What Is a Cashless Society? How Would it Work?

Living in a “cashless society” would mean cash as we know it wouldn’t exist. There would be no more walking around with a wallet full of paper bills or collecting loose change for a rainy day.

Instead of relying on cash to make purchases or pay bills, people in a cashless society would use other payment methods, including:

• Debit cards linked to a bank account
• Credit cards
• Gift cards
• ACH or wire transfers
• Mobile banking and digital wallets
• Cryptocurrencies
• Peer-to-peer payment apps

Instead of handing over physical money, purchases and bill payments would all be processed electronically. Instead of depositing cash, you could add money to your bank account using electronic transfers, mobile check deposits, and direct deposit.

Currently, there’s not a completely cashless society. Countries worldwide still print and circulate paper money and mint coins, though Sweden is recognized as a mostly cashless society.¹

Despite the uptick in digital payments and debit cards, cash is still a popular way to pay, but it’s declining. Roughly a decade ago, 24% of Americans said they used cash in a typical week. In recent years, that has dropped to 14%.²

For over a decade, the percentage of people who reported not using cash at all has also shot up from 24% to 41%. That’s more than four in 10 Americans who don’t regularly use cash for payments.

So, could a cashless society happen? Yes. But it may take time for the idea to catch on in countries like the U.S., where 6% of adults are unbanked (no checking, savings, or money market account) and thus solely depend on cash.³

While we may be far from an entirely cashless society, the U.S. and other countries are trending toward being largely cashless in many ways. And while we wait for complete countries to follow suit, we can strive to become more cashless in our day-to-day lives.

Why would you want to go cashless? Here are a few advantages to consider:

1. It’s easier to manage your finances

Tracking purchases can get tricky if you aren’t keeping up with receipts or recording your spending.

You can quickly see where your money goes when you’re spending or making cashless payments (using a debit card, credit card, or payment app, for instance).

Electronically tracking your spending is an excellent way to budget. When you know what and where you spend each month, you can more easily identify and cut out unnecessary expenses and save more money.

Plus, many online payment services let you set up alerts to monitor your spending. This can help you avoid running a low balance or incurring overdraft fees.

2. Your money is safer

Carrying cash can be problematic if your wallet is lost or stolen. If a thief makes off with your cash, you will unlikely get it back.

Using debit cards, secured credit cards, and other cashless forms of payment can offer more built-in security. For example, imagine your credit card information is hacked and used to make unauthorized purchases. If your card issuer offers a $0 fraud liability guarantee, you won’t be held responsible for any of those charges.

Debit cards linked to a bank account are also protected under federal law. However, the amount of fraudulent purchases you are liable for may depend on how quickly you report a lost or stolen card.⁴

3. You can save time

To withdraw or deposit cash, you’ll need to use an ATM, wait in line at the bank, or find a change machine if you need coins.

Going cashless can save time in several ways. First, it makes it easier to send and receive money with friends and family. If you need to pay your share of the dinner tab or split the rent with roommates, for instance, you can easily send or receive electronic payments via person-to-person payment apps that link directly to your bank account.

It can also make your checkout time faster at the store. In fact, contactless payments are 10x faster than other forms of in-person payment, including cash.⁵

4. Crime rates are lower

Instances of petty theft and even armed robbery at points of sale could theoretically decline in a cashless society. If people don’t carry money in wallets or purses, and registers aren’t stuffed with cash, there is no physical money for criminals to steal.

5. International payments are easier

When you travel internationally, you may exchange your American dollars for another currency, though there’s usually a fee for this service. But in a cashless world, you’d simply pay with a credit card, debit card, or mobile wallet without worrying about the currency. Just make sure you use a card without foreign transaction fees.

6. There are automatic paper trails

With digital paper trails for all payments, criminals will have a more difficult time laundering money. A cashless society could help reduce illegal financial transactions for drugs and gambling.

7. There are major savings for businesses

Going digital could mean significant savings for small businesses and, thus, a stimulated economy. For starters, bank branches can reduce their security staffing because no physical money would be at risk. Retailers and restaurants can also save money on security as well as overall cash management – everything from counting tills to making physical bank deposits.

While there are several pros to a cashless society, going completely cashless could also have some potential drawbacks that you should know about. The biggest disadvantages associated with a cashless society include the following:

1. Cashless transactions are exposed to hacking risks

With electronic payments, you lose your anonymity as a consumer because digital payments aren’t as private as cash ones. Spending and receiving money digitally comes with risks like data breaches. If your banking or personal information is stolen, it could be used to make fraudulent purchases. Be sure you follow the proper steps to avoid identity theft.

2. Technology problems could impact your access to funds

Cashless transactions rely on technology, which isn’t always dependable. When you go cashless, a power outage or dead phone battery could leave you unable to purchase what you need.

3. Overspending could increase

The physical act of paying with cash makes tracking how much money you are spending easier. You can see your money dwindling as you spend.

With electronic payments, you can swipe or click without consciously being aware of the amount of money you are using. Managing your spending takes a more deliberate effort when going cashless.

4. Payment minimums

In a cashless society, businesses could require a minimum transaction amount to pay with a debit or credit card.

Going fully cashless has its pros and cons. The table below breaks down the advantages and disadvantages that we’ve just reviewed:

No one knows what the future holds, but based on how our relationship with cash – and technology – has changed over recent decades, here’s what a cashless society could look like:

• More plastic: Credit and debit cards have become a common part of everyday life, and they’ll likely still be relevant in a cashless society.
• Digital wallet: Similarly, smartphones (and other smart technology) will continue to grow in popularity as convenient ways to pay for goods and services.
• Payment apps: Many peer-to-peer payment apps will make it easy to split bills and send money to friends.
• New regulations: Many of our current regulations and laws are built around the old ways of banking. Even now, organizations like the Consumer Financial Protection Bureau are working to protect consumers as the rise of fintech companies and neobanks continues.⁶ Regulators will need to continue to evolve policies to protect consumers.
• Rise in cryptocurrency: In a cashless society, cryptocurrency could become even more commonplace. Another component of a transition to a cashless society is the rise in a central bank digital currency (CBDC), a digital currency regulated by a country’s central bank.⁷

If you’re ready to experiment with cashless living, it’s good to have a bank account with a linked debit card and potentially one or more credit cards you can use as payment. You can also look into other payment methods, like personal payment apps or a cryptocurrency savings account.

From there, you can move on to setting up direct deposit for your paychecks and scheduling online bill payments. You can also tailor your spending to those stores or businesses that accept your chosen forms of payment and skip the ones that only take cash.

Finally, keep in mind that you may still need to use cash from time to time. It might make sense to keep a little cash on hand or, at the very least, make sure you can access your bank account through a wide network of ATMs near you. That way, you won’t be stuck without a way to pay if you find yourself in a cash-only situation.

A truly cashless society is one in which there is not a single dollar bill to be found. While we may not ever reach this status uniformly across the globe, the world is increasingly relying less on cash and more on digital payments.

Looking for more ways to reduce your reliance on cash in everyday life. Consider the advantages of going cashless, like with a prepaid card, debit card, or credit card.