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What Would a Cashless Society Mean for the Financial Industry?

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By    |   Wednesday, 14 March 2018 03:09 PM

Today’s financial industry is largely defined by highly regulated and centralized entities.

Since the early 19th, the financial sector has continually been forced to adapt to a changing world, yet, over the last 20 years, major technological advancements and social changes have challenged the financial industry.

One of the most prominent discussions today being the introduction of cashless societies, which would completely change the structures that hold up the current financial industry.

With various opinions on the subject, such as what it means concerning privacy, accessibility, and choice, what would the eradication of cash mean for one of the oldest industries in the world?

There would be a rise in digital currencies

Since the introduction of Bitcoin in 2009, cryptocurrencies have challenged the central banking system. Rather than relying on a third party to facilitate financial transactions, digital currencies are exchanged through blockchain technology, which secures the date of each individual exchange. While cash is largely considered to the most anonymous way to conduct financially related activity, the blockchain ledger technology has shown to be promising. Today there are over 100 digital currencies available and a number of financial institutions, such as British financial giant Barclays, are already investing in both in cryptocurrencies as well as technology that will enable the, to implement blockchain technologies in the near future.

Eradicating cash could make space for innovation

While there are numerous legitimate arguments against eradicating cash, one of the main ones being that cashless societies could contribute to more income inequality. Yet, there is also reason that removing cash could essentially force financial institutions to be more innovative as a means to combat inequality. Denmark, one of the first countries to start experimenting wish removing cash as a way to ease administrative burdens on financial institutions, also sees the shift as potential means elevating the availability of use throughout the country, while This proposal has brought to light the various ways that cashless societies could push for the financial sector to focus on ways to include rural and disenfranchised communities in the greater economy.

Another source of innovation will come from financial experts, who are working with more and more clients interested in implementing digital currencies. As financial professionals gain new knowledge, this can be passed on to help improve the industry on the whole.

It could increase the risk of cyber attacks

Any major shifts come with change. In the case of eradicating cash, one of the definite risks would be an increase in cyber attacks. While there are already risks, such as credit card fraud, a cashless society would mean our finances would be completely controlled by a government entity. Yet, at the same time, we have to remember that the technology behind cyber security systems and decentralized banking is still relatively new. According to Fred Ehrsam, the founder of Coinbase, these technologies will improve over time as we learn how to work out any kinks that might pose a risk.

It could make room for decentralized banking systems

Again, there are many individuals who don’t like the idea of having their finances in the hands of a single entity. At first glance, a cashless society may seem like it would mean giving up control over how our money is handled, but not if we recognize that government and private banks will be the only ones in charge of our hard earned cash. In the early days of the digital currency development, there was a lot of hope that a completely digitalized financial system could mean more personal autonomy.

Projects like the Internet of People is an open-source decentralized infrastructure that aims to stop digital currencies completely falling into the hands of big banks and creating an alternative economy run for and by people. So far, this knowledge is highly specialized, but could potentially be simplified that the general public will be able to be their own bank in the future.

So far, we are still in the early days of experimenting with cashless societies, but that doesn’t mean it’s a real probability in the future. As we move into a post-industrial societies, it’s vital that we understand the risks and benefits that come with new technological developments to ensure that we make informed decisions that benefit everyone.

Paul Sciglar is a columnist interested in international policies and economic affairs. Certified Accountant with broad experience in strategic analysis, FP&A, investment banking, and investment management. You may connect with him on Twitter.

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Economy
As we move into a post-industrial societies, it’s vital that we understand the risks and benefits that come with new technological developments to ensure that we make informed decisions that benefit everyone.
cashless, society, financial, industry
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2018-09-14
Wednesday, 14 March 2018 03:09 PM
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