A Cashless Future? Exploring the Benefits and Disadvantages of a Cashless Society for Singaporeans

Somewhere in the future, cash will be a thing of the past.

Governments all around the world are moving towards a cashless society.

This is happening in Singapore well.

Back in 2018, Monetary Authority of Singapore (MAS) board member and Minister for Education Mr Ong Ye Kung talked about reducing the use of cash and cutting out cheque use by 2025.

At the 45th Annual Dinner of The Association of Banks in Singapore on 20 Jun 2018, Mr Ong stated that:

“we should aim to eliminate cheques … and become a cheque-free society by 2025.“

Mr Ong added that:

We don’t need to be literally a cashless society – some people will always find cash useful – but we certainly can transact with a lot less cash and we won’t need to visit the ATM so often.

More recently, the ongoing push to digitalise Singapore that has been made more urgent because of the disruptions caused by the COVID-19 outbreak,

In response, the Government has established a digitalisation office which aims to reach out to hard to reach groups in our society (e.g. seniors and hawkers and get them to adopt digital tools).

The SG Digital Office (SDO) will recruit 1,000 digital ambassadors to convince hawkers to implement the SGQR code standard for e-payments and reduce the reliance on handling cash.

TL;DR: Pros and Cons of a Cashless Society for Singaporeans

Although we might never become a cashless society in the future, we are already feeling the impact of living in a cash-lite society.

Thus, it is important for you to know about the benefits and disadvantages of a cashless society and how it might impact you.

Benefits of a Cashless Society For Singaporeans

To kick things off, we will be exploring the pros of having a cashless society for individuals in Singapore.

Reduction in Cash Related Crime

Singapore remains one of the safest countries in the world, but low crime ≠ no crime.

According to Data.gov, Singapore had 11,215 reported theft and related crimes in 2019.

Moving to a cashless society would likely reduce this statistic as physical cash is easier to steal compared to money in cashless wallets.

In addition with a cashless society, it will become more difficult for criminals to launder money, carry out illegal transactions (e.g. trading drug trade), fund illegal activity (e.g. terrorism) and evade taxes as every financial transaction will be tracked.

Thus, going cashless will help address these specific cash related crimes, resulting in a safer Singapore for individuals.

Going Cashless is Convenient and Saves Time

One of the major benefits of a cashless society comes from the convenience brought about by electronic payment (e-Payment) solutions.

E-payments have made it possible for people to go about your day without any physical cash.

There have been days when I can function without my wallet.

For example, I can just simply whip out my phone to pay for my food and shopping without having to fumble around for change.

I also save time as with services like SimplyGo, I no longer have to queue to top up my EZ-Link card. Speaking of queuing, I have saved more time as I no longer have to queue at the ATM as often.

Also, when you are travelling, it’s also a safer and easier spending option. Not to mention the benefits you get from using your credit card.

Going cashless will also save businesses time and money, as managing physical cash incurs cost. The costs of storing, depositing and keeping a supply of physical money could be a thing of the past if we live in a cashless society.

Deputy Prime Minister Tharman Shanmugaratnam stated that;

“It has been estimated that the cost of processing cash is about S$2 billion a year, or 0.5% of GDP in 2015. This is the amount that businesses collectively, especially small businesses, can potentially save,” he said.

Cashless is More Hygenic

Going cashless will be better for public health.

Physical money is dirty as there are lots of germs and disease-causing organisms on paper currency and coins.

Physical money can be a host for viruses, protozoa, bacteria and even pathogens.

In other words, going cashless means that this risk of spreading germs via physical money will be eliminated.

More Accurate Collection of Economic Data For Governments

This benefit is more indirect for the individual.

With a cashless society, there will be no need for the government to conduct expensive surveys and studies to collect data about real-world transactions to make their decisions.

In theory, the Singapore government will have access to a greater amount of quality data they can use to formulate their policies.

Hopefully, this will translate to better and more impactful economic policymaking that will benefit the public.

