A cashless society simply put refers to exactly that, no paper or coins- everything is electronic. Payments and transactions go digital thus making currency notes and coins a thing of the past.

They say that change is the only thing in life that is constant and this we can attest to in every sphere of life surrounding us. The exchange of goods and services has evolved from barter trade to the modern currency system. Currently, the transition to a cashless society is already happening and while Kenya may not be fully ready to switch over completely to a cashless economy, financial institutions including credit and debit card firms are more than willing to support this revolutionary idea.

Most economies of the world including Kenya have a Central Bank or an authority that reserves the right to manufacture currency as well as regulate cash flow into the economy guided by the market forces in terms of demand and supply.  However, that is changing with the emergence of innovative electronic cash transfer services such as Bitcoin that allows individuals to send and receive money across the globe with no central authority regulating it hence putting the user in full control of their money.

With the global economy venturing into making transactions cashless and with the advancing technological developments, a cashless society is looming and may be closer than any of us expect. The Government of Kenya through the Ministry of Transport recently introduced a cashless payment system for the public transport sector which despite criticism and resistance from the players in the sector, saw a number of firms bring on board their ‘innovative’ solutions to address the e-payment of fare in Public Service Vehicles.

The use of EMV chip-cards has also gained momentum in Kenya and other countries in East and Central Africa. This has reduced incidences of credit/ debit card fraud and helped establish faith in electronic payment systems among the masses. In addition, other innovations such as the Domestic Interbank Transfer Service (DITS) by the National Payments Switch- Kenswitch Limited have been launched into the market. The system facilitates payments across financial institutions within the Kenswitch network as well as assist Small and Medium Enterprises (SMEs) and retailers in their day-to-day transactions.

Like everything else, a cashless society has its pros and cons and with Kenya making positive advancements in technology, infrastructure and trade, the adaptation of a cashless economy may be embraced sooner than later. In the wake of negative and fraudulent practices that are associated with the use of cash, adopting a new, smart and innovative way of carrying out transactions may see a cashless society achieved.

While a cashless economy may not be fully realized now, it is something that is surely coming our way in the near future. Adopting a cashless economy will result in the reductions of the risks associated with transporting currency notes both for banks and individuals such as robbery. It will also help to formalize informal transactions since it is a transparent process thus combating crime and corruption while keeping record to reduce tax evasion. Convenience is also an advantage as sending and receiving money as well as recharging of prepaid credits will be done whenever and wherever one wishes.

On the flip side, in spite of the advantages, there are also some challenges that need to be addressed. Kenya will require clear policies that would allow the players to follow a structured process towards achieving the full benefits of a cashless economy, including a national policy that encourages more electronic-based transactions, while discouraging physical cash usage and circulation.

The existing financial infrastructure and systems will also need expanding to the point that they are ready for a cashless economy. In countries that have made advancements towards a cashless economy, there is evidence that some of the pitfalls include loopholes in security. The need to have secure systems that allow citizens to transact without the worry of identity theft or other cyber fraud is critical.

The prolonged popularity of paper and metal currency may stay on for a while especially amongst the older generations because of its being tangible, as well as the only form of money imprinted in our psyche. However the question begs, must money be in a physical form that people can identify with? The future generations may live at a time when their idea of money will be credit and debit cards and this will be the time when cash will have to give way to a world where exchange will take place without money being visible. It can thus be concluded that, with the increasing popularity of transactions through cards and mobile money, cash is slowly but surely dying a natural death.