As ‘Cashless Society’ Emerges, Businesses Need to Prepare Now to Meet Security Demands

The adoption of digital transactions has skyrocketed since the beginning of the pandemic, alongside a commensurate decrease in the use of cash, causing many to ponder the future fate of fiat currency.

“We were all kind of growing digital, we just had an event that accelerated that to the next level — and at this point, it looks like there’s no turning back,” Leslie Bailey, vice president of market planning at LexisNexis Risk Solutions, told PYMNTS.

It remains to be seen whether or when we will actually become a so-called “cashless society,” she said, but countries like Sweden have trended that way and it has worked out well, while an entire generation of digital natives is completely comfortable going cashless — and in fact, prefer it.

“But I think it’s going to take a little while to get an entire society to evolve into trusting that digital transactions, or something that would replace cash, are okay,” Bailey said.

Facilitating Transactions in a Seamless, Timely Manner

The foundation for the digital transition is already there — placed by PayPal, Apple Pay and other disruptors. With the tools those providers created, consumers have grown used to the convenience of making frictionless, easy payments with their cell phones.

“I think all of those little changes that we’ve seen over time allowed those companies and, candidly, a generation of people who got comfortable with digital to be able to transition quickly,” Bailey said.

Along with this move into the next phase of global payments comes a significant risk of fraud. At the same time, though, businesses must provide customers with the payment mechanism they desire.

“Our ability to provide simplicity — and part of that is risk mitigation — and our ability to help facilitate transactions in a seamless, timely manner is critical for businesses going forward,” Bailey said. “Businesses have to prepare themselves; customers have an expectation that they are engaging in trusted transactions.”

Being an Early Mover Helps

She suggested that businesses be informed, look at the trends, prepare themselves for changes in legislation and upgrade their technology, adding that companies that invested early in technology have had lower instances of fraud.

As far as trends, changes often start elsewhere before ultimately landing in the U.S. As an example, Bailey pointed to what Europe has done over the past several years in terms of open banking or more mainstream platforms to adjust to payments.

“It all kind of moves outward in, and so I think looking at those trends and your options to be an early mover certainly helps businesses all the way around,” she said. “Whenever you veer from the traditional, you have you have a pretty great responsibility to establish trust that leads to change.”

Moving in the Direction of a Cashless Society

Any shift to a cashless society is going to take time, but the potential is there. Bailey noted that it’s taken 20 years for financial institutions to stop asking what check stock customers would like as the first question upon opening a new account. So, assuming the rate of change moves more swiftly than that, it might take 10 years.

“It’s certainly a move in that direction,” Bailey concluded. “It’s just easy. It’s easy to pay with your phone, it’s easy to Venmo somebody or use Apple Pay — people have it on their watches and they enjoy that speed.”