The boon and bane of going cashless

WHILE the growing shift towards digital payments is still being debated, the proliferation of new electronic and mobile instruments has opened the door to a possible revolution in the payments landscape. Yet, a national shift to a cashless society could prove more complex than apparent at first glance.

To justify a withdrawal of paper money, the argument is that a fully digitalised system could eradicate tax evasion and money laundering, reduce transaction costs and enable financial authorities to stimulate economic growth. A cashless system can enable governments to track every transaction, leaving no loopholes for fraudsters to exploit. Moreover, central banks would be able to impose any desired monetary policy, including negative rates, as consumers would have no way to retrieve cash from the system.