Is India ready to go cashless?

Paytm, PayPal or Airtel money along with card payments is becoming the norm, thanks to demonetization. The question is can India, a predominantly cash-run system, adjust to this drastic change? Is it even possible to go fully cashless? But the basic question is why do we need a cashless system?

What is a cashless system?

Early man used the barter system to exchange goods, which then progressed to coins made of precious metals like gold and silver. The Chinese invention of paper money made cash transactions easier and lighter to deal with. But the onset of the 21st century saw a need to upgrade the cash system. Enter the cashless system.

A system where no physical cash is in circulation is a cashless system. Payments are made through credit and debit cards, bank electronic fund transfers or virtual wallets. Cash is non-existent in such a system.

Cashless is painless

A cashless system brings down the transaction cost of printing, managing storing and transporting cash. The risk of money getting stolen or lost is almost zero. Cash is also untraceable, unaccountable, easy to hide, steal and counterfeit it. Cash feeds into the black money system, which brings down the money accountable to the nation.

This reduces money laundering and increases tax compliance. The country would be benefitted with the money due to it. Criminal activities like illegal drug trade, illegal immigration, terrorism, human trafficking and corruption would be minimized as these activities run on cash transactions. People would also be hugely benefitted, as standing in serpentine queues for cash and access to banks will no longer be a problem. Faster and simpler ways of shopping, paying bills and transferring money would make for a unified payment system around the world.

Can India go cashless?

India lacks infrastructure, which might be the biggest setback for a cashless system. Access to banking facilities and opening accounts has not reached the interior parts of India. In spite of Jan Dhan accounts being opened, most of the accounts seem non-operational. Lack of literacy about available banking facilities is a huge hindrance for such a system.

A cashless system needs a strong online system to function. Internet availability and knowledge about technology is crucial for the same. There is also a fear amongst people regarding online transactions. Losing internet connection while transaction is being processed, hacking or being cheated by fake online portals are fears, which need to be addressed. Small retailers in India do not have the facilities to move to online payment. Going cashless needs to be motivated by providing tax benefits and perks.

Steps taken for cashless India

The Reserve Bank of India has initiated payment banks, which simplify digital payments in all walks of life. It is a pre-cursor move to encourage India to ditch cash.

Post demonetization, the government has also dropped surcharge and service charge on card usage. The message is very clear that India is going guns blazing to stop cash flow and to go digital. The government has also eased norms for e-commerce to do business with Amazon, Flipkart, Myntra etc, becoming hugely popular.

The initiative of Unified Payments Interface by National Payments Corporation of India makes digital transactions as simple as sending a text message.

Digital wallets like Paytm, Pay U, Mobikwik, Gio Money, etc, are being promoted by the government to send money, pay bills, buy movie tickets or even give e-gift vouchers.

India is still far away from being cashless, but the steps taken have surely initiated the long-drawn process.