India is making an enthusiastic attempt to reduce the use of physical currency in order to transition to a cashless transaction economy. One mechanism that could assist the economy in moving toward a cashless future is digitalization. When electronic banking gained popularity, there was a shift in daily life towards the use of cashless transactions and settlements.
The goal of Prime Minister Mr. Narendra Modi’s “Digital India” initiative is to make India a digitally empowered country and establish a cashless, paperless economy.
Cashless Modes: It Types
The three common types of cashless modes discussed by various RJS Coaching institutes are as follows:
- Mobile Wallet: Mobile wallets are the next cashless payment option. Paying with a mobile wallet doesn’t require a debit card, credit card, or internet banking password. Simply put funds into your wallet over IMPS and utilize it while on the go. From the Play Store, you can download a mobile wallet app.
- Plastic Money: An additional cashless payment option is to use a credit card or debit card. In India, the use of debit and credit cards was restricted. Nonetheless, as a result of demonetization, credit and debit card use is rising. The ability to swipe a card at the merchant’s end is one of this payment method’s constraints.
- Net Banking: It is merely an internet way to transfer money from one bank account to another, credit card, or third party; it doesn’t require a wallet. It can be accessible using a computer or a smartphone.
- Apps for UPI: Using your smartphone, you can conduct a variety of financial transactions with the UPI mobile system. With UPI, you may send and receive money using a virtual payment address without having to provide your bank details. Businesses can register with banks to accept UPI payments. To take UPI payments, the retailer would need to have a current bank account, much like with a point-of-sale system.
Cashless Economy: Advantages
Some of the major advantages discussed by various experts in the RJS Coaching institute are as follows:
- Developing a Plastic Economy: People’s desire for a cashless economy is going to promote their financial attachment. All households must be connected to a bank and the plastic economy by the government. A benefit of digital business is reduced handling costs and wait times. If properly met, it will raise the rates of production and fasting, thus fostering the economy.
- Optimal use of Cash: Encouragement to go cashless results in a decrease in the amount of cash in circulation and eliminates the opportunity to use the optimal cash for investments in other endeavors. A cashless economy will ultimately impact channels like illegal remittance.
- Maintaining Transaction Records: Keeping track of one’s spending will be incredibly simple if all transactions are recorded. In addition, it will make it easier for people to justify their expenditures in the event of security and assist with income tax returns that fail.
- Simplify Transactions: Probably the main reason to switch to digital banking is how simple it is to execute financial transactions. You won’t need to carry large amounts of cash, use plastic cards, or stand in line to withdraw money from an ATM. Additionally, it’s a simpler and safer way to spend money when traveling.
- No Chance for Counterfeiting Notes: There won’t be any unclean notes or counterfeit money delinquencies in a cashless economy, which will lower the cost of operating ATMs. Customer service should be completed quickly, without any delays or queues, and without requiring any interactions with bank employees.
Cashless Economy: Major Challenges
- Presence of Digital Illiteracy: The majority of people in the country still lack computer literacy. Rural residents are still unaware of smartphones. Furthermore, a nation cannot go cashless without internet access, which is lacking. Even today, a lot of urban and rural locations have very difficult access to 2G networks. In addition, the price of access to the internet is significantly higher than in wealthy nations.
- Lack of Phones in Rural Areas: India currently has over 250 million smart phone users, and by 2023, that figure is expected to rise to almost 350 million. Simply put, it is insufficient to sustain an economy that wants to conduct significant transactions using e-wallets. Millions of people live in India. And that demonstrates that there are currently far too many individuals in India without smartphones.
- Absence of Proper Data Securitization: A lot of customers are wary of cashless transactions since no legal guarantee of security is made. What happens if you conduct all of your business online and there is a security breach that makes all of your purchases and transfers visible to the public?
Is the Indian Economy Ready to Go Cashless?
The information on debit card usage, which shows that all debit card usage occurs at ATMs for the purpose of withdrawing cash, highlights the challenges associated with becoming digital. In an Indian context, the primary function of cards is thus to facilitate cash withdrawals. The drive for financial inclusion, which resulted in the opening of over a million bank accounts, is directly responsible for the exponential growth of debit cards. Although millions now own plastic money, the move has essentially merely changed the way people withdraw cash from banks to ATMs, which did not correspond to the intended outcome.
Way Forward
The cashless economy has many advantages, but it also presents a number of challenges derived by experts from RJS Coaching institutes. These include how to reduce cybercrimes and online fraud, how to increase the penetration of ATMs and banking facilities across the nation, how to significantly raise the rate of literacy, how to scale up the accessibility of internet facilities, and how to improve the efficiency and transparency of digital modes of transaction to the point where people are satisfied. Any attempt to move the economy toward cashlessness may not be as successful unless these structural problems are largely resolved.
