Cashless Society Case

The notion of a “cashless society” is drawing ever closer with the usage of coins and banknotes for transactions being steadily replaced by other systems which present themselves not only as viable, but also as potentially better alternatives. This movement of replacement, where cash as a mode of payment is being replaced by other forms, is led primarily by Plastic. When the first credit card was introduced in 1946 and the first debit card in 1978, the global community began its transition into a cashless society. Fast forward to the present and it is indeed evident that plastic has attained staggering levels of dominance and growth when compared to those of cash- which have met with a highly perceptible decline. According to an article in the Kenyan daily The Star by the VP of MasterCard, today, over 15% of transactions worldwide are cashless, pointing to the rising usage and acceptance of prepaid, debit and credit as modes of payment to cover our day-to-day transactions.

The chart below indicates the rise in card-payments from the year 2000 up till the year 2007. According to the chart, the use of cashless payments by non- Monetary Financial Institutions in the European Union had seen a significant rise.

Today, the concept of a cashless society has been realized and put into action in several places around the globe, although in a relatively smaller scale. For instance, the middle and upper classes of the Kenyan population, the reality of a cashless society is not a far- off prospect. Rather, on the contrary, it is something that has already attained high levels of acceptance and feasibility among the Kenyans, as properly evidenced by a Central Bank of Kenya survey. The results of the survey have clearly indicated that cashless transactions have grown 83% to Sh.386.6 billion in the first half of 2012 from the Sh.211.2 billion recorded during the same period in 2011. Although, cash remains to be the preferred and widely prevalent mode of payment in Kenya at over 98%, the confidence in plastic money is on a steady rise owing largely to its convenience and the potential risks associated with cash as a mode of payment.

The infrastructure costs of maintaining a cash- based system are huge. On the other hand, without it the customer becomes a more direct a participant in the various transactions involving himself and the product- provider thereby helping the transaction achieve a more satisfactory level of transparency and feasibility. This also eliminates all and if at all any peripheral costs by bringing the buyer and the seller into direct contact and thereby eliminating the need for a middle ground. This kind of a transaction is quite similar to how the P2P (Peer to Peer) cryptocurrency “Bitcoin” works. Bitcoins can be transferred through a computer or a smartphone without necessitating the involvement of an intermediary financial institution.