What Is The Main Disadvantage Of Moving To E-Money Loading Or Moving To A Cashless Society?

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 6 minute read

U.S. currency could be exchanged for gold or silver until President Richard Nixon ended the gold standard in the 1970s. American money has value because people have faith in the government and the legal system; this is why the Federal Reserve uses fiat currency. 

Despite the fact that the Federal Reserve continues to control the nation’s currency supply, there are influential groups working to shift this influence.

Although cash is still widely used in most transactions, the major banks and tech firms in the world are developing wireless communication payment systems that will eventually make them obsolete. 

Some businesses, like IBM, hope to take this a step further by connecting biometric signatures with wireless payments to make sure your account is never compromised by identity thieves.

Technology for Avoiding Cash

Your bank or credit union may introduce a cashless system based on the digital wallet concept, or one with an extra layer of protection employing biometrics that goes beyond your smartphone, in the near future.

Who Has Already Stopped Using Cash?

Google, which debuted Google Wallet, is currently the market leader for these types of payments. Apple and Visa, though, are also probably going to enter this market shortly.

Transit travelers in New Jersey are already using Google Wallet to purchase tickets, but only with handsets with the Nexus S and Galaxy Nexus. 

There haven’t been any serious bugs to report thus far, although that might be primarily because only a very small number of people are able to utilize such a system, and only in a relatively controlled atmosphere.


IBM has created exclusive methods for verifying a person’s identification, and one of those approaches is the use of a biometric signature. A person’s fingerprints, eyes, face, heartbeat signature, or voice are all examples of biometric data. 

In the not-too-distant future, according to IBM, users will be able to access their accounts and make ATM withdrawals by scanning their eyes. Whether you agree with it or not, IBM’s findings indicate that this is a technology trend that is beginning to gain traction in the United States.

Advantages and disadvantages of Cashless Financial Systems

While technology has the potential to improve our quality of life, it is not without its disadvantages. Consumers should assess the benefits of a wireless payment/biometric grid against any possible disadvantages.


A cashless banking system is promoted to the public as the ultimate time-saver, and this has led some to argue that it is rational to do away with cash and credit cards altogether. 

Businesses and even some government agencies promote the concept that using a traditional wallet to access cash or credit cards is insecure and archaic and that switching to a digital system that incorporates biometrics is the best solution.

1. Security

The technology used to usher in a cashless era may provide safety advantages to its users:

  • It’s very easy to shut down a digital wallet remotely if it falls into the wrong hands.
  • Your biometric ID is yours and yours alone, and therefore very hard to copy.

2. Convenience

Users who prefer having as few devices as possible in their hands may find a cashless system more appealing:

  • It eliminates the need to carry cash or plastic.
  • Digital payments can be made with a tap or wave of a smartphone, depending on the technology used.
  • It would make it easier to loan or borrow money – as, with digital payments, lending and borrowing can be reduced to a tap or wave of a smartphone.


How a global cashless financial system would function is incredibly difficult, if not impossible, to foresee. In the early stages of any new technology, consumers are more likely to be put through unneeded annoyance and problems.

1. Hackers

While Google insists that its Google Wallet system is safer than using cash or credit cards, the company recently had to temporarily disable a feature that allowed users to save prepaid card information on their cellphones. 

A security flaw, discovered by a researcher from Zvelo Labs during a meeting for the technological industry, was the root cause of the closure.

The study’s author demonstrated how simple it is to steal someone’s phone and then use software to crack their PIN and gain access to their digital wallet. The only way to enjoy Google Wallet’s perks is to keep your phone safe.

There’s no need to worry about the safety of the network Google Wallet uses because it doesn’t appear that the phones have secure encryption.

There are many other instances where this is true. Even though a cashless and cardless future is exciting, it is likely that other would-be crooks are working on similar techniques.

2. Failure Rates

The fact that biometric ID systems sometimes malfunction is a further concern. It’s true that these methods save time and effort, but they’re not flawless. As a matter of fact, you can find some dismal facts if you look up the failure rate of biometric data systems in a search engine or academic database.

The UK’s National Physical Laboratory conducted a test of fingerprint biometric systems and found a 1% failure to enroll rate using their Centre for Mathematics and Scientific Computing. For this reason, fingerprint-based biometric systems may not be available for everyone to enroll in. 

This kind of error makes one wonder if biometrics really are as trustworthy as their promoters claim.

Many people would probably say that 1% is too small to be concerned about. But let’s pretend there are a hundred million people interested in protecting their digital wallets with biometrics. If only one percent of eligible individuals do not enroll, that’s one million people who will be unable to use the system.

Factors at Risk

How important do you find this ease of access to be now? The following are extra dangers to think about:

  • Your inability to make payments will increase if your phone dies.
  • Due to the ease with which hackers and governments can remotely disable a digital wallet, users’ bank accounts are at risk of a new form of exploitation.
  • As with any network technology, hackers are likely attempting to find vulnerabilities in it.
  • When you agree to share your biometric signatures with a third party, you lose access to them permanently. It’s common knowledge that numerous corporations sell customer data to competitors and government agencies.
  • We don’t know how the hypothetical database storing this information would function, or who would be allowed access to it. If hackers were able to break into this database, they would have a veritable gold mine on their hands.

The precedent will be set by foreign nations.

However, many major players in the tech and banking industries view cashless systems as the next big thing and are working toward their implementation. It’s true that there are no guarantees in life, but it’s also true that India’s government has previously implemented a biometric system to curb welfare fraud.

Despite the fact that registering for a biometric ID is voluntary in India, the government has reportedly had discussions with financial institutions and other businesses about adopting the system as a means of standardizing the verification of identity.

Although participation was initially presented to the public as a choice, it may soon become obligatory.

Bottom Line

The predictions of technology prognosticators are not always spot on. It was predicted that the videocassette recorder (VCR) would put an end to the film business in the 1980s and that LaserDiscs would replace VHS cassettes in the 1990s. 

The adoption rate of new innovations is never certain, and consumers have the final say in how their identities should be confirmed.

Avoid using things like digital wallets and biometric IDs if they bother you. And do what you can to stick with a bank that won’t hassle you into getting a digital wallet or biometric ID.

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