A cashless economy is still far from reality for some countries but for a developing country like India, is the elimination of paper currency far ahead in the future? Well, Not so much! Rather it’s the way towards it.
A country goes cashless when the financial transactions are conducted without the usage of cash and instead, all transactions are executed electronically with debit/credit cards or other payment services such as PayTm, PhonePe, Google Pay etc.
Many countries are headed in this way but it's hard to say which ones will completely eliminate paper currency.
A cashless society may sound like something out of a science fiction novel but it already is becoming a reality. Several powerful forces, including some government agencies and huge financial businesses are driving the transition towards a cashless future. However, no country has so far gone completely cashless.
Apart from practical obstacles, various societal issues must be solved before the nation can completely abandon cash.
Considering the current situation, many businesses had to change how they received payments in the pandemic era. To eliminate the risk of infection from handling cash and paper cheques, merchants and customers switched to digital payment options.
Things are no longer the same as they have been in the past. We need to make the necessary modifications to avoid any long-term negative impact on the revenues.
Moreover, Shifting to any other mode of payment might disrupt the US Business as they process nearly $12.5 trillion worth of paper cheques annually. All this could lead to businesses facing hefty losses.
BENEFITS OF ELIMINATING CASH AND PAPER CHEQUES
A cashless society will most likely be more convenient for those who have the technological abilities to benefit from it. As long as we have our card or phone, we have immediate access to all of our cash. The benefit of convenience isn't the only one. Here are a few more benefits to consider:
1. Lower Crime Rates
2. Automatic Paper Trails
3. Cash Management Costs Money
4. International Payments becoming much easier
DRAWBACKS OF ELIMINATING CASH AND PAPER CHEQUES
Going cashless could be more difficult than it sounds, depending on one’s point of view. Following are some of the significant drawbacks of a cashless banking system:
1. Digital transactions sacrifice privacy
2. Cashless transactions are exposed to hacking risks
3. Technological problems could impact one’s access to funds
4. Economic inequality could become exacerbated
5. The temptation to overspend may increase
Several countries are already taking steps to phase out cash with consumer and government pressure driving the initiative. Sweden and India are two significant instances, each with its own set of results.
Leading the way with cashless payments, the latest World Bank data shows 83% of the population (aged 15+) own a credit card – the highest usage in the world. This also gives them all a sense of financial freedom due to which they try to understand the value of money at a very early age in their life. Canada also has the highest contactless payment limit in the world at $250 CAD (£147~).
In Swedish shops, it's common to see signs that say "No Cash Accepted." Cash
transactions amounted to about 1% of Sweden's GDP in 2019. According to the European Payments Council, cash withdrawals have been progressively declining by roughly 10% per year. The majority of consumers are satisfied with the situation but some who are unable to keep up with technological advancements continue to rely on cash. Sweden is on track to become the world's first cashless nation by 2023 with a fully digital economy.
In November 2016, the Indian government outlawed 500 and 1,000 rupee notes to arrest criminals and others who worked illegally or were into black marketing.
The implementation was contentious, partly because nearly all of the banknotes were eventually deposited. Criminals on the other hand, were not penalised for stockpiling untraceable cash, which was the goal of the move. According to the Reserve Bank of India, electronic transactions soared initially after demonetisation but cash reverted to pre-demonetisation levels by the end of 2017.
To sum up, paper less currency has its own pros and cons but irrespective of that it could be said that in the testing times of Coronavirus pandemic, digital transactions have gained importance throughout the globe due to which majority has taken a shift towards paperless currency.
The business of digital wallet platforms like PayTm and Google Pay have enhanced and ‘Money made simple’ is indeed the reality.