The positive and negative impacts of a cashless economy for a business post COVID-19- by Courtney Smyth

 

This blog explores the positive and negative impacts of a cashless economy through the perception of a business.

Does less cash= less financial crime?

Cash transactions have been declining in Sweden since 2012. Since then, Sweden has seen a downward trend in robbery crimes. The graph below predicts that the reduction of cash could perhaps diminish the likelihood of robberies.  Additionally, the movement of counterfeit cash may harm businesses, counterfeit cash could increase the loss of sales which then will impact the businesses profitable income. A cashless economy could prevent the possibility of such crimes and therefore, might cumulate a more positive economic result for businesses.  


[1]

 

 Is your money safer digitally? 

The European banking authority sets the regulatory framework for the protection of bank finances throughout the European Union.  Having money installed in a banking system could ensure financial security for both the businesses and the consumers. However, a cashless society could perhaps put more emphasis on fraudulent behaviour. Regulation and supervision must be guaranteed to ensure the protection of digital money.  The  European Union Executive Vice-President Valdis Dombrovskis had stated that 'there had been a 72% increase in the use of finance mobile apps, one week after the pandemic had begun,' since then, "attacks on financial institutions have risen by 38%". [2]


[1] (European Payments Council. 2020. Sweden: Cashless Society and Digital Transformation.)

[2] (European Commission. 2020. Speech By Executive Vice-President Valdis Dombrovskis At The Digital Finance Outreach 2020 Closing Conference.)

[3] (Shaikh, and Ganguly, 2020. How Safe Is Your Digital Cash? Find Out)

Will there be an increase in spending through cashless means?

A cashless economy may yield an upturn in public confidence in relation to spending. Cash is restrictive whereas when using a credit card, users can surpass their spending limits. According to the European payment council, “VISA predicts a ‘permanent’ shift to in consumer spending habits” [4] with an increase of credit and debit transactions- Statistics show that people are more inclined to spend more with credit or debit cards within European countries.


[5]

Also, digital transactions had allowed businesses to continue trade during global lockdowns. Contactless payments were urged by governments throughout the world to reduce the spread of COVID-19.  In the  UK, consumer spending at the beginning of the national lockdown in March had stalled however, there has been a consistent rise in contactless transactions from May 2020 onwards.

[6]

However, these statistics exclude certain people within society, such as the homeless, lower-income families, the disabled, and the elderly. If businesses were to become cashless, they would discriminate against those who are not financially able to adapt to the changing economy. Also, smaller businesses which cannot afford the latest technologies to comply with the latest economic trend may face lower consumer productivity.


[4] (Megaw, 2020. Visa Predicts ‘Permanent’ Shift in Consumer Spending Habits.)

[5] (UK Finance. 2020. UK Finance Payment Markets 2019.)

[6] UK Finance. 2020. UK Card Spending Update June 2020


 What are the financial implications of a cashless economy for a business? 

Although cashless payments within businesses are effective in preventing fewer robberies/counterfeit cash, ensuring a level of economic growth, and increasing consumer spending, cashless transactions can have implications for businesses, one being that businesses must pay a transaction fee for every sale that is made to the credit card company, this is an additional cost to the business. Also, according to the American Congress and House of Judiciary, “some of the card associations '(such as Mastercard and Visa) fee schedules are openly weighted to provide that larger businesses pay less”. [7] This sets an unfair disadvantage for small to medium-sized businesses.

[8]

                               

Nonetheless, businesses could save money on wages to an employee to handle financial administrative work. It is also important to add that technical issues could arise with the use of cashless transactions. If digital payment is the only form of transaction, and the digital payment system breaks down or service is lost, then the business will be unable to generate a profitable income.


[9]


Conclusion

 

To conclude, the characteristics of a cashless economy could increase the financial burden on businesses in the short-term; however, in the long-term, it could increase shareholders' wealth and create substantial business growth. Change is inevitable, COVID-19 is accelerating the cashless demand, and businesses must adjust to the latest trends to become successful in today's economy. The second wave of COVID-19 is engulfing Northern Ireland, the end of the global pandemic is unknown and therefore, the question remains, will digital transactions outlive the pandemic and become the only form of the transaction?

