Humans have come a long way. For centuries, our ancestors used the barter system as a method of transaction. Then gold and money were discovered and used as the medium of exchange. Today, we’re talking about a cashless society.
So, what is a cashless society? Simply put, it’s a world where humans trade and make payments without carrying any cash. Every payment will be done digitally, which means that banks won’t print money anymore.
Is it good? Is cashless payment the way to go? Before we make any verdict, let’s take a closer look at what cashless payment actually is.
What is Cashless Payment
Cashless payment is a method of trading that involves no physical money, be it coins or banknotes. Payments will be done using cards (credit, debit, smartcard, etc.), smartphones (Apple Pay, Android Pay, Google Wallet, etc.), and even human facial recognition (in China).
Some banks and retailers call this method “Tap-and-Go” because of its simplicity and convenience. Say goodbye to those banknotes and clunky coins that you have to carry around in your wallet.
How Does Cashless Payment Work
Here are the technical steps of cashless payment:
- A card or smartphone is placed near a cashless payment terminal within 4 cm or 1 ½ inc
- Then the terminal will read the chip of the card or digital wallet in the phone and transmit the data to a card-processing network like Visa or Mastercard.
- The network will run a fraud analysis to look for any suspicious activity. After it’s clear, a confirmation will be sent to the card issuer.
- The card issuer will confirm that the card isn’t stolen and has sufficient funds to continue the transaction.
- This confirmation will be sent back to the terminal.
- Your payment is accepted. All of this is done in just 2-3 seconds.
Now that you get the hang of what cashless payment is, let’s talk about its benefits and drawbacks.
The Benefits of Cashless Payment
Better customer satisfaction
Cashless payment speeds up the entire process of a transaction. That means less waiting time and shorter queues in restaurants and stores. As a result, customers will be more satisfied with the service.
More loyalty programs
Brands who use the cashless payment system usually give more rewards and discounts for customers. One of the best examples is the Starbucks Rewards program which gives cashback, discounts, and even free beverages for loyal customers that keep paying with a Starbucks card.
A Convenient means of payment
As mentioned before, the cashless payment enables people to go shopping without carrying any cash. They can just bring a card, sticker, smartphone, or even bring nothing but their face to pay for something.
The Drawbacks of Cashless Payment
The technology isn’t perfect
No matter how hard we try, our creation will never be perfect, including technology. Sure, it will work 99% of the time. But there’s a 1% chance that an error will occur in the cashless system. When that happens, people can’t pay and merchants can’t receive payment, meaning that the economy will be hampered.
Easier to overspend
When we pay with cash, we can physically count our expenses. That’s not the case with cashless payment. Because it’s so convenient and easy to use, people are more likely to overspend when using digital payment.
Harder for older people to understand
The older generation grew up with gold and cash, so the concept of cashless payment might be a little too strange for them. Plus, some of them don’t even have a bank account or a smartphone. It will take extra effort to introduce cashless payments to older people.
Is Cashless Payment Safe?
Movies often portray that stealing information from somebody’s card is easy. In reality, it’s not. Nowadays, cards are equipped with EMV chips, making it super hard to be hacked. On top of that, cashless cards are also secured thanks to their encrypted 16-digit account number.
Although technology isn’t perfect and it’s not 100% guaranteed that hackers can’t access your digital wallet and personal info, it’s still safe enough that they can’t clone a card or make purchases using your card.
Digital apps like Apple Pay and Android Pay have also upped their game by implementing safeguards to make sure that no one is gonna take your money. Now, before you decide to go fully cashless, always remember these two things:
- Wipeout all of your details if you lose your iPhone using the “Find my iPhone” app. If you use an Android phone, then you can relax a bit. Android Pay never transmits your credit or debit card number and instead use a virtual number. So, your private information is safe.
- Don’t overspend. Yes, it’s hard to stay on track with your budget with the convenience of tap-and-go. But, it doesn’t mean that it’s impossible. There are a few things you can do to control your expenses, such as using a prepaid card, setting up spending notification, canceling unused subscriptions, as well as having the commitment to limit yourself.