Towards a cashless economy

Money, money, money. Must be funny. In the rich man’s world...sang the Swedish band ABBA in 1976. Nearly 35 years later, in 2010-11, Sweden, more or less, moved to being a cashless economy and cash transactions became miniscule compared to those on cards. Incidentally, the move towards cashless transactions had more to do with the rising crime graph on people carrying cash.

Now, talks of India moving to a cashless economy has again found takers following a government proposal to offer income tax benefits to people making payments through credit or debit cards. The draft paper for moving towards cashless economy and thereby reducing tax avoidance has also some interesting details. Plans are afoot to do away with transaction charges on purchase of petrol, gas and rail tickets with plastic money in a bid to give a fillip to this proposal. As it is, high-value transactions are anyway getting restricted with cash payments.

Also, with SBI’s announcement to introduce 10,000 point of sale (PoS) terminals across India, digital wallets are increasingly finding takers and, with increasing credit and debit card transactions, we are well on the way towards cash-less transactions. A number of other factors are also leading towards an economy that is less dependent on cash.

Today, the number of debit cards far exceeds credit cards and debit transactions are also on the rise. In recent years, electronic payment gateways have come up and mobile cash is fast catching up. All these changes have left people with options to transact with currency modes other than cash. Yes, there are benefits and pitfalls in each of the available options, and it is equally true that there has been a transition that is resulting in overall less use of cash.

The only worry with non-cash transactions is that sometimes convenience overtakes everything else. Credit card debt is a reality, and it is mostly because of one spending more than what one can afford. Studies also show that using plastic influences people to overspend. Paying with plastic doesn’t register in people’s brains the same way as when they use cash. In contrast, it is rather difficult to get people to part with their cash. It would be really nice if some bright kid comes up with an app, which will induce some sort of emotion every time one makes a card payment to remind him of the cash going out of his account.

The other problem is about losing privacy. Every electronic transaction will leave a trail that someone could very well misuse. Unless the government comes clean and guarantees protection of privacy of people using cards and mobile payment mechanisms, it is unlikely to find takers. Money is indeed funny!

nk@outlookindia.com