CONFIDENTIAL 2 LG JUNE 2020/ELC231/ELC230/SET 1

PART A: READING COMPREHENSION (25 MARKS)

Read the passage below and answer all the questions that follow.

Cashless Society
I A cashless society might sound like something out of science fiction, but it is
already on our way. According to The Malaysian Reserve (2019), with 70% of
the consumers favouring sellers that accept digital payments compared to those
that only accept cash, Malaysia is one of the countries that is fast becoming a
cashless society. Several powerful forces are behind the move to a cash-free 5
world, including governments and large financial services companies. Even
critics of the mainstream financial system and government-issued currencies
favour doing away with cash. However, we are not there yet. In addition to
logistical challenges, we need to address several social issues before giving up
on cash entirely. According to the Visa Consumer Payment Attitudes Study 10
(2018), there is a growing preference for digital payments among Malaysian
consumers as seen in a similar trend based on their VisaNet data. Digital
payments are becoming the method of choice with an increase of 21%
compared to the previous year. There are many benefits and disadvantages of
being cashless society can have on money and banking. 15

II First, the benefit of a cashless society is that lesser number of crimes can take
place since there is no tangible money to steal. It is easy to steal money if we
use cash, whether the amount is large or small. Illegal transactions such as drug
trade also typically take place with cash so that there is no record of the
transaction and that the seller can be certain about getting paid. The next benefit 20
of being a cashless society is that performing money laundering becomes much
harder because there is always a paper trail of the source of funds. Financial
crime should also dry up as it is harder to hide income and evade taxes when
there is a record of every payment made and received. Next, it costs money to
print bills and coins. Businesses’ owners need to store the money, get more 25
when they run out, and deposit cash when they have too much on hand. By
going cashless, less time is used and cost is lowered compared to handling
paper money. Hence, it lessens the cash management hassle. In addition, the
benefit of going without cash is international payments can be done easier.

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When visiting a foreign country, buying local currency is always a must. 30

However, payments are easy if both nations can handle cashless transactions.
Instead of figuring out another currency, the smart device handles everything
that is needed. Therefore, it makes currency exchanges easier while traveling
internationally.

III However, there are several disadvantages in moving towards a cashless 35

society. Depending on the perspective, going cashless is not all roses. The first
drawback of a cash-free world is privacy issue. Electronic payments mean less
privacy. We might trust the organizations that handle our data, and we might
have nothing to hide, but our payment information could turn up in ways that are
impossible to predict. This is because cashless transactions allow us to spend 40
money and receive funds anonymously. The second disadvantage is that going
cashless provides opportunities for hackers who are the bank robbers and
muggers of the electronic world. In a cashless society, the consequences are
higher if somebody drains our account because we might not have alternative
funds to turn to. Though we are protected under federal law, we will still face 45
significant inconveniences and other consequences after a breach. Then, many
are concerned that we are not technologically prepared for a cashless economy.
In the event of a glitch or power outage, consumers might be left unable to
purchase basic essentials when they need them. Likewise, merchants have no
way to accept payments from customers when systems malfunction. Even 50
something as simple as a dead phone battery could leave us ‘penniless’.

IV Moreover, going cashless could fuel inequality in the society. The poor and
unbanked will have an even harder time in a cashless society. A recent study
found that 6.5% of households in the United States were unbanked in 2017.
They do not have smart devices for making payments, and those who operate in 55
the informal economy would have no way to get paid or receive aid. In addition,
when we spend with cash, we feel the “pain” of every dollar we spend. In
contrast to electronic payments, it is easy to swipe, tap, or click without noticing
how much you spend. Consumers will need to renew their efforts to avoid
overspending. Finally, when money becomes electronic and if the government 60
charges banks a negative interest rate, they can pass it on to customers in the

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form of fees. Dropping the interest rate is typically a move to stimulate an

economy, but the result is that money loses its purchasing power.

V Payments happen electronically without using cash. It means instead of using

paper and coins to exchange for a value, a transfer of funds is authorized to 65
another person or business. The logistics are still developing, but consumers
have some hints on how a zero-cash world look like and how it might evolve
them. Credit cards and debit cards are among the most popular cash
alternatives in use today. Nonetheless, cards alone are insufficient. Electronic
payment apps, like Zelle, PayPal, and Venmo, are helpful for peer to peer 70
payments, or P2P payments. In addition, bill-splitting apps allow friends to split
their bills easily and in a fair manner. In addition, mobile payment services and
mobile wallets like Apple Pay provide secure, cash-free payments. In most
countries that use cash sparingly, mobile devices are the most common tools for
payments. 75

VI Several nations are already making moves to eliminate cash, with the push
coming from both consumers and government bodies. Sweden and India are
two notable examples for such countries. It is common to see “No cash
accepted” signs in Swedish shops and some banks are no longer handling cash.
Cash payments are only 15% of retail sales in Sweden and at some point, 80
Sweden has become the model for a modern cashless society. Consumers are
mostly happy with this situation, but the poor and elderly still struggle with an
electronic world. Meanwhile in India, the government banned 500 and 1,000
rupee notes in November 2016 in an effort to penalise criminals and those
working in the informal economy. The implementation was rushed and 85
controversial, and roughly 99% of those banknotes were deposited; meaning
criminals did not lose much money. Electronic transactions increased
temporarily, but they fell to pre-demonetization levels in the following year.
Those examples suggest that going cashless is possible with sufficient
infrastructure and gradual progress. The remaining questions centre on how the 90
deprived consumers will fare when cash is history.
Adapted from https://www.thebalance.com/pros-and-cons-of-moving-to-
a-cashless-society-4160702

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QUESTION 1
State whether the following statements are TRUE (T) or FALSE (F).

i. Digital payments are the only preferred method by Malaysian consumers

when making cashless purchases.
ii. Financial crimes are more evident with cash transactions.

iii. Managing spending is more difficult with cashless transactions.

iv. The majority of Swedish consumers are pleased to practise zero-cash

transactions.

(4 marks)

QUESTION 2
What do the following words mean as used in the passage?

i) evade (line 23) : _________________________________________________

ii) glitch (line 48) : _________________________________________________

iii) stimulate (line 62) : _________________________________________________

iv) notable (line 78) : _________________________________________________

(4 marks)

QUESTION 3
All of the followings are TRUE about cashless society except
(circle two (2) answers)

i. The critics of mainstream financial system and government-issued currencies have

issues with going cashless.
ii. Travelling is more convenient with cashless international transactions.
iii. Cashless society provides opportunities for cyber criminals to breach consumers’
privacy.
iv. The society perform can only perform digital payments by using mobile devices.
(2 marks)
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QUESTION 4
What are two (2) advantages of moving towards cashless society?

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

QUESTION 5
According to the passage, why privacy breach can occur in a cashless transaction?
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

QUESTION 6
Explain what the author means by the following statement.
“Depending on our perspective, going cashless is not all roses.” (line 36)
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

QUESTION 7
According to the text, why inequality is possible in a cashless society?
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

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QUESTION 8
How is a transaction being done in a zero cash world?
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

QUESTION 9
What can you infer from the following statement?

“In addition, when you spend with cash, you feel the “pain” of every dollar you spend.” (lines
56-57)
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(2 marks)

QUESTION 10
Should Malaysia become a zero-cash nation? Provide two (2) reasons to justify your
answer.
_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

_________________________________________________________________________

(3 marks)

END OF QUESTION PAPER

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