Prospects of a cashless society: Where does Bangladesh stand?

Cashless societies are nothing new; they have existed ever since human society came into being, based on numerous methods of exchange. Even in modern times, there have been usages of digital currencies such as bitcoins. 

However, when we talk about cashless societies against the backdrop of today's context, we specifically refer to the societies where financial transactions are conducted with digital information (usually an electronic representation of money) instead of physical banknotes, coins or cheques.

No country has so far become a 100% cashless society. But ironically, Sweden, the first European country to issue banknotes in 1661 and establish Riksbank as world's first central bank in 1668, is now on the verge of becoming world's first cashless society, as its economy is expected to become fully digital by 24 March 2023. 

This was the conclusion of a 2017 research done by two professors — one Swedish and the other Danish —  in collaboration with an adviser and researcher at the central bank of Sweden.

As of May 2022, Sweden had just 32 ATMs in operation per 100,000 people, with more than 98% of its citizens owning either a debit or credit card. It is one of the top countries utilising mobile payments as well. 

In the last one decade, the proportion of goods paid for with cash has fallen from around 40% to less than 10% in the Nordic country. Primarily the older population, that too very few in numbers, still use cash for small payments. 

Also, there are several other countries such as Norway, Finland, China, Hong Kong, the UK, and the Netherlands who are about to go cashless very soon. Countries like Bangladesh, however, may still have a long way to go in this regard. 

What will a cashless society look like?

When a country becomes a cashless society, it will not only mean that its citizens will stop using cash, but also cash will no longer be a generally accepted means of payment there. 

"No Cash Accepted" is a very common sign in Swedish shops nowadays. A unique law is already in place in the country which enables merchants to make customers pay electronically in spite of the status of cash as a legal tender.

Now the interesting thing is, banknotes and coins will not be totally nullified once a country like Sweden goes completely cashless. There might still be some paper money and coins left; it is just that they will not really come to help to buy anything.

How will people make payments? 

First and foremost, reliance on credit and debit cards will drastically increase in a cashless society. 

But of course, only such cards will not be enough to support a cashless society.  There will also be electronic payment apps, mobile payment services and virtual currencies. 

It is predicted that at one point, mobile payment services will get the better of all other methods, thanks to the spread of smartphones among anyone and everyone. 

Even in a developing country like Bangladesh, Mobile Financial Services (MFS) providers like bKash, Nagad and Rocket are now household names. 

Apart from sending and receiving money, making payments or paying utility bills or application fees in government and private offices have become easier by using these services.

Pros of a cashless society

There will be several advantages in a fully cashless society, which starts from the easy, convenient and instant money exchange and payment system for anyone with a card or electronic device. 

Crime rates will fall in such a society. As there will no longer be any cash in one's wallet, hijackers and robbers will also not be able to steal money. 

Other crimes like illegal transactions, money laundering as well as gambling, drug dealings, etc. are also expected to come down. 

At the moment, paper money is used for such crimes so that no records are left. But with the emergence of 100% transactions through electronic media, criminals will become wary of leaving behind digital footprints. 

In this day and age, a significant amount of cost and manpower go into cash management, which will no longer be required once there is no physical cash in circulation. 

And last, but not the least, international payments and foreign exchange will also pose no more headaches, as the electronic transaction devices will be responsible for everything ranging from automatic currency conversion to payment completion. 

Cons of a cashless society

The biggest disadvantage that a cashless society could pose is in terms of inclusion. 

And when we talk about inclusion, it is not just about the elderly people unable to make transactions digitally, but also about the low income population who do not have a bank or MFS account. 

As a result, the economic inequality that exists in our society could exacerbate even further.

Then there is also the question of privacy looming large. Needless to say, electronic payments are nowhere near as private as cash payments. 

Every time one makes a digital payment, the information makes its way online, with the possibility of someday winding up in malicious hands. As such, a cashless society will also make one more exposed to online hackers and robbers.

Relying completely on electronic money could bring humankind an unprecedented sense of insecurity. 

Whenever the servers are down, some unwarranted glitches arrive, or simply the electronic device has run out of money, transactions will come to a standstill, leaving one with no alternate way to resort. 

It is already a statistically proven fact that credit cards encourage a large number of users to overspend, putting a strain on their overall monthly or annual budget in the process. Such a phenomenon could become more commonplace in cashless societies. 

Another big concern could be the negative interest rates. With all money becoming electronic, consumers would have to put up with its direct effects. 

Future of Bangladesh

Irrespective of its pros and cons, a cashless society is the final destination of Bangladesh as well, with the journey of "Cashless Bangladesh'' having kick-started already in the country earlier this year. 

Cashless Bangladesh is a quick response or QR code-based universal payment system developed by Bangladesh Bank. It has started with an initial engagement of 1,200 merchants, including street vendors. 

From now on, anyone can make payments using the QR codes, regardless of their account-keeping banks or organisations. Earlier, the service was limited. Clients of a particular bank could make payments using the QR codes of the bank only.

A total of 10 banks, three MFS providers — bKash, Mcash and Rocket — and three multinational payment service providers — Mastercard, Visa, and American Express —  have joined the system, according to central bank officials. 

The banks are Dutch Bangla Bank, Mutual Trust Bank, AB Bank Bank, Eastern Bank, Islami Bank, United Commercial Bank, City Bank, Bank Asia, Pubali Bank, and One Bank.

The ultimate goal of such a project, no matter how far-fetched it might sound, is definitely to become a fully cashless society someday. 

According to Prime Minister's ICT Affairs Adviser Sajeeb Wazed Joy, the government aims to turn Bangladesh into a cashless society within the next three or four years.

However, it is easier said than done. The government data estimates that still 50 to 60 million village people of the country do not have bank accounts —  a must for a cashless society. 

So, the biggest challenge for the Bangladesh government before moving towards the cashless society ambitions will be to bring cent percent people of the country under banking services.

Jannatul Naym Pieal is a journalist, Illustration: TBS