CASHLESS CANADA'S NEW TREND

Cashless ecosystem is gaining popularity in Canada as contactless payment options are on the rise.

I know technology is taking money towards less cash dependant society, but these cashless contactless digital payment methods have their challenges too.

What is cashless :

In a cashless society physical bank notes or coins are not accepted in any financial transactions, rather money is used transferred and stored in a digital form.

Right now it just looks like a forward-looking statement, but with evolution of technology and changing consumer preferences who knows we might go completely digital.

In other words legal tender which is our money will exist, but is exchanged in a digital form.

Scandinavian countries in Europe are way ahead in this evolution where cash handing at bank branches is extremely low.

Some central banks have introduced government-backed digital currencies to replace their fiat money, and I believe Covid 19 accelerated the whole concept of touchless and cashless transactions.

Eliminating Cash :

Cash has been linked with tax evasion or money laundering, which can be checked with digital money as it leaves an audit trail.

Any cash transaction exceeding $10,000 in the US must be reported to IRS, which has reined in money laundering.

Data from digital transactions can be used by policymakers to improve governance, or coming up with better financial models to stimulate economic growth.

Surely these digital transactions do bring in economic efficiencies which improves profit for businesses.

That is why The Fed has been exploring about creating, “The Central Bank Digital Currency” or the CBDC for a while now.

European Central Bank is also eliminating bigger denomination notes to curb fraud and money laundering.

Canada going cashless :

By 2030, cash will make up only 10% of money spent in Canada according to experts.

Two factors slowing this rapid adoption are, consumer concerns about security and second ability of mobile wallets to digitally store contents like loyalty cards and receipts.

But Canadians are rapidly adopting contactless technology as it’s speed and ease of use is attracting younger audience.

Way back in 2016, Apple Pay included all major Canadian banks in it’s payment ecosystem, which has changed how younger generation use their phones or smart watches for contactless payments.

More than 60% Canadians surveyed said they would be more likely to use if they knew it was secure.

Rising trend :

Whether paying by debit credit mobile or smartwatch, speed and convenience are driving how Canadians are choosing to pay.

For sure use of cash is going down, whereas credit and debit cards are the two most widely used means of payments in Canada.

A fully automated store “Aisle 24” is getting traction, where you sign up for an account using its app do your shopping checkout at a self-serve machine, a complete contactless and cashless experience.

We all are strapped for time thus prefer ease of use which is driving consumer behaviour.

But every time you tap your card, the business pays transaction fees which is hampering widespread adoption.

Future :

In 5 years a quarter of Canadian grocery stores won't accept cash according to a new study.

During pandemic cash was avoided thus digital transactions went up, but for sure consumers are concerned about their privacy and security.

It costed Sobeys $25 million for a cybercrime event, where customer information might have been compromised last year.

Maybe we are a little bit more vulnerable than we think we are, and are constantly trading our private information for benefits that technology can bring.

Underbanked households who rely on alternative financial services such as payday loans will be left behind, but this cashless trend surely is picking up.

Risks :

Slower disaster recovery greater discrimination loss of freedom and no check on payment provider fees, are some of the concerns raised by a move away from cash.

Often cash has a multiplier effect during times of distress as they say, cash is king.

For sure no cashless payment and it’s ecosystem is completely secure, whereas cash comes with freedom of use at no cost to you but safety can be an issue.

In case of negative interest rates banks can charge you to store your digital money as you have no other option.

There are multiple steps and costs associated the moment you tap your card, but you pay for speed and ease of use.

Disclaimer :

As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.

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