A cashless society could negatively impact someone who is unbanked or underbanked in several ways, primarily by excluding them from essential transactions, increasing their costs, and limiting access to digital financial tools. Without cash, unbanked individuals who lack bank accounts cannot participate easily in many everyday activities such as buying groceries, paying for transportation, or settling bills, especially when businesses operate on digital-only payments. They often rely on costly alternatives like prepaid cards or check-cashing services, which charge fees that reduce their limited income. Additionally, many unbanked or underbanked people lack the necessary technology, such as smartphones or internet access, and digital literacy to use cashless payment methods, further marginalizing them economically and socially. This exclusion can deepen financial inequality, increase vulnerability to predatory lending, and reduce autonomy and privacy for these populations.
Exclusion from Essential Transactions
Without cash, unbanked or underbanked individuals cannot pay for basic goods and services if only digital payments are accepted. This barrier affects food, transportation, utilities, and small daily transactions. For instance, some stores or transit systems that do not accept cash completely shut out these people from accessing essentials.
Increased Costs for Alternatives
These individuals often resort to expensive financial services like prepaid cards, check-cashing agencies, and money orders, which charge fees for every transaction or monthly maintenance. Such costs are a significant burden on limited incomes and can reduce the money available for essential needs.
Limited Access to Technology and Digital Infrastructure
Many unbanked or underbanked lack bank accounts, debit cards, or smartphones and may have limited or no access to broadband internet. Lack of ID and digital literacy further impede their ability to participate in cashless payments. This digital divide excludes them from the convenience and security of digital financial tools.
Financial Vulnerability and Social Exclusion
A cashless society may deepen existing economic and social inequalities. The unbanked often belong to marginalized communities, including ethnic minorities and low-income families. Lack of access to banking services restricts opportunities to build credit or save money. Furthermore, dependency on others' accounts or exposure to predatory lenders becomes more likely, increasing economic insecurity.
Privacy and Autonomy Concerns
Cash transactions offer anonymity, which is lost in cashless systems where every transaction leaves a digital record. This loss of privacy and increased dependence on digital accounts can lead to exploitation and reduce individual autonomy.
In summary, for unbanked or underbanked individuals, a cashless society risks significant financial exclusion, increased costs, reduced access to necessary goods and services, and vulnerability to exploitation, worsening their economic and social marginalization.
