With strong support from governments and the tech industry, digital payments are becoming globally prevalent, a trend accelerated by the COVID-19 pandemic, wrote Seema Prem for the Stanford Social Innovation Review. While countries like Norway, Sweden, and the Netherlands are advancing towards cashless economies, she warned of inherent risks, particularly for marginalized groups.
Digital payments offer significant advantages, such as convenience, security, and valuable data for businesses. However, Prem highlights the importance of cash as a redundant system to ensure resilience against digital infrastructure failures and crises, such as sanctions or network outages. In addition, every digital transaction requires connectivity and data access, posing a challenge during emergencies. For instance, during the war in Ukraine, sanctions led to a rush for cash as digital payment networks became inaccessible. Therefore, a less-cash economy, rather than a cashless one, ensures greater stability and inclusivity.
Instead, there should be balanced approach, emphasizing that moving towards a fully cashless economy is not ideal at present. Governments should consider the needs of the poor, unbanked, elderly, and digitally illiterate. Ensuring financial literacy and maintaining cash as a backup can create a more inclusive and resilient financial system.
