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Pros and Cons of Cashless Economy

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The growing number of digital payments has led to a global cashless economy. Most of the transactions are done through digital systems like the use of e-commerce, debit or credit cards, digital wallets, and POS machines among other.

Is cashless economy right for your country? Look at the following pros and cons to know how no liquid money or paper currency will affect you.



1. Stimulate economic growth: Online buying of goods and services provides businesses with a wider market to serve. Businesses spend more money on developing products with satisfying consumer’s needs. More money spent by consumers to buy goods leads to economic growth.

2. Reduce money laundering: A cashless system enables the government to monitor and track every transaction to ensure no loopholes for fraudsters and money laundering.

3. Reduce transaction cost: It reduces ATM fees, cash transportation expenses for businesses as well as currency printing expenses.

4. Access to loans: People will be forced to open bank accounts for use in carrying all online transactions. There is also increased access to credit facilities to people who didn’t have any banking network.

5. Reduction in crime rates: Cashless economy in the society has contributed to a reduction in crime rates like extortion, robbery, and burglary.

6. Increase tax net: All individuals and business are required to record both sales and purchases. This process ensures individuals or business do not evade tax since all transactions are recorded increasing the tax net for the government.

7. Security and convenience: You don’t have to worry about losing your money or forget your virtual wallet. Security of your money is guaranteed. You can conveniently access the money from anywhere with your mobile phone or credit cards.

8. Easier payment: With digitization, you can transfer money to any place across the country and make payments at anywhere making transactions more transparent.

9. Reduce tax evasion: Maintaining digital transactions and digital money services increase transparency in all transactions and help the government track tax payments by all individuals increasing tax compliance.

10. Helps mitigate corruption: It helps the government to know what people are spending money on and how much they receive.



1. Security: There is an increased number of cyber-attacks and fraud associated with digital transactions. Hackers can hack the system and obtain sensitive information like consumer’s credit card details or passwords.

2. Violation of privacy: Keeping track of all business transaction by the government and other organization in need of personal data may violate one’s privacy.    

3. Reduces financial inclusion: This shift will bring issues with financial inclusion. A country’s push to the cashless economy will force the poor to sign up with a bank network which can be a hard decision for them if what they earn is only enough for their daily needs.

4. Poor infrastructure: Poor internet accessibility, electricity, and technological devices needed for online transaction affect the implementation of cashless transaction.

5. Availability: It is impossible to make digitization universal since not everyone can afford a smartphone or a device to access online transaction.

6. Awareness and education: Some countries like India have high levels of illiteracy and are not aware of how to use the digital medium for buying and payments of goods.

7. Loss of freedom: It is a personal decision to hold or not hold money in the bank and introduction of digital transactions will force them to rely on banking sector for any transaction leading to loss of financial freedom.

8. Reduces liquidity: Small business and some certain sectors like retail industry, real estate or restaurant rely on hard cash and will be affected by cashless society.

9. Control of third parties: All the money is entrusted to third party like banking institution or the government and in case of any disaster, you’re left without any hard cash.

10. Spend more: People using credit cards tend to spend more money than they should.

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