Introduction
Technology has influenced the way monetary institutions operate and continues to function. Automated teller machines (ATMs) are a typical indication of how technology can transform a sector. ATMs increase consumer financial inclusion such as cash transactions of payments and abolish individuals’ requirement to depend on a financial institution for such activities. Innovation has accelerated in the latest generations, resulting in the creation and widespread acceptance of advances in artificial intelligence, advanced analytics, ubiquitous computing, and blockchain. Another illustration of innovative solutions emerging in the banking industry is peer-to-peer (P2P) financing. This type of banking does not involve using a monetary intermediary such as a banking institution, and customers deal directly with creditors. This paper aims to discuss the current cashless trend in China, its strengths and weakness, and how the US can take advantage of it in its economy.
Cashless Technology in China
With retailers refusing to accept cards and cash transactions becoming increasingly complex, using an alternate mechanism has become more inevitable. The rapid popularity of smartphones presented an opening for the development of an alternative approach. Smartphones create a new communications infrastructure that can rival smartcards that necessitate a landline or wireless broadband connection. The QR code is another element of this transformation in China (Chong, 2019). As with the barcode technology before it, the QR code enables businesses not attached to the payment scheme through mobile phones or the web to navigate the billing platform (Chong, 2019). The fact that only one group needs to be linked for the process to occur necessitates it. The QR code enables the client to establish a linkage. All that the retailer requires is creating a barcode system that may be produced on a plain sheet of paper.
The customer can use their smartphone to scan the QR code and execute transactions online. Therefore, this significantly reduces retailer expenses, especially for people without easy access to telecommunication services. Alipay and WeChat Pay, two main electronic payments networks, have changed China’s billing method, achieving near-ubiquity in less than a decade (Chong, 2019). Alipay and WeChat Pay combine commonly accessible but underutilized technology in the United States (Chong, 2019). As such, it provides each party with a straightforward, low-cost option of transmitting payment between them almost quickly (Chong, 2019). A mobile payment automatically maintains one or more of a user’s billing credentials and enables customers to send and receive payments in various scenarios.
Typically, the account is maintained through a transfer from another digital wallet or instantly through the wallet connecting to a financial institution and sending payments. It is not the same as a digital depiction of a debit card, as is sometimes done with Apple Pay (Chong, 2019). While a mobile wallet keeps the money, a digital card replica only swaps a credit card for the actual one (Chong, 2019). Each organization within the Alipay and WeChat Pay environments has its QR code. Consumers use them for their wallets, companies for their establishments, and even specialized transaction terminals such as a garage.
How Cashless Technology could Change the Lives of Citizens and Businesses in the US
As it has proved crucial in countries like China, cashless technology could also be vital to the United States. Various sectors and citizens in the US are set to benefit if the technology is introduced to the US market. First, business organizations must hold money, obtain additional funds when they come up short, deposit excess cash, and in some situations, pay firms to carry some cash securely. Banks employ significant security personnel to guard their outlets against robbery. Wasting time and effort transferring money and safeguarding enormous sums of money may become obsolete in a cashless economy.
Second, with digital payments, financial fraud within the US should likewise dwindle. Illicit activities, such as illegal gambling or criminal activities, are frequently conducted with cash to avoid establishing a transaction history and make money simpler to launder. Laundering becomes significantly more complicated if the funding source is constantly apparent. It is more challenging to conceal earnings and dodge taxes when every transaction is recorded. Third, handling cash exposes an individual to a high risk of theft from criminals. Once the money is removed from their pocket and placed in the hand of a burglar, it will be impossible to trace or establish that it belongs to a specific individual. According to Pridemore et al. (2018, p. 926), crime decreased by 9.8 percent in Missouri after replacing cash welfare payments with Electronic Benefit Transfer (EBT) devices. The convenience with which money transfers can be conducted is perhaps the primary reason for going digital. One will not need to carry large amounts of cash, credit card, or even wait for ATM transactions.
