The Benefits of Going Cashless

By Mark Roberti

Getting rid of paper money and coins offers benefits that go well beyond consumer convenience.

Last week, I wrote about how Hong Kong has embraced the RFID-enabled Octopus card for many low-dollar transactions (see Hong Kong: The First Cashless Society?). As I was using my contactless card to pay for rides on a wide variety of transportation, and to make small purchases at stores, I began thinking about the benefits and potential benefits of replacing cash with electronic payments. What I realized is that the benefits go way beyond just consumer convenience.

Here are some of the benefits that RFID-enabled transactions deliver:

Reduction in fare-collection costs: This is the big reason that transit authorities worldwide are introducing RFID payment systems. The cost of collecting cash from hundreds of fare-collection locations around a city is huge. It requires security, and a lot of manpower is expended counting coins and reconciling trips with the amount collected. The cost of this in many cities is, in fact, greater than the amount of money collected from fares. RFID eliminates virtually all of this expense.

Reduction in turnstile maintenance costs: Mag-stripe cards are a big improvement over the old tokens used in New York and other cities, but mag-stripe card readers have mechanical parts that move the card from the insertion slot to the removal slot in most transit systems. These parts break and need to be repaired regularly. RFID readers have no moving parts, so they break less frequently.

Reduction in accounting time: Hong Kong retailers that accept the Octopus card greatly reduce the amount of employee labor spent counting cash and reconciling transactions. They can simply download a report of all their transactions, and the appropriate funds are then transferred electronically to their account.

Increase in spending: Studies show that sales increase when consumers can pay with a stored-value card. This is because people often forego small purchases when they do not have cash on them. With a stored-value card, however, there is usually money on the card to pay for a snack or other small purchase.

Reduction in the cost of producing coins and paper: Producing coins and paper notes that cannot be counterfeited is an expensive endeavor, and the average life span of a US$1 bill is just six years. Going electronic reduces the cost of producing physical currency.

In addition, reducing or eliminating cash probably has health benefits. Physical money is passed from one person to another, and has the potential to spread germs (see Money and Transmission of Bacteria). Greatly reducing the amount of paper currency could reduce germ transmission.

With all of these great benefits, why aren't more cities following Hong Kong's lead and embracing RFID-enabled stored-value cards?

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.