Anisha has done MBA in Marketing from NMIMS And Executive Management(PMNO) from Harvard Business School. She has been instrumental in growing CATKing Digital with her experience with Marico and Henkel in the past.
Can India move towards a Cashless economy?
Let's see the Pros and Cons of the Cashless Economy
Pros:
- Transactions can be completed with the touch of a button, saving time.
- Helps the government keep track of all financial transactions.
- Makes International transfers significantly more convenient.
- The issue of counterfeit currency will be eliminated.
- Cashless transactions give the consumers proof of payment. It can be used in case of disputes.
Cons:
- People from low-income families are frequently vulnerable to numerous online scams.
- The cashless economy has yet to take root in our country’s semi-urban and rural areas.
- The technology we utilize is still vulnerable to hacking.
- Technical issues in banking can halt access to money.
Challenges to the Cashless Economy
- More than 60% of the Indian population lives in rural areas.
- Approximately 90% of the Indian labor sector is informal and mainly cash-reliant.
- A quarter of the rural population does not own a cell phone, and a big proportion of them is computer illiterate.
- The possibility of theft and hacking of digital money instruments exists in digital India.
- Mischievous people hack Net Banking solutions, Debit/ Credit cards, ATM Cards, and even transaction websites of financial institutions and banks.
Overcoming the Challenges
- Before embarking on the digital India agenda, digital security must be addressed.
- Implement the notion of a cashless economy on a smaller scale and observe how it works in rich urban areas. Once the concept gains popularity, it may be implemented on a bigger scale.
- Targeted incentives will persuade individuals and businesses to abandon cash. This might be accomplished by lowering the cost of digital payments, instituting cash-handling fees, or prohibiting the usage of cash over specified thresholds.
Note: There is still a long way to go before India becomes entirely cashless, and initiatives must be done to enhance penetration in each of these sectors.
Central Bank Digital Currency
- The Reserve Bank of India (RBI) is developing its digital currency, known as the “Central Bank Digital Currency (CBDC)” in India.
- The CBDC in India will be the digital equivalent of the rupee.
- Cryptocurrencies were introduced a few years ago, and they offered several benefits over traditional currencies.
- They were unregulated and had various additional flaws.
- To capitalize on blockchain technology, numerous countries (like India) are developing their state-issued digital currencies.
Steps were taken by the Government of India
- GOI agreed to waive the fee for BHIM, UPI, and debit card transactions up to Rs. 2000
- Demonetization has boosted the use of e-wallet services.
- The Government also held a Digi-Dhan campaign in which 16 lakh fortunate winners (merchants and users) received rewards ranging from Rs. 1000 to Rs. 1 Crore.
Conclusion
- Although the cashless economy appears to be highly promising, we must address issues such as banking the unbanked, banking illiteracy, and digital illiteracy to go cashless.
- We need easier ways to educate people about the significance of cyber security and protect them from online scams.
- Central bank digital currency has the potential to transform the system.
- The introduction of a central bank's digital currency can aid in the fight against financial crime.
- India is undoubtedly on its way to becoming cashless, but the cashless economy will have to wait for a while.
- With several efforts, the goal is to simplify the economy and reduce corruption.
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