main reasons of many current issues. It's not simple to make India digitally literate or a cashless economy. There are still many places without running water or electricity. Thus, the internet and computers are a long way off. Most people reside in rural areas without access to these basic amenities. In these underdeveloped locations, people only have access to money. They might be tricked if they have to depend on someone for their online activities.

 

• Device Availability is Limited:

A further obstacle to the widespread use of digital payment methods is the cost, accessibility, and effectiveness of online transaction-supporting devices, like PCs, cellphones, and point-of-sale equipment.

 

• Economic Disparity:

Buying smartphones or other gadgets will probably become essential if cashless payment methods totally replace the current payment method. Buying a smartphone is undoubtedly a luxury that the impoverished cannot afford in a nation like India where many people struggle to meet their basic requirements. Inequality in society would arise if cashless transactions become commonplace since not everyone can afford them.

 

• Identification Fraud:

The possibility of identity fraud is one of the main drawbacks of the cashless economy. Hacking dangers are rising as a result of the daily increase in online fraud rates. Not everyone knows everything there is to know about technology or is an application expert. In an online forum full of eerie lurkers, many people may wind up losing their identities while trying to conduct digital transactions.

 

First off, people who are "unbanked," or who do not have or are unable to open a bank account, are primarily people in the lower classes. Since few transactions and purchases would be anonymous, it might encourage major privacy violations. Systemic failures brought on by large-scale hacking or natural disasters may render all transactions and payments impossible, and even small technical issues may prevent access to funds. In the event of a serious economic crisis that jeopardizes the viability of large banks, depositors would not be able to save their money via cash withdrawal. Depositors also couldn't stop troubled banks from using a portion of their funds in "bail-in" situations, where creditors, including depositors, are held accountable for the debts of the institution and its shareholders. Regular depositors would not be able to defend themselves against negative interest rates, which have been imposed by central banks in some nations like Japan in an attempt to fight deflation or recession following the failure of attempts to reduce positive interest rates to almost zero. Negative interest rates enable private banks to charge their depositors a nominal fee for retaining their funds, so incentivizing them to make investments and expenditures. In fact, some economists argue that this is in favor of a cashless society because it would become impossible to withdraw cash, making extraordinarily large negative interest rates possible.

 

However, there can be disastrous repercussions if companies push the transition to a cashless society before customers are ready for it. A hasty transition to a cashless society may cause significant segments of the populace to become financially marginalized and vulnerable to exploitation as they struggle to adapt to the new norms. The senior population is especially vulnerable since they frequently lack confidence while using online banking services or digital payment methods. The UK is expected to go cashless in the next fifteen years, but around 25 million individuals, or 50% of the population, would suffer if they lost access to real money. To guarantee that the transition to a cashless society is as seamless and progressive as it needs to be and that no segments of society are left out in the cold and financially exposed as a result, banks, FinTechs, and government agencies must collaborate.

 

Recent Developments

1. In July 2023, the implementation of India's UPI payment mechanism in France, commencing at the Eiffel Tower, has been agreed upon, according to an announcement made by Indian Prime Minister Narendra Modi. This is a big step forward for bilateral trade and tourism between India and France because it will enable Indian tourists visiting France to pay with Indian rupees.

 

1. In June 2023, The Center exalted India's dominance in the field of digital payments. According to the report, the nation is paving the way for a cashless economy. According to official data, India led the list of the top five countries in digital payments in 2022 with 89.5 million digital transactions.

 

1. In October 2022, for the advantage of Indian professionals and workers, the Central Bank of Oman (CBO) and NIPL inked a Memorandum of Understanding (MoU) that facilitated seamless digital transfers through Indian RuPay cards and the UPI platform in Oman.

 

1. In September 2022, leading global payments infrastructure group TerraPay established a partnership with NIPL to bolster its cross-border payment solutions. By utilizing TerraPay's flexible infrastructure and the UPI network, this cooperation aims to facilitate cross-border payments for Indian consumers and merchants in India who have an active UPI ID.

 

1. In July 2021, The Royal Monetary Authority of Bhutan has access to UPI. India's digital payment software, BHIM (Bharat Interface for Money), is powered by UPI, a technology that unifies several bank accounts into a single mobile application.

 

1. In February 2021, with UPI and PayNow, the equivalents of each other's payment systems, residents of Singapore and India can send money to each other instantaneously. "The cross-border real-time payment systems linkage was launched.

 

About the Spherical Insights & Consulting

Spherical Insights & Consulting is a market research and consulting firm which provides actionable market research study, quantitative forecasting and trends analysis provides forward-looking insight especially designed for decision makers and aids ROI.

Which is catering to different industry such as financial sectors, industrial sectors, government organizations, universities, non-profits and corporations. The company's mission is to work with businesses to achieve business objectives and maintain strategic improvements. 

 

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