Chasing the cashless dream

If the world's top ranking economies by per capita GDP and expenditure, education level, financial inclusion and digital penetration are not keen to go cashless in the face of resistance from their citizens, India's bid to build a cashless society may be described as highly impractical or even a wistful thought with the potential to lead to a nation-wide economic chaos. It is true that the latest data on payment behaviour from China has been an eye-opener for the many highly advanced countries. However, India is not China. The two countries don't share the same political and economic systems. Even then, going by the available data, China still made payments for 37 per cent of all its purchases in cash in 2016 while 43 per cent of spending was via money card or credit card. Mobile payments made up 20 per cent of all transactions. This is despite the fact that China is the world's largest producer-user of mobile phones. India's current digital movement banks heavily on mobile phones, imported mostly from China, Korea and Taiwan.

The movement for a cashless society is being resisted even in highly advanced democratic countries by per capita GDP such as Switzerland, Germany, France, Sweden and USA. Interestingly, in Switzerland, the world's second-richest economy by per capita GDP and a global financial capital, the Swiss are less progressive when it comes to their payment behaviour. According to official estimates, around three-quarters of payments were made in cash in 2016. Only 0.2 per cent of all transactions

in 2016 were executed via smartphones. Cash remains the most popular payment method in Switzerland and it's not going to change anytime too soon. It is

true that the backdrop in China and Switzerland is very different. For instance, in China, the majority of the population does not have access to banking services.

The common man is concerned as the cashless economy is more prone to fraud. Unauthorised electronic payments involving prepaid payment instruments (PPIs) are rising in India. Customers, who carry out transactions on mobile wallets such as Paytm, PhonePe, MobiKwik, among others, may lose their money in case of a cyber attack or negligence of the platform on which the transaction is taking place. For many, cash in hand for transactions is more likeable than mobile phones or credit or debit cards in hand. Consumers tend to spend more on invisible transactions. Cash transaction is simple. Cash is visible and easily divisible, offering a stable and reliable purchasing power. Cash payments normally come without a transaction cost. They are also geographically restricted to a currency zone. The relevance of cash as a store of value remains high and will increase further in times of negative interest rates, corrupt and authoritarian governments, ailing banks and financial systems, as well as criminal machinations.

Most economists across the world feel that a cashless society, even in a small country such as Switzerland, having a population of only 84.2 lakh and boasting a per capita GDP of USD 80,189, remains some distance away. Despite the fact that 99 per cent of Swiss adults are literate, the country loves to deal in cash. Similarly, the people in Sweden, easily the world's best-governed country with strong societal values, having a per capita GDP of USD 57,000 and adult literacy rate of 99 per cent, are generally happier when dealing in cash. Citizens opt for digital transactions at their own will and convenience and not because it is thrust upon them by the Swedish government.

Considering the global backdrop, it is difficult to appreciate and justify the urgent need for a country like India, having a population of over 1.3 billion and per capita GDP of only USD 1,939.61 in 2017, to go cashless. The drive for digital transaction towards a cashless society in India does not even take into consideration that nearly 26 per cent of its adult population or over 150 million people are simply illiterate. The ongoing BharatNet project, intended to offer internet connection to some 2.5 lakh village Panchayats, may be a good idea on paper; but, it does not guarantee that the wi-fi system will dependably operate in the absence of reliable infrastructure, including power supply. The champions of Digital India may not be aware that even in the last five years, Indian Railways, boasting the world's largest rail network, failed to ensure a reliable wi-fi system for passengers in its most prestigious Rajdhani Express trains.

In the absence of appreciation for societal values in India, including standards of education, guaranteed employment and income, quality of life, the rush for a cashless society would appear to be unwarranted and uncalled for. The success of cashless society depends on the level of individual savings in savings or current bank accounts and mobile wallets and on the efficient functioning of digital infrastructure. In a country where over 70 per cent of the working people are low-income, part-time employees and daily wage earners, cash remains the most desirable and easy route for money transactions.

Ideally, a society should decide the forms of financial transactions on the basis of their utility and convenience and not by a government diktat. A cashless society is subject to extreme legal restrictions on general cash acceptance. For a government, cashless society means a huge saving on cash production and better tax management, containing unaccounted income and black money circulation. However, under any democratic system, the choice for modes of financial transactions should be better left with individuals. A government would do well by indirectly moulding individual choice by meeting its social obligations such as imparting education to its citizens, creating job opportunities and steady income and improving living standards. India needs strong government intervention to first improve the quality of life of its people. A less-cash society will automatically follow.

(The views expressed are strictly personal)