The Pros and Cons of a cashless economy

The Pros and Cons of a cashless economy

A cashless society presents its own unique advantages and disadvantages

Advantages include:

• Reduced tax evasion:Digital money and money services would bring about increased transparency in transactions, providing governments with enhanced abilities to track and analyze citizens’ financial activities.

• Less crime in black markets:The anonymity and untraceability of paper currency facilitates the operations of corrupt activities. In a cashless society, the elimination of this medium of exchange would disrupt their normal operations and force them to rethink their business models.

• Savings on costs of cash:These costs of cash include ATM fees for individuals, cash storage and transportation expenses for businesses, and currency printing costs for governments.

• Fostering the adoption of new wireless technologies

 Digital finance could provide an additional loans to individuals and small businesses. Financial services providers would also benefit from a shift from traditional to digital accounts, potentially saving $400 billion annually in servicing fees.

Disadvantages:

• Violation of privacy:In a cashless society where all money, payments, and money services are digitized, there is concern around “big brother” surveillance activities by the government and organizations seeking to profit from the traceable data. Some may view the ability to take one’s ability to spend cash anonymously as central to freedom within society.

• Decreased financial inclusion:While some experts believe a shift to cashless transactions could eliminate the costs of cash for the marginalized, others believe this shift would exacerbate the existing issue of financial inclusion. Moving to a cashless society would place pressure on these individuals to sign up for formal financial services, something the poorest might be unable to do.

• Increased risk of security breach:A cashless society may bring about increased risks to personal and national security. From a personal security standpoint, the risks we already experience when we lose credit cards or our phones would only be exacerbated in an environment without paper currency. From a national security perspective, during financial and global crises, cash has repeatedly demonstrated its importance for consumers and members of society.

Pros of Cashless economy

• No counterfeit currency.

Counterfeit currency in 500 &1000 denominations will be rendered useless. People who engage in corruption and allied practices generally hoard their wealth in cash. This hoarded cash will be of no use because of the note ban. If they deposit it in the bank, they will be questioned regarding the source of that income.

• There will be minimum theft of cash.

After the note ban, nobody would want to steal cash in 500 & 1000 Rupee notes. This will quickly stall the theft, as that money won’t be accepted anywhere but banks.

• Easier payment across the country.

People who want to transfer money to places across India can be done with more ease, via NEFT for instance.
With digitisation being initiated, every person will have to be digitally literate at some point, thus soothing their efforts in transferring money and making transactions more transparent.

• It will also help in widening the bracket of tax payers. People will have to give and receive their payments via cheques and online transactions.

Cons of Cashless economy

• Lesser literacy rate has been the top reasons for so many issues.
  Making India digitally literate is not an easy task. There are places which don’t even get electricity and water, let alone computers and internet. A large number of population is based in the remote areas without these basic necessities. People here rely solely on cash. They can be conned if they have to rely on someone for online transactions.

• Another issue in implementation is the affordability, availability and efficiency of the devices which support online transactions, such as, computers, smart phones, Point of Sale devices. Only 15% of India’s population uses the internet. With such a meagre number of people being exposed to the internet, digitisation can’t be made universal, not at least in a short span of time.

• Corruption, despite being one of the points for digitisation, can’t be guaranteed to decline.

A person taking a bribe in cash right now might demand it in kind in the future, say a mobile phone, or a computer. This is merely a speculation.

• Cyber security: India will have to tighten its cyber security owing to the instances of hacking into banks and personal accounts occurring globally. A country like India, being at its nascent stage in terms of cyber security might be more vulnerable to such threats.

• Indians need cash every single day.

Ola cabs refused to take cash payments as their drivers started facing multiple challenges in their daily course. Currently, the eateries which accept debit and credit cards are higher priced. Things like cigarettes and tobacco aren’t available in shops which accept cards, and the ones who sell these things don’t have the resources or the infrastructure to get a Point of Sale device. Such small businesses will succumb to digitisation. This is just one example, there are myriads more.

Government’s role 

• The Ministry of Electronics and Information Technology has launched DigiShala, a government-owned 24*7 TV channel to spread the awareness of Digital Payments.
• VISAKA – Vittiya Saksharta Abhiyan, is a campaign initiated by the Government of India, Ministry of Human Resource Development, for promoting Digital literacy.
• The first place to go cashless is a village named Palnar in Chhattisgarh. It has installed more than 1500 Point of Sale devices. This can be a good step in curbing thefts and extortions as this village happens to be a hub for naxalites.
• Grocery stores, local doctors, chemists and other essential commodities and service providers have been asked to install Point of Sale devices by the government.

Despite the government efforts India lags behind due to illiteracy, lack of technical knowhow, unequal incomes etc. Even if a person is willing to transfer the money online, the receiver should at least have a bank account, he should have that bank in his area, that bank should have the cash whenever a person needs to withdraw. These are only some of the problems faced by all many Indians on a daily basis.