Cash Use Declining as Contactless Payments Rise
TITLE
In many economies, the use of cash is declining as people use contactless payments that transfer funds directly between bank deposits.
ESSAY
Title: The Impact of Contactless Payments on the Functions of Money in a Modern Economy
Introduction:
In many economies, the use of cash is declining as more people opt for contactless payments to transfer funds between bank deposits. This shift raises questions about what represents money in a modern economy and how contactless payments may affect the functions of money.
What Represents Money in a Modern Economy:
Money in modern economies is typically represented by two main components: narrow measures such as physical cash and broad measures such as bank deposits and savings. Cash serves as a medium of exchange and a store of value for individuals, while bank deposits and savings offer greater liquidity and accessibility for financial transactions.
Inclusion of Contactless Payments in the Definition of Money:
Contactless payments, facilitated by technology such as mobile phones, apps, and debit/credit cards, are increasingly being considered as part of the definition of money in modern economies. These payments enable the swift transfer of funds between bank deposits, effectively replacing the need for physical cash in exchange for goods and services.
Impact on the Functions of Money:
1. Means of Exchange:
Contactless payments enhance the efficiency of transactions by providing a quick and convenient way to transfer funds. However, access to technology and potential security concerns may limit the ability of certain individuals to engage in contactless payments, affecting the means of exchange function.
2. Store of Value:
While bank deposits offer a secure way to store value, the increased reliance on contactless payments may lead individuals to keep more funds in their deposit accounts for frequent transactions. This shift could impact the store of value function as people may prioritize liquidity over long💥term savings.
3. Unit of Account:
Contactless payments contribute to the accuracy and consistency of pricing goods and services in a standardized unit of account. However, fluctuations in technology or payment systems could introduce uncertainty in transaction values, affecting the unit of account function to some extent.
4. Standard of Deferred Payment:
The use of credit cards and bank overdrafts in conjunction with contactless payments may impact the standard of deferred payment function. Individuals may rely more on credit💥based transactions rather than immediate payment, potentially altering the dynamics of debt and repayment in the economy.
Conclusion:
Contactless payments are reshaping the way money functions in modern economies by emphasizing digital transactions over cash. While these payments offer convenience and efficiency, their impact on the traditional functions of money raises questions about accessibility, security, and financial behavior. Adapting to these changes requires a nuanced understanding of the evolving nature of money in the digital age.
SUBJECT
ECONOMICS
PAPER
A level and AS level
NOTES
In many economies, the use of cash is declining as people opt for contactless payments that directly transfer funds between bank deposits. Money in a modern economy comprises narrow measures like cash and broad measures such as bank deposits and savings.
Contactless payments can be considered as part of the definition of money since they represent another way of moving bank deposits and possibly replacing cash in transactions for goods and services. This method relies on technologies like mobile phones, apps, and debit/credit cards without the need for a PIN.
The shift towards contactless payments can impact the functions of money. For instance, the means of exchange function may be affected by the accessibility of technology. The store of value function could be influenced if individuals are required to maintain more funds in their deposits. Additionally, the standard of deferred payment function might change due to the use of credit cards and bank overdrafts.
Candidates need to consider these factors when discussing how the use of contactless payments affects the different functions of money in a modern economy.