Lastly, the recorded transaction history will assist citizens in keeping track of their consumption, resulting in more effective budgeting. Consumption restraint may also contribute to increased investment among individuals. If the same quantity of cash does not re-enter circulation and consumers continue to utilize digital payment and cards, the latter component will likely decrease. Budget breaches and unexplained expenditures are less likely to creep into their budget when the month ends.
How Cashless Technology could be Enhanced
Cashless technology can be improved by first enhancing continuity of experience across multiple browsers and devices. Different web applications employ various mechanisms to process cashless transactions, save credit and debit card information, and so forth. The same modification is achievable for several device types. As a result, it becomes critical for an electronic payment model to regulate its payment system and enhance consistency across all platforms, gadgets, and processors. Essential information such as a credit card, debit card information, and credentials are used for electronic payments. Thus, redirecting, pop-ups, and one-time password (OTP) authentication should be consistent across all devices and highly protected against imminent hazards. This level of uniformity will contribute to customers’ trust in mobile money services.
Second, enhancing security may be a benefit of cashless technology. Several billions of dollars are being committed in anti-fraud measures. Online payment vulnerability solutions have substantially improved and currently outperform those used in the conventional payment system. Pridemore et al. (2018) insinuate that burglaries are declining due to people holding less cash. Lastly, educating customers is increasingly rejecting new techniques or solutions out of fear of loss or discomfort. Such conduct becomes more pronounced when money is involved. When it regards digital payment methods, individuals’ primary consideration is whether their cash is securely transferred.
While the move toward electronic payments is positive, there is still a sector of traditional consumers who are fearful of adopting digital payment options. As a result, educating prospective consumers about the computerized payment method is critical. Mobile wallet technology should enlighten both existing and new clients about the increased security and convenience of digital transactions over traditional payments. They should be trained and encouraged to use a cashless payment system in a variety of ways. Customers must trust and be confident in digital payment solutions to switch from traditional money transfers to the latest technological payment developments.
Problems Associated with Cashless Technology
Among the challenges that a cashless technology would bring is worry about confidentiality and protection due to new technologies. A growing concern among many customers is that financial institutions are not adequately regulating the security and vulnerability risks associated with cashless transactions. Cybercrimes from both coordinated technology-fueled cybercriminals and nation-state disruptive entities are developing in the current climate. Customers have confidentiality worries, as each transaction leaves a digital trail, whereas cash transactions are more untraceable. Users are possibly more susceptible to theft when conducting digital purchases. Consider what has occurred during the epidemic.
Additionally, system durability and weaknesses would be a significant concern for individuals and businesses. If a country’s digital payment supporting system is destroyed by a catastrophic event or any other means, it creates a considerable challenge for the financial sector. Clients’ ease of accessing their finances would be abruptly cut off, and with no one capable of paying for anything, the outcome would almost certainly be an economic standstill. Cash also provides significant advantages concerning customer planning, money management, and setting an expenditure limit. When a person’s bills tangibly depart their hand during a payment, this registers considerably more than when they pay with a card or another method.
Conclusion
In conclusion, cashless technology has made transactions between individuals and businesses more straightforward and more effective. Among the benefits it has had on economies such as China are reducing the amount of cash at hand an individual may be holding at any given time and enhancing security in business transactions. However, its introduction in other economies can prove detrimental due to the risks associated with it. For instance, consumers who fear the loss of their cash due to the introduction of the new cashless technology may be reluctant to use the innovation. Therefore, it is prudent to do more research on improving and making the invention efficient and secure to reduce its threats.
References
Chong, G. P. L. (2019). Cashless China: Securitization of everyday life through Alipay’s social credit system – Sesame Credit. Chinese Journal of Communication, 12(3), 290-307. Web.
Pridemore, W. A., Roche, S. P., & Rogers, M. L. (2018). Cashlessness and street crime: A cross-national study of direct deposit payment and robbery rates. Justice Quarterly, 35(5), 919-939. Web.