[10]


[7] (the United States. Congress. House. Committee on the Judiciary. Task Force on Competition Policy and Antitrust Laws, 2008, Page 26.)

[8] (Baraniuk,  2018. The Bar Where Your Cash Is Worthless)

[9] (Brophy, M., 2020. 9 Best Merchant Services for Small Businesses In 2020)

[10] (The Asian. 2020. Cash or Card?)



References

 

Brophy, M., 2020. 9 Best Merchant Services for Small Businesses In 2020. [online] Fit Small Business. Available at: <https://fitsmallbusiness.com/best-merchant-services/> [Accessed 15 October 2020].

 

Baraniuk, C., 2018. The Bar Where Your Cash Is Worthless. [online] BBC News. Available at: <https://www.bbc.co.uk/news/business-46507529> [Accessed 17 October 2020].

 

European Commission. 2020. Speech By Executive Vice-President Valdis Dombrovskis At The Digital Finance Outreach 2020 Closing Conference - European Commission. [online] Available at: <https://ec.europa.eu/commission/commissioners/2019-2024/dombrovskis/announcements/speech-executive-vice-president-valdis-dombrovskis-digital-finance-outreach-2020-closing-conference_en> [Accessed 15 October 2020].

 

 

European Payments Council. 2020. Sweden: Cashless Society and Digital Transformation. [online] Available at: <https://www.europeanpaymentscouncil.eu/news-insights/insight/sweden-cashless-society-and-digital-transformation> [Accessed 15 October 2020].

 

Havaldar, K., 2014. Business Marketing. India: McGraw Hill Education.

 

 

Hendrickson, R., 1972. The Cashless Society. New York: Dodd, Mead.

 

 

Hitchcock, M., 2009. Cashless. Eugene, Or.: Harvest House Publishers.

 

 

Lawrence. G, 2019. Globalisation, Localisation, and sustainable livelihoods. [s.1]: Routledge.

 

Megaw, Nicholas 2020. Visa Predicts ‘Permanent’ Shift In Consumer Spending Habits. [online] Available at: <https://www.ft.com/content/90d666a2-621e-487e-8048-e86c047bb3c7> [Accessed 16 October 2020].

 

 

UK Government. 2020. Financial Services Act of 2012. [online] Available at: <https://www.legislation.gov.uk/ukpga/2012/21/contents/enacted> [Accessed 15 October 2020].

 

Management Association, I., 2018. Digital Currency. Hershey: IGI Global.

 

Shaikh, S., and Ganguly, P., 2020. How safe is your digital cash? Find out. [online] The Economic Times. Available at: <https://economictimes.indiatimes.com/small-biz/security-tech/technology/how-safe-is-your-digital-cash-find-out/articleshow/55803672.cms> [Accessed 15 October 2020].

 

 

The Asian 2020. Cash or Card? | Theasian. [online] Available at: <http://www.theasian.asia/archives/21992> [Accessed 15 October 2020].

 

 

UK Finance. 2020. UK Card Spending Update June 2020. [online] Available at: <https://www.ukfinance.org.uk/sites/default/files/uploads/Data%20(XLS%20and%20PDF)/Card-Spending-Update-June-2020-final.pdf> [Accessed 15 October 2020].

 

 

Uk Finance. 2020. UK Finance Payment Markets 2019. [online] Available at: <https://www.ukfinance.org.uk/sites/default/files/uploads/pdf/UK-Finance-UK-Payment-Markets-Report-2019-SUMMARY.pdf> [Accessed 15 October 2020].

 

The United States. Congress. House. Committee on the Judiciary. Task Force on Competition Policy and Antitrust Laws.2008. Credit Card Fair Fee Act Of 2008. [Washington, D.C.]: [U.S. G.P.O.].

 

 



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