Policy will be key to supporting cashless consumption

Subject

Cashless society transformation.

Significance

Transacting electronically is quicker and cheaper than using cash, provided the infrastructure is in place to support the transactions. Across the world, the number of electronic transactions and the supporting infrastructure has surged over the last two decades. Card payments averaged 25.3% of GDP in 2016 in the 24 countries the Committee for Payments and Markets Infrastructure covers, up from 12.8% in 2000. Despite this, cash retains a key role, paradoxically even more since the global financial crisis, as ultra-low interest rates in the ten post-crisis years reduced the opportunity cost of holding cash.

Impacts

• All cashless transactions are automatically tracked, forcing consumers to sacrifice more privacy without the ability to ‘opt-out’.
• An individual’s credit standing will gain importance and may become as key to gaining employment as it is to accessing financial services.
• There will be a digital divide not only in access to and exclusion from financial services but also the ability to pay.
• Payments for services could become the fastest-growing category of cashless transactions.