Disadvantages of a Cashless Society For Singaporeans

Unfortunately, it is not all sunshine and rainbows for individuals in a cashless society as there are quite a few cons as well.

Loss of Privacy in a Cashless Society

With a cashless society, there will be reduced privacy when it comes to data about your financial transactions.

By going cashless, it will be next to impossible to send and receive money anonymously like with physical cash.

I would like to emphasise that the right to privacy is not about withholding information but protecting that information and I’m sure that you would have information you want to protect.

A cashless society means that there will be much more personal financial data available about you.

This information might be held with a trusted organisation but there is no telling where this information could turn up and be used against you.

Increased Risk of Cybercrime

Online scams are a worrying problem in Singapore. As we move to a cashless society, the criminals are moving online too.

Just this quarter alone, Singaporeans lost $41.3 million to scammers with the majority of these scams facilitated through e-Payment solutions.

Admittedly, these e-Payment solutions are just a tool. But with a cashless society and e-payments, it makes life easier for criminals as the money is just a few clicks away.

With physical cash, it is a lot more difficult and risky for scammers as they have to meet up with their victims and run the risk of getting caught and identified by the police.

A less prevalent problem but a problem nonetheless are hackers.

Hackers are now the robbers and thieves of this electronic world we live in. If we move to a cashless society, hackers who drain your accounts can leave you helpless.

For example, in 2019 florist in Singapore reportedly lost $24,000 after their Shopify account got hacked. There was also this case where hackers obtained access to a Singapore finance company when one of their executives opened up a phishing email. Thankfully they were stopped by the company’s AI cybersecurity software.

With more money going online and the wider adoption of e-Payment solutions as we move to a cashless society, we will become more vulnerable as well.

Technological Limitations

A cashless society is also very reliant on technology as without the device you are essentially ‘broke.’ Something as simple as a dead phone battery can prevent you from buying goods and services when you need them.

For business owners, a faulty point of sales (POS) system can stop you from accepting payment from customers.

A Cashless Society Might Exclude People

In a cashless society, groups that find it hard to participate and adapt to e-payments are at a disadvantage.

In Singapore, a report put together by Google, Bain & Company and Temasek holdings found that four in ten Singaporean working adults are ‘underbanked.’

FYI: Underbanked individuals who are underserved by retail banks as they do not have access to mainstream banking services like credit cards or loans.

Groups like the underbanked and the elderly who only use physical cash will suffer, as they might find it difficult to send or receive money or generally participate in our society.

To put this into perspective, the 2019 Population in Brief report indicates that 16% of Singapore’s citizen population are over 65 years old, and most of them still rely on cash as their main mode of payment.

In addition, these groups might have to incur additional fees from banks and financial institutions that charge overhead fees for digital banking services. An example of this would be the fall below fee for not having enough money in the account.

Greater Risk of Overspending

Last but not least, there could be a greater risk of people overspending in a cashless society.

This is more of a subjective point, but studies have shown that people tend to spend less with physical cash as it is a tangible and painful reminder of what we are giving up when spending.

In comparison, e-payments might lead to overspending as the experience of using e-Payments is less tangible and you do not feel as much pain when spending.

This can be problematic for Singaporeans as 20% of Singapore’s households who are also in the lowest income bracket earn less than they spend.

Each month on average, their spending exceeds their income by $335. This deficit typically ends up as debt as these households might have to take up loans to meet their daily needs.

Going cashless might worsen this situation.

In sum, I would refer you to a quote from Jack Ma taken from his 2017 speech at De La Salle University:

“It’s not the technology that changes the world. It’s the people using technology that changes the world”

As much as going cashless can bring has its benefits, there are still many disadvantages of going cashless.

If Singapore ever becomes a cashless society in the future, I hope these cons can be thoroughly addressed by the government and our society.

Not to mention the lingering questions about how marginalised groups will survive when cash becomes a thing of the past.