Going cashless!

Money is the fundamental need of an economy. In a country like India, it is a fact of no doubt that the it is an immensely cash-concentrated economy. With the change in time and technology, a new term was introduced called as the Cashless Economy.

Cashless economy is used to describe the situation wherein the flow of cash doesn’t exist within the economy and that all the transactions are undertaken through electronic channels. This can include cash transfer through credit and debit cards, direct debit, and electronic clearing and payment systems such as Immediate Payment Services (IMPS), National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) in India. 

Then, we come across the question, why is cashless economy necessary? What changes does it bring about? Let's have a look - 

• When it comes to cash, an obvious fact is the significant amount of time and money is needed to print the currency. According to some reports, RBI has spent Rs.32.1 billion on printing the currency.. One of the immediate benefits to the government would be a higher Seigniorage. Seigniorage is the profit from the printing of currency. Cashless money exists in the form of digits on a computer. Hence it does not have to be printed. As a result, the Seigniorage is high. The government saves a lot of money.

• Cash being the paper form of money is difficult to trace. Its transaction provides secrecy enabling the people to carry out illegal activities. According to the govt the amount of black money circulated within the country goes upto 16Lakhs.

• All the transactions that are done can be monitored and traced back to a given individual. If officials from tax department smell something fishy then they can trace the money transaction back to the individual.

• India is also a home to many successful mobile wallet companies like paytm and phonepe which shows its increasing success in bringing in the cashless trend. Also, development of these apps give employment opportunities to many. 

• Going cashless helps to curb corruption hence increases the economic growth of the country. With the demonetization that took place in 2016, a large step was taken to initiate this concept. According to Union defense minister after demonetization the crime rates in Mumbai has dropped to half.

• Just by scanning a QR code, you can easily pay bills for local vegetable vendors, auto-rickshaws etc. Paytm had witnessed 5 million daily usage post demonetisation as opposed to their average transaction of three million. It also saw a 700% increase in the overall traffic and a 1000% increase in the amount of money added to its account in the first two days of post-demonetisation.

• When people go digital, a large amount of data is generated for every transaction that takes place. This means that we can find patterns in this data to improvise and analyse the government policies.

• During this period of a global pandemic, the concept of being cashless has been a very big boost to the economy. There is no direct hand-over of cash through which there can be a possibility of the virus to spread.

Even if there are plenty of benefits, how do we bring this in practice?

Let's focus on some aids given by the government over the years for developing a cashless economy- 

• Pradhan Mantri Jan Dhan Yojana, 2014

This policy had the aim of getting a bank account for every household.This scheme ensures access to a range of financial services like availability of basic savings, bank accounts, access to need-based credit, insurance and pension.

• Direct Benefit Transfer

It is a scheme that was launched by the Government of India to transfer the benefits and subsidies of various social welfare schemes like LPG subsidy, Old Age Pension, Scholarship, MGREGA, etc. directly to the bank account of the beneficiaries.

• Unified Payment Interface

It is a system that powers multiple bank accounts into a single mobile application based on a UPI ID

• Other promotions like e-banking, debit and credit cards, card-swipe or PoS machines and digital wallets have made the transition to cashless economy easier.

Even though we utilize these guidelines given by the government, still there are some challenges that we, as a nation come across, while implementing the cashless trade.

• India is a country having major business in the agricultural sectors. Expecting this sector of the population to suddenly adapt to the cashless trade is inadvisable.

• For using mobile wallets, it is necessary to have a secure internet connection, which is usually not available in the rural areas. Also, for transacting using cards, a stable internet connection is important.

• The rate of cash to GDP is the highest in India (12.42%). In other large economies, the average cash to GDP ratio is 5%. In fact, the year 2015 saw 78% of all consumer payments in cash in India.

• The use of cards is dangerous if one doesn't have adequate knowledge about it. The card can also be misused in cases of theft as the only thing you need to know for using a card is the 4 digit pin.

• The online transactions of money are highly dependent on the internet. Taking into consideration the growing cases of cyber attacks and cyber crimes, people have become reluctant to use these means. If one does not have a secure internet connection, then the entire savings of a life time could be put to risk.

• The transaction fees charged by some banks are humongous. Also, the minimum balance policy of the banks is not affordable to all.

• India currently has only 2.3 lakh ATMs. This is a very less count as compared to the population and area of the country.

What should be done? Yes, now that we know what actually the cashless concept is and what challenges are being faced, we can of course come up with some solutions!

See, suddenly shifting everything to the cashless trade is of course going to be difficult. It is necessary to proceed slowly and gradually. The banks must make sure that the transaction fee is either free or affordable to all. The banks must encourage the opening of zero balance accounts to encourage the poor to make use of the bank accounts. The internet connectivity being a major issue in the rural areas should be treated by the govt on priority to ensure secured connectivity to all. There must be sessions promoting the use of cards, and tutorials to the illiterate about how to use the card and what precautions. People in the cities who have adopted for the cashless transactions have already started seeing the benefits like monitoring expenditure, giving exact cash at small vendor shops, etc. Thus, making India cashless is a very strong concept, but it needs the support of proper infrastructure, tutoring as well as a step wise plan to succeed!