Thanks to covid, the media are speculating about the future of cashless societies more than ever before. If you’ve ever read any of these articles, you will have probably come across the terms social exclusion, financial inclusion, underbanked and unbanked.
But what exactly do they mean? And why are these terms so important when talking about the future of cash?
The term ‘cashless society’ simply means a society with no cash whatsoever; banknotes and coins will essentially be a thing of the past and we will rely on digital payment processes for all of our purchasing and banking.
This may sound idyllic, or even inevitable to some. But the cashless lobbyists who stand to profit from cashless societies are pushing this agenda without concern for who will be affected or what we stand to lose if cash does not exist in our everyday lives.
Someone who is unbanked is defined as someone who either does not have access to or is not registered with a bank or another form of financial organisation.
When it comes to the cashless argument, those fighting for cash or debating the topic will reference the impact moves towards cashless societies will have on those who are unbanked. As there are 1.7 billion unbanked people across the globe relying primarily on cash, cashless societies stand to simply exclude them.
With no cash and no access to a bank account, these people will become isolated in their communities and will struggle to purchase even the most basic of items such as food and medicine.
The highest rates of those who are underbanked are primarily those in developing countries, however, there are individuals in every country in the world that would be classed as underbanked. This includes vulnerable individuals, those with visual impairments, and those with limited or no access to digital payment methods, such as the elderly. Read more
Underbanked individuals or families are people who have a bank account but often rely on alternative financial services such as money orders, check-cashing services, and payday loans rather than on traditional loans and credit cards to manage their finances and fund purchases. Read more
Underbanked individuals are located all around the world, however, concerns regarding those who identify as underbanked have most recently been debated in the media outlets of one of the most pro-cashless countries in the world, the United States.
In their Report on the Economic Well-Being of U.S. Households in 2018 - May 2019, the Federal Reserve advised that a staggering 16% of Americans are underbanked.
If you’re wondering why people find themselves underbanked, it is often due to the cost to open basic bank accounts, paying for check-cashing or even the cost using debit cards for purchases. These services often incur small fines and fees that ultimately add up, meaning low-income families are often forced to find alternative solutions to access the most of their money or make up for money lost to these fees.
Cash vs. Cashless, or shall we say inclusive vs exclusive?
Banks and credit card organisations often have set criteria for opening a banking or credit account. This can include anything from a minimum deposit per month to evidence of a fixed address. If you can’t offer formal identification to satisfy one or a number of these criteria, depending on the bank or credit organisation, you are simply excluded.
Therefore, when we talk about social exclusion within the context of a cashless society, we mean the unbanked and underbanked stand to be excluded when they are not able to make purchases at the same shops or restaurants or even use public transport without digital payment methods.
The social exclusion posed by cashless societies is so great that 36% of Open Banking experts cited social exclusion as the most negative impact of a cashless society.
Financial inclusion, however, refers to one of the many benefits of cash: it is accessible to all. No matter your social status, financial standing, creditworthiness, age, gender, race, nationality and ability, we all have the right to access cash.
Why cash matters
Cash is essential within the payments landscape because it offers choice. How we use our cash is so varied, it can mean something different to everyone. For the impulse buyer, it can help them budget. It could offer a domestic abuse victim the opportunity to escape. In developing countries, it allows women to work in exchange for cash to support their families.
Cash is essential in so many individuals daily lives due to its inclusivity. Without it, the unbanked and underbanked will inevitably become socially excluded.