India as a Cashless Society: Issues & Advantages

The stupendous growth of contactless payment systems, the widespread advent of mobile technology, and the development of Open Banking boosting speedy development of digital payment infrastructure, cash is gradually getting replaced. The payment economy of India is experiencing tectonic shifts in its structure and organisation of late. Platforms developed for sending and receiving payments have been a recipient of promising technological and policy supports from the industry and the government – and, henceforth, from the citizens, as well. The announcement and implementation of the historic demonetisation in November 2016, and the thrust with which the subsequent Digital India campaign was executed, the planned strategy of the government that commenced with a consideration of the Black Money SIT (Special Investigative Tribunal) report recommendations, the launching of the Jan-Dhan Yojana, tracking of the illegal (money hoarding) foreign accounts, got strengthened with the announcement of the income declaration scheme and the strategic initiative in the form of demonetisation drive.

The digital frameworks put in place by the government include the launch of a UPI-based BHIM app for smartphone users, launch of Aadhaar merchant pay, and direct benefit transfer (DBT). There are, however, apparent challenges facing the economy of India in going 100% cashless – these include: lack of electricity 24/7, digital illiteracy, still an untapped smartphone market, economic slowdown, and a lack of required technological infrastructure. The boons of going cashless are multiple: reduction in crime rates, reduced cost of producing and managing cash in government and administration – increase in efficiency, the data available from going cashless can be analysed to improve their public policies and spreading of germs via physical currency notes will also decrease.

It should also be noted that the cost of maintaining the infrastructure to support cash transactions will not be affordable in the future – thereby, accelerating a transition to digital payment methods will be the only alternative. By the time we reach this phase of development, the government also needs to sensitise people of India to adopt cashless means of transactions by comprehending their psychological and behavioural limitations, if any, preventing them to still stick to cash. People generally give preference to the convenience and incentivised offers available upon switching to cashless modes of payments – however, they need to be sensitised about the wider scope of a cashless society: countervailing black money, simplified tax collection system, only white money existing in the economy, almost no corruption, etc.

Likewise, people need to be made feeling safe when sharing their financial and personal information online. It’s a must to note that the informal workforce of India accounts for about 90% of the employed. This informal sector has a system of providing earnings to workers in cash. These workers generally exhibit tendencies of low savings and suboptimal banking habits. This needs to change if India wants to make its digital cashless economy strong.