What is Cashless Economy?Cashless economies, as the name suggests, are those that run mostly on plastic or digital money and thus with minimal cash or money in paper form. This is possible in mostly those countries where there is greater financial literacy and citizens are aware of the benefits of going cashless. A very important factor in the running of such an economy is the confidence that the people’s money is safe in banks. Also, going cashless is much more convenient.
But, it is not just the easiest way to transact, but also brings about a lot more transparency in the financial system, which helps in curbing black money, discourages tax evasion and ultimately leads to lesser funding for illegal trades and activities including terrorism.
Thus because of the multiplying effect of the benefits, many developing economies are adopting the cashless approach and are going digital. This is a mammoth task and requires the infrastructure to be robust and have a reach in the entire consumer base as well as the traders and businessmen. It is up to the governing bodies of the countries to provide a push to banks and telecom companies to improve the mobile and net banking ecosystem so as to provide a seamless end to end solution to customers as well as traders.
Everything said and done, Cash is Still the King
It is the habit of transacting in cash and trusting it to be the most viable option which needs to be changed. However, this dependency on cash does hold merit. Most of the developing countries are struggling with basic infrastructure for online transactions like a mobile phone or handheld device, internet connectivity; in some even electricity is a far-fetched dream. Thus performing critical activities like online transactions is not even heard of. Also with the growing cyber-attacks and frauds, banking is still susceptible and the need of the hour is stricter cyber laws and a focused approach to developing safer systems.
A cashless economy is not just an effort by the governmental bodies but a revolution which has to be brought about to make people understand the benefits and finally empower them to transact digitally in their everyday life. From one’s salary to their mobile recharges, all remittances if done electronically will lead to a more transparent and accountable society. Apple Pay, PayTM, etc digital wallets are gaining popularity in cashless economies.
The advantages of going cashless are beyond imagination, not just to the citizens but the country as well.
Advantages of going cashless for individuals:
- Pack of cards: No need to carry bulky notes in a case. Just carrying the required cards or mobile banking will suffice.
- More sense of safety with a PIN protected card etc. which will work only with your own credentials.
- No fear of being robbed unlike carrying cash and letting everyone know that there could be something worth snatching.
- Tracking of expenses: it becomes easier to determine how much was spent where.
- The exact amount in small denominations can be paid. Unlike cash transactions, there is no need to pay fringe amount in case the exact amount is not available with either of the parties.
- An important, though seemingly insignificant issue is that of hygiene of the notes.
Advantages of going cashless for businesses:
- Easier accounting
- Direct payment to bank account. You don’t need to go every day to deposit cash to your current account.
- Easier transactions
Advantages for the economy as a whole:
- Taxation: with lesser availability of hard cash at homes and more in banks, there is lesser scope of hiding income and evading taxation and when there are more tax payers it ultimately leads to a lesser rate of taxation for the whole country.
- Transparency and accountability: it becomes a lot easier to track the flow of money with every transaction being recorded with the buyer, seller as well as regulatory bodies, making the system much more transparent and compliant. In the long term it leads to better business and investment prospects for the economy as a whole.
- More currency in bank will mean more circulation of money in the economy, leading to greater liquidity and would eventually mean lesser interest rates (according to the monetary policy of the country).
- Reduced red tapism and bureaucracy: with cashless transactions through electronic means the wire transfers are tracked and people are accountable which in turn reduces corruption and improves service time.
- Less availability of cash for illegal activities: when people are encouraged to go cashless, there is lesser cash available with the people and there won’t be a means to invest in other activities to use the idle cash. Channels like hawala (illegal remittance) will ultimately suffer the brunt of a cashless economy.
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