The most popular transaction method in India is cash. Use of cash is highly preferred all around the nation. According to the government survey in the 2016, there are less than five percent payments that are done electronically. So, what is the place for Cashless Economy
In 2016 budget speech, finance minister talked about the idea of cash less economy. The aim of this idea was to determine and curb the black money flow in the financial market. In fact, RBI vision of 2018 also states Payments and Settlement Systems.
Steps Taken By RBI
- Payment Bank Licensing
- Mobile wallets, e-gifts, e-voucher etc.
- Liberalizing the FDI norms
- Launch of UPI for simpler e-transactions
- Withdrawal of service charge, surcharge on digital or card payments
Clearly, government is pushing electronic payments and making necessary efforts to make India a cashless economy so that the use of cash can be reduced. Black money flow is hard to track in cash payments but digital payments make transaction transparent and traceable.
In fact, even the e-commerce market in India is driven by the Cash on Delivery payment option. Most of the consumers prefer choosing this option. However, as the result of demonetization in this country, there has been a significant preference shift towards electronic payments.
Benefits Of Cashless Economy
- Financial inclusion and credit access improvement
- Reduction of tax payment avoidance for proper tax regulations and flow
- Reduced the risk of carrying cash and safer payments
- Reduced black money flow in the market
- Universal banking availability leads universal cash availability
- Reduced risk of fake note utilization
- No currency boundaries
- Customer satisfaction with no delays and no bank queues
As per the statistics of Several Research centers, demonetization reduced the cash on delivery payment mode popularity. Online