Essay Example on Mobile Money: The 'Perfect Money' for the Global Society

Introduction

The new global payment system incorporates both physical and mobile wallets. Physical wallets involve the use of physical cash, while mobile money consists of the use of electronic or cashless wallets. In the evolving global society, the application of mobile wallets is becoming more common among the people (Mullan par. 4). Dunwoodie and Myers described cash instruments as bulky, expensive to transport, make as well as a guard as compared to non-cash instruments, which are 'perfect money' that weigh nothing, cannot get dirty, scuffed, or worn, and travels at the speed of light (65). For instance, people prefer to use credit and debit cards or e-money to conduct transactions or make payments. The cashless society is supported by three primary industries which are banking, telecommunications as well as retail (Desai par 1). Nevertheless, if the private and public sectors agree to work together, they would be able to harness the full potential of the cashless society, which will be beneficial to all parties that are involved.

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Abbas defines a cashless society or a less-cash society as an environment where individuals have adapted to the use of instruments that are non-cash in the transaction of their habitual economic activities (193). Furthermore, a cashless society is identified as an environment where few cash notes are in circulation or are issued by the central bank of a country such that the central bank attempts to transform the cash instrument into non-cash that is used in economic activities (Abbas 193). In all economies, cashless instruments are introduced as cost-effective alternatives to cash for value transactions as well as a suitable medium to pay over the internet. Additionally, retail stores have resorted to offering cards that have contactless technology, which makes them cheaper than both debit and credit cards and, at the same time providing software that makes it efficient and safe to conduct internet payments (Papadopoulos 2).

Indicators of Cashless Societies

There are three key indicators of a cashless society in any country. The first is the share, which is the ratio between cash and non-cash payments for consumers. This indicator assesses the instruments which are more common among the consumers in a given country. The trajectory is the second indicator as it evaluates the shift of the share over a specific time. Additionally, the index identifies after how long the share indicator shifts from one instrument to another. The final indicator is readiness, which assesses the prerequisite conditions that deal with the access to financial services, merchant scale, and competition, macro-economic and cultural factors, as well as infrastructure and technology. This indicator assesses whether the economy has all the available elements that will initiate it into a cashless society (Abbas 193).

Categories of Cashless Alternatives

Cashless alternatives have existed over a while, along with payment technologies, as well as the complexities of the users. Some of the cashless options include debit and credit cards, as well as cheques. The cashless instruments have different levels of security, settlement time, user protection, ease of use, as well as associated fees and costs. There are three categories of cashless instruments that include wrappers, credits, and local currencies, as well as digital currencies (Achord et al. 8).

Wrappers focus on providing 'wrapper' services to enhance the user interface and accessibility of the existing payments. This system is presented neither new currency nor payment system. The second category consists of users trusting a new currency as a unit of account as well as a mode of exchange. Credits are a system where private companies accept money in exchange for an alternative group of reports that can be spent on a specific platform. The final category incorporates both a new currency as well as a new payment system. Digital currency can be identified as a type of electronic money that is combined with modern technology relating to cryptography, databases, peer-to-peer networking, as well as a system of consensus. A typical example of digital currency is the bitcoin (Achord et al. 9).

Advantages of Cashless Instruments

A cashless economy will facilitate safety and reduce rates of robberies as a cashless economy will diminish the tension of carrying a wallet full of notes. As an alternative, individuals can use their mobile phones, or cards to conduct all forms of transactions such as payment of bills, recharge as well as transferring funds (Parmar 11). As a result, band and store robberies will reduce, and societies will no longer have to suffer from attacks by perpetrators in search of available cash.

Ragaventhar noted that cashless societies would help to reduce the instances of tax avoidance as financial trails are left after every transaction (22). As a result, the governments will not need to spend more money tracking down tax evaders. This reduction will also contribute to a reduction in both the income tax rate and national debts. Furthermore, drug trafficking will be reduced since the governments will be able to identify and track anomalous transactions electronically.

Counterfeit paper currency will also cease to exist with the incorporation of a cashless society since paper money will no longer be necessary. Individuals will be able to merely complete and authorize cashless transactions that will enable them to purchase goods and services. This situation will be useful even on days that the banks have closed as the individual will not be required to visit a bank to send or receive money.

Disadvantages of Cashless Alternatives

Despite the benefits presented, cashless transactions sacrifice an individual's privacy. Electronic cash is not as private as the cash transactions, which might become problematic as private information can be used for malicious purposes. However, cash transactions promote anonymity and privacy of information for users (Pritchard par 9).

Cashless transactions can also be hacked as the information can be obtained by bank robbers. Pritchard noted that if one is targeted and his or her account is drained, he or she will not have any alternative ways of spending money. Additionally, it will be inconvenient to restore an individual's financial standings after such a breach (par 10).

