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Consider the drawbacks of a cashless economy

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Dr Madeline Berma

KUCHING: While there are numerous benefits of a cashless economy, there are also drawbacks and challenges which need to be considered.

Academy of Sciences Malaysia fellow and economic analyst Datuk Dr Madeline Berma said these challenges needed to be addressed in a comprehensive way before an economy can effectively transition from cash to cashless.

“There is a need to create more awareness on the benefits of a cashless economy and digital transactions to alleviate fears and maintain transparency in the process,” she said when contacted by New Sarawak Tribune recently.

She explained that a cashless economy was one which performed all its transactions using plastic money or digital means.

“There is no paper money or coins. Everything is electronic. Payment is done via e-wallets, electronic funds transfer (EFT), electronic payment system (EPS), and microchips or smart cards,” she said.

Touching on the benefits of a cashless economy, she said there would be lower crime rates as there would be no tangible money to steal, as well as less money laundering as there would always be a paper trail.

Madeline said there would also be less time and costs associated with handling, managing, storing and depositing paper money.

“While travelling internationally, there would be easier currency exchange,” she added.

She said a cashless economy would also bring about a lot more transparency in the financial system, which would help to curb the generation of black money.

“With cashless transactions through electronic means, the wire transfers are tracked and people are accountable which in turn reduces corruption and improves service time,” she said.

Cashless economy will lessen the time and costs associated with handling, managing, storing and depositing paper money. Photo: Freepik

In terms of the challenges that come along with a cashless economy, she said one would be the fear, cost and complexity of digital payments.

“For many people in rural areas, cash transactions are fairly simple and straightforward. In contrast, a cashless economy is a more complicated array of digital transactions, including internet banking, mobile banking, mobile wallets and prepaid cards — which further raises the anxiety of the first-time rural user,” she said.

She pointed out that the poor and uneducated would struggle even more in a cashless society, as they had limited access and knowledge on the matter.

“They do not have expensive devices such as smartphones and computers for making payments. Also, those who operate in the informal economy would have no way to getting paid or receiving aid,” she said.

She noted that rural dwellers still had limited internet access for digital transactions due to inadequate or ineffective digital infrastructure.

Another challenge, Madeline said, was technology issues — whereby glitches and innocent mistakes could cause problems and leave customers unable to purchase things when needed. Likewise, she said merchants had no way of accepting payments from customers in the event of a system malfunction.

“Even something as simple as a dead phone battery could leave a person ‘penniless’ or without money,” she said.

She said there would also be cybersecurity and privacy concerns, especially the risk of online fraud, leakage of confidential information, cybercrimes, as well as malware and virus attacks. 

In a cashless economy, she said the temptation to overspend may also increase.

“With electronic payments, it is easy to swipe, tap or click without noticing how much you spend,” she added.

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