Should we fear a cashless society?

Abstract

The rapid development of digital payment technologies has accelerated the global transition toward cashless societies, raising important questions regarding financial efficiency, market competition, and strategic risk. While cashless payment systems can reduce transaction costs, improve payment efficiency, and promote financial innovation, they may also generate concerns related to market concentration, privacy protection, financial inclusion, and systemic vulnerability. This paper aims to examine whether a cashless society should be regarded as a source of economic progress or a potential threat to social welfare. This study adopts a qualitative analytical approach by integrating theories from industrial organization, digital finance, and welfare economics. It evaluates the economic benefits and potential risks of cashless payment systems through comparative analysis of digital payment platforms, network effects, market structure, and the emerging role of central bank digital currencies (CBDCs). Relevant theoretical literature and international case studies are used to support the discussion. The findings suggest that the welfare consequences of a cashless society depend less on the disappearance of cash itself than on the institutional and competitive environment in which digital payment systems operate. Excessive market concentration resulting from network effects may weaken competition, reduce consumer welfare, and increase strategic risks. Conversely, effective competition policies, data governance, and well-designed CBDCs can mitigate these challenges while preserving the efficiency gains of digital payments. This paper contributes to the literature by providing an integrated framework linking digital finance, market competition, and strategic risk. It further offers policy recommendations aimed at balancing technological innovation, financial inclusion, and market regulation, thereby supporting the sustainable development of future digital payment ecosystems.