This country is trying to go cash-free

Denmark is inching closer to becoming the world's first cashless country after the country's government proposed that retailers should be allowed to only accept mobile and plastic payments.

This month, the Danish government unveiled a series of initiatives that included plans to eradicate laws that require stores to accept physical cash.

If parliament gives the go-ahead, clothing retailers, restaurants and gas stations could go cash-free by January 2016.

A worker demonstrates Apple Pay inside a mobile kiosk sponsored by Visa and Wells Fargo.
Getty Images
A worker demonstrates Apple Pay inside a mobile kiosk sponsored by Visa and Wells Fargo.

Cards already dominate payment in Denmark, according to a report by payment processing company WorldPay. By 2012, 84.2 percent of Danish transactions were made using cards, with e-wallet payments facing significant growth, the report said. That same year, Ireland was the only other European country that topped Denmark in terms of card payments.

Supporters of the program say less cash at the register will help boost in-store security and cut out resources required for counting and storing coins and bills.

"Cashless environments will make it possible to test new innovative store concepts and payment without having to incorporate the very cost-intensive measures are required when handling cash," Danish Chamber of Commerce CEO Jens Karskov said in a press release.

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Still, essential services like post offices, hospital cafeterias, dentists and chiropractors will still be legally obligated to accept Danish krone, according to the Danish Finance Ministry's website

Making the change to a completely cashless society will mean overturning tradition, which may be a bigger hurdle than technology, Peter Hahn, a senior lecturer in corporate finance and banking at London's Cass Business School, said.

"This is a cultural issue which requires adoption, and depends on how comfortable people are with plastic," Hahn told CNBC in a phone interview.

While not everyone may be equipped with mobile payment, even the poorest segments of Western populations have access to bank cards. Some governments are even starting to pay out benefits electronically, Enrique Velasco-Castillo, a lead analyst with Analysys Mason's Digital Economy Strategies programme explained.

"There really isn't issue of excluding a section of the population where banking penetration is so high."

In markets with stable financial systems like the Nordics, there's no reason for people to store cash, Velasco-Castillo said.

Some Swedish shops have already gone cashless, and bus systems in some major cities like Stockholm no longer accept change for fares. London last year made similar moves, pushing commuters to prepaid transit passes or contactless debit cards.

Read MoreSweden is close to becoming a cashless society

The rise of electronic payment could also raise privacy concerns, but Hahn said these pale in comparison to what it would mean for state revenues. Tracking payments would help governments collect taxes and "could do wonders for fighting corruption."

"It makes economic sense, and it's cheaper for everyone to move to all electronic model. Pushing coins and paper through the system very expensive. Money wears out, you carry it back and forth, redistribute it, count it. It's a big cost on the system," Hahn stressed.

The Danish Chamber of Commerce is realistic about how widespread an initial cashless rollout could be, saying that only a proportion of stores will drop cash altogether.

"It's definitely the future but, the future doesn't have to be tomorrow," Hahn said.