Cashless societies also face the risk of a lack of access to funds in case of technological problems. Issues such as glitches, innocent mistakes as well as outages can cause problems that will result in the inability to make necessary purchases. Furthermore, system malfunctions may render the merchant with no alternative method of accepting payments, which may cause an unnecessary halt in business transactions (Pritchard par 11).

Future Implications of a Cashless Society

The emergence of a cashless society would be most welcomed by global companies as the most profitable alternative due to the cost of cash transactions. Additionally, organizations that continue to partake in cash transactions would be identified as irrational as they would be incurring unnecessary expenses that are associated with cash transactions (28). A majority of the large organizations recognize the beneficial value of accepting electronic modes of payment as they integrate payment options such as PayPal, Google Wallet, and Square Wallet (28). On the other hand, small companies are less compatible with cashless instruments due to expensive fees that deter them from incorporating cashless alternatives. Furthermore, (29) noted that small businesses would realize that the opportunity cost of rejecting credit cards exceeds their expenses and would eventually accept non-cash options.

For banking institutions, the cashless society would be both beneficial and detrimental. Banking institutions would be able to save costs and, at the same time, induce revenue. Moreover, a cashless system would help banks to maintain a competitive edge over their counterparts. Profits for banking institutions would be collected from the fees charged to the cashless instruments such as debit and credit cards. Customers are required to activate and maintain their cards, failures to which attract overdraft penalties. However, banking institutions will face expensive costs when switching to a purely cashless system. Cashless transfers are similar to cash transfers such that they are liable to theft. As a result, banking institutions will need to invest more in cybersecurity to ensure the safety of all electronic transactions. Nevertheless, banking institutions would be willing to convert to the cashless society due to the cost reduction and revenue venture opportunities presented by the cashless society.

Conclusion

The world is slowly transitioning into a cashless society as a safer and more beneficial alternative to bulk cash. The frequency of the transition into a cashless society will vary in regards to the availability of the factors that facilitate and promote a successful change. However, it is necessary to identify and take into consideration the risks that are associated with cashless instruments such as hacking, and lack of privacy. Nevertheless, the cashless society presents the world with great potential for development and revenue ventures that will be beneficial for businesses, customers, as well as banking institutions.

Works Cited

Achord, S., et al. "A cashless society: benefits, risks, and issues Abstract of the London Discussion." Institute and Faculty of Actuaries, vol. 23, Nov. 2017, www.actuaries.org.uk/system/files/field/document/A%20Cashless%20Society-%20Benefits%2C%20Risks%20and%20Issues%20%28Interim%20Paper%29%20-%20disclaimer.pdf.

Desai, Mehul. "The Benefits of a Cashless Society." World Economic Forum, 7 Jan. 2020, www.weforum.org/agenda/2020/01/benefits-cashless-society-mobile-payments/.

Dunwoodie, Erica, and Michael D. Myers. "The dreams of the cashless society: A study of EFTPOS in New Zealand." Journal of International Information Management, vol. 8, no. 1, 1999, scholarworks.lib.csusb.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1199&context=jiim.

Ewa Abbas, Antragama. "Literature Review of a Cashless Society in Indonesia: Evaluating the Progress." International Journal of Innovation, Management and Technology, 2017, pp. 193-196, www.ijimt.org/vol8/727-DT0028.pdf.

Mullan, Laura. "The Great Shift Towards a Cashless Society | Article | Fintech Magazine." Home - FinTech Magazine, 11 Sept. 2019, www.fintechmagazine.com/mobile-payments/great-shift-towards-cashless-society.

Papadopoulos, Georgios. "Electronic Money and the Possibility of a Cashless Society." SSRN Electronic Journal, 2007, www.researchgate.net/publication/228280500_Electronic_Money_and_the_Possibility_of_a_Cashless_Society.

Parmar, Ravi. "A Study of Cashless System and Cashless Society: Its Advantages and Disadvantages." Indian Journal of Applied Research, vol. 8, no. 4, Apr. 2018, pp. 10-11, www.worldwidejournals.com/indian-journal-of-applied-research-(IJAR)/fileview/April_2018_1522924122__135.pdf.

Pritchard, Justin. "Cashless Society Pros and Cons." The Balance, 10 June 2020, www.thebalance.com/pros-and-cons-of-moving-to-a-cashless-society-4160702.

Ragaventhar, R. "Cashless Economy Leads to Knowledge Economy through Knowledge Management." Global Journal of Management and Business Research, vol. 16, no. 8, 2016, pp. 21-24, globaljournals.org/GJMBR_Volume16/3-Cashless-Economy-Leads-to-Knowledge.pdf.

Skaggs, Stephanie K. The financial implications of a cashless society on individual consumers, businesses, banking institutions, and the government. JMU Scholarly Commons, 2014. commons.lib.jmu.edu/cgi/viewcontent.cgi?article=1507&context=honors201019.