Overcoming Barriers to Reach a Cashless Society

Talking about cashless society can be very popular everywhere. People can know by heart everything about cashless society. Even though they identify how to solve problems with concept of cashless society, a lot of barriers, which is sourced from internal or external factors, may preclude implementation of this concept. In this article, I propose many strategies how to overcome these barriers.

We are making on average five payments in a day, whether it is to pay for groceries and lunch, buy a metro ticket or book an airline ticket. Businesses also pay suppliers and staff, and receive payment from their customers. Governmental organizations also have to pay suppliers and staff, realize social welfare transfers and accept payments of tax and user charges. Modern societies should make all these transactions via a modern payment system because they deserve a number of benefits given below:

• Shadow economy: Cash usage increases the size of shadow economy
• Cash security: E-payment decreases security risk the circulation and storage of cash.
• Late payments: Collection and payment execute within seconds.

Modern societies should have options universally accepted e-payment methods (also robust and reliable), access to most innovative payment methods around the world and the information how to use them. Modern societies do not prefer cash because the pricing structure of e-payments creates advantages for e-payments.  

To be frankly, it takes a long time to tell benefits of cashless society. However, I propose policy recommendations to a reduction in the reliance on cash

Generally, there are three main stages to organize how to reach our goal:

• Providing policies to have infrastructure and technology
• Developing tools, programs and partnerships among businesses, financial institutions and government
• Communication and Persuasion of people

I support first two stages with strategies. I will not put emphasis on third subject. It has too many psychological factors on which I am not expert.

• Increasing the penetration e-payment in low value transaction

The vast majority of low value transactions at the point of sale are still made with cash. The use of contactless debit card, NFC technology and digital wallets in payments will facilitate to reach this goal. Particularly, the public sector in aggregate is the biggest single consumer of payment services, and needs to demand and provide the most efficient payment options such as NFC, contactless cards.

• Creating new e-Payments acceptance fields

Strategies should promote alternatives in payments and consumers have the choice in the payment instrument they use to purchases goods and services. Government can regulate payment portals in many sectors. (For example, all wages should be paid via banks in Turkey according to the law) Tuition fees, donation to charities, medical expenditures, parking charges can be paid cards compulsorily.  Also, it requires taxis to take payment card.

Social expenditures can be suitably remit to people via bank accounts. If people on low incomes use their costless bank accounts for these transactions, it does not only benefit to cashless society, but also increase the financial inclusion.

In sum, if corporations and governments paid all salaries, social benefits and pensions through bank accounts or prepaid cards, the dream of cashless society would be real. Merchant acceptance of cards and consumer card use at the point of sale (POS) can be bolstered through a combination of incentives (a fund for payments innovation, a value-added tax cut etc.) and legal obligations (requiring card acceptance by merchants of a certain size, placing a cap on cash payments etc.). For example, a Value-added tax reduction in card use and tax deduction in card spending for individuals can attract people to use e-payment solutions. More auditing merchants who refuse to install card terminals or request extra charge at the POS may be effective solutions.

• Non-price incentives using e-payments.

Banks keep low levels the cost of branchless banking compared to cash related banking. However, people cannot know enough information whether it is safe and cheap. Public service ads can be useful to attract consumers for e-payments.

• Optimization of cash distribution

Although a cashless society is an important target, cash will not able to lose its important and optimizing cash distribution should be an important factor for a country (I hope just for a short-term). Particularly, low value transactions will be made by cash and cash still can be more efficient while also better serving the needs of ordinary consumers and businesses. Therefore, consolidation of cash centers, efficient provision of ATM services and increase dispensing of smaller notes in ATM should be supported by authorities. If all of these should evaluate in a scale of economy, creating a single, centralized entity responsible for the full value chain of cash. An exemption from competition law can be required to do so.

• National standardization of e-payment

IBAN implementation is still complicated and non-standard. As well as the standardization of payment transfer scheme, security measures should have national standardization (encryption, passwords, PINs, signatures and even fingerprint scanning)

• Other effective solutions to overcome barriers

Setting restrictions for the cash payment is certainly to overcome barriers for a cashless society. Limiting business transactions done in cash and bringing penalties for these will be able to foster new digital solutions.