How to become a cashless economy and what are the determinants of eliminating cash
This 2022 article from the Journal of Applied Economics is titled “How to become a cashless economy and what are the determinants of eliminating cash.” This paper aims to conclude the determinants by which individuals decide to use credit cards as a payment method rather than cash. They focus on sociodemographic variables, which are the main drivers explaining the transition from stages of cash payment dominance to noncash payment dominance. Using the data from The Spanish Survey of Household Finances (SSHF) and a panel data estimation, they identified education, age, income, and wealth as the main drivers of credit cards as a payment method. They state that there are generally four main stages that economies experience during transitions from cash payment dominance to noncash solutions. Which are inception, transitioning, tipping point, and advanced. The main drivers for changing the payment method used are digitalization, financial inclusion, and the change in the retail environment from offline to online channels. There are many benefits from less use of cash since it discourages tax evasion, illegal immigration, and crime and enables governments and central banks to handle economic crises more effectively. However, if cash disappears, financial exclusion might be one of the major problems regarding a cashless society, especially in non-developed countries.
Researchers found that the level of education, income, and wealth has a positive effect on the proportion of card expenditure. In contrast, age exhibits a negative relationship, meaning that the older people are, the lower their card expenditure will be. COVID-19 also attempts to be pushing many markets toward a cashless economy due to the call of the World Health Organization asking for the usage of contactless payment methods. A change this big also requires the willingness of institutions, such as governments and central banks, to make cash disappear and create an integrated standard system. The idea of cryptocurrencies has many potential benefits, including faster and more efficient settlement of payments. However, there are concerns centered around their use in illegal trade potential to fund terrorism, launder money, and avoid capital controls.
This relates back to what we have learned in class primarily because this journal is centered around the use of cash. We, as an economy, run on cash. It’s what fuels our economy. This article is an interesting take on what our world could be starting to lean towards as we approach a more digitalized economy.
authors, All, et al. “How to Become a Cashless Economy and What Are the Determinants of Eliminating Cash.”
Taylor & Francis, 4 Apr. 2022,