By Nivedyta Khanna
By the year 2020, nearly $500 billion worth of transactions in India will happen digitally. Now if we look back to the biggest Indian news story of the past year, Prime Minister’s cash ban, his initiative to demonetize the country was viewed as a remote event.
But it was something that forced everyone to enter into the new digital system.
A cashless society means ‘to have such an economic state in which the financial transactions are not conducted with the physical form of money like banknotes or coins. But rather through the transfer of digital information between the transacting parties.’
A report from MasterCard was found stating that India was one of the countries least ready to change from transactions to a digital payment system. In 2015, 78% of all consumer payments in India were made by cash.
India stack which is the act of going digital in simple terms, could be a good way to speed up the move to digital payment systems across the developed world and put an end to cash transactions. It should also be noticed that from the time demonetization was announced, over $80 billion have flown into the banking system.
The Nifty Bank Index that takes a look at the 12 biggest banks of India, went up over by 30% in 2017 and even the telecommunication and technology sectors of India are expected to a quick growth in light of such transactions.
YES, we should go cashless. But why?
The whole country has witnessed the effects of demonetization and transfer of digital information. This new system has also shown how it leads to convenience for people, since they can save money and time with it.
There is a high chance that companies and government agencies will also get efficient as they can reduce costs due to them no longer needing the manual accounting sector.
In Seattle, Amazon is experimenting with a grocery store where the customers can stroll in, take what they like and leave without pausing at the cash counter.
Payment of bills will also supposedly become easier with technology like fingerprints and biometric-chip implants and it will be simpler to monitor cash flow since digital bytes are easier to track than coins and bills.
More Data Means Better Policies
Having less cash can also lead to having more data. By using this data, the officials can predict the pattern of activity and use this information for major projects like transportation.
It can lead to governments use of data that will help to analyze and improve the policies and make changes in the existing policies for a better country.
E-wallet services like Paytm would perhaps be the biggest success story from demonetisation that have seen an incredibly quick rise in usage with Paytm especially having over 17 crore Indians using the app in their daily lives.
Its spokesperson said, ”We are already seeing a TV run rate of USD 29 billion. We are currently logging about one billion transactions per quarter and we aim to double it this year.”
Even theft that is such a common crime, can see a decrease since without the solid cash what will they steal? Countries like US and more have seen a slight decrease in street crimes over the past 2 decades with the rising number of people using debit and credit cards. So essentially lesser cash will decrease crimes.
But this might arise the problem of online crimes and the government should really tighten that sector up before pushing for a digital economy.
It will also become easy to track black money or illegal transactions because the money transactions would be done directly and the banks will have the details or records of all the transactions being made.
Since the transactions will be done through an organized channel, it will result in an increase in tax revenue. The cash transactions that were before being done illegally will enter into the banking system in a clean manner, and the tax can be levied on them which in turn can be used by the government.
The other benefit is that spending more helps to improve the economic growth. It was noted that in countries like US higher card usage had contributed to a consumption of about US $296 billion globally from the year 2011-15 which is a 0.1% increase in the GDP.
Countries like Singapore have also witnessed a growth of 0.1% in GDP which accounts for about S$400 million per annum.
To conclude, I agree that there are difficulties in implementing the ideas of a cashless economy in a vast country like India where a large number of people are living under poverty, yet a beginning had to be made someday.
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