Development\nis an inevitable phenomenon and it is always welcomed in every phase of growth\nof a nation. Since we live in an economy based on cash and service\ntransactions, it is necessary to be aware of the rapid changes that are\nhappening in this sector. We have come a long way from the age old barter\nsystem, metal coins and paper cash and have reached a phase where solid cash\ncirculation will be replaced by a cashless economy and a cashless society is no\nlonger just a figment of imagination. While cash still reigns globally on\naggregate, progress towards cashlessness is particularly pronounced in most of\nthe countries and in this situation, it is better if everyone has an\nunderstanding of what a cashless economy is and what its pros and cons are.<\/p>\n\n\n\n
Simply\nput, a cashless economy is where fewer notes exist in circulation as compared\nto the total money supply in that economy. For instance, in a country like\nIndia, about 14% of the total money in existence is present in the form of\ncash, the rest is digital money. In most of the economically advanced countries\nthis percentage is close to 5%. The aim of a cashless economy is to move\ntowards 0% usage of cash. But, a perfect 0% can never be achieved in current\neconomic scenario. However, the closer the number is to 0%, the better it is\nclose to the state of being a cashless economy. In cashless economies, only\nsmaller bills will exist for small menial transactions. Any transactions above\na certain amount will have to be done digitally.<\/p>\n\n\n\n
Hence,\nwe have seen the basic tenets of a cashless economy. The most highlighted\nadvantage of this is, of course, convenience and the ease in transactions.\nThere is no need to carry cash as such and is a safer mode of transactions.\nEmergency situations of financial needs like hospital cases or those that\nhappen during journeys can easily be managed. \nAlso, access to a bank account and a corresponding linked digital\nfinance portal can unlock numerous comfortable economic opportunities,\nparticularly for senior citizens and women, who are twice as likely to be\nexcluded from formal financial system in economically backward countries.\nToday\u2019s generation is well versed in technology and cashless transactions are\nhassle-free and easily accessible with just a smartphone. Another point of\nattraction is that online payments let one view history of their expenses and\nplan their budget in a smart way.<\/p>\n\n\n\n
How\na cashless economy plays an important role in reducing the problem of\ncorruption in a country is also a factor that should be considered. As every\ntransaction can be easily checked, production and circulation of black money\nand counterfeit money can be prevented, or their sources can be identified, and\ntaking necessary actions against that can result in decrease in the rate of\ncorruption in economy. Money laundering, another problem existing in most of\nthe nations, can also be brought under control with the help of well monitored\ndigital transactions. The unforgettable event of demonetisation in India, announced\non November 8, 2016 by Prime Minister Mr. Narendra Modi, stands as a proof\nthat these malpractices can be checked and controlled to an appreciable extent\nby reducing the circulation of solid cash.<\/p>\n\n\n\n
Another\nimmediate benefit to the government would be a higher seigniorage. Seigniorage,\nsimply put, is the profit from the printing of currency. Cashless money exists\nin the form of digital data on a computer. Hence, it does not have to be\nprinted. As a result, the seigniorage is high. As seigniorage is a source of\ngovernment revenue, digital transactions can save a lot of production cost and\nthis excess saving can be used to provide tax waivers to the people. So,\ndigital money is simply a more efficient way to operate an economy.<\/p>\n\n\n\n
A\ncashless economy can also lead to better distribution of support promised\nthrough various welfare schemes. Most of the developing countries have many\nsuch schemes which seem to be beneficial\nin advertisements and documents. However, in reality, they fail miserably as\nmoney earmarked for the purpose never reaches the people due to exploitation\nand corruption that has crept into the \ngovernment systems. However, this is not possible with digital money\nwhich can be directly sent to the bank account of the beneficiary. Thus,\neligible recipients, especially in the rural areas, can benefit a lot from a\ncashless economy.<\/p>\n\n\n\n
One\ncan also see reduced rate of tax avoidance in a cashless economy. In a society\nthat uses solid cash in transactions, there is a chance that discrepancies may\nbe attempted and go unnoticed. A 2016 study conducted by the nonpartisan Centre\nfor Studies in Economics and Finance (CSEF) looked into the effects of\nelectronic payments on tax evasion in Europe. CSEF found that the use of\nelectronic payments such as debit and credit cards reduced tax evasion, and\nthat there was a positive statistical relationship between cash withdrawals and\ntax evasion. As digital money and money services would bring about increased\ntransparency in transactions, it provides governments with enhanced abilities\nto track and analyse citizens\u2019 financial activities. Ultimately, this would\ndecrease tax evasion and increase tax payouts to the government as the\nfinancial background and transaction of each individual is monitored and\nanalysed.<\/p>\n\n\n\n
The\nlower risk that cashless economy offers should also be acknowledged. If stolen\nor lost, it is easy to block and prevent the misuse of digital devices, but it\nis nearly impossible to get lost or stolen cash. Hence, it offers the users a\nsense of confidence in financial dealings. Digital modes of transactions, thus\noffer a kind of security that conventional methods of cash transactions can\u2019t.<\/p>\n\n\n\n
However,\nwe must not be ignorant regarding the problems associated with this modern mode\nof transactions. Major among them is the difficulty experienced by ordinary\npeople when a transition from a cash-using economy to a cashless economy takes\nplace. Confusion and ignorance regarding the use of technology may prevent\npeople with minimal education from using this. Also, digital transactions\nquestion autonomy in decision making as the user has to depend upon and is\nalways under the surveillance of a third party\u2014the digital platform. <\/p>\n\n\n\n
Another\nproblem is the lack of availability of high-speed internet connectivity. A lot\nof regions, especially rural ones do not even have uninterrupted electric\nsupply. It would, therefore, be impossible to encourage digital transactions\nthere since the concepts of internet connections and wi-fi connectivity will be\nout of question in such places. In the absence of high speed connectivity,\nusers can never be sure about digital payments and will always have to carry\ncash as a second option.<\/p>\n\n\n\n
The\nincreased risk of security breach is another problem associated with the\nconcept. A cashless society may bring about increased risks to personal and\nnational security. The introduction of digital mode of transaction is seen by\nmany as a loss of their personal freedom. Again, from a personal security\nstandpoint, the risks we experience when we lose credit cards or our phones\nwould only be intensified in an environment without paper currency. Today,\nbecoming a victim of digital hacking can lead to denied payments, identity\ntheft, account takeover, fraudulent transactions and data breaches. Hence,\nwithout high security and protection, cashless economy cannot function in a\nsatisfactory manner.<\/p>\n\n\n\n
The\nrisk of overspending too cannot be overlooked. Though digital transactions can\ntrack and show your spending history, young people and teenagers may misuse it.\nAlso, according to behavioural financial theorists, the pain of parting with\nmoney is felt more intensely in the usage of solid cash. So, one should\ndefinitely have a disciplined mentality, if opting to go for cashless\ntransactions.\n\nA cashless society was an utopian dream once, but it is not that\nanymore. As any developmental process, it
\nhas its own advantages and disadvantages. Also, care
\nshould be taken to ensure that the cashless economy includes people from every\nstrata of the society and is not confined to educated users only. As\nprospective customers in a cashless economy, we should understand the digital\nprocess and its features, and adapt to them in a suitable manner.\n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"
Development is an inevitable phenomenon and it is always welcomed in every phase of growth of a nation. Since we live in an economy based on cash and service transactions, it is necessary to be aware of the rapid changes that are happening in this sector. We have come a long way from the age […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/posts\/484"}],"collection":[{"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/comments?post=484"}],"version-history":[{"count":1,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/posts\/484\/revisions"}],"predecessor-version":[{"id":485,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/posts\/484\/revisions\/485"}],"wp:attachment":[{"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/media?parent=484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/categories?post=484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.competitionreview.in\/blogs\/wp-json\/wp\/v2\/tags?post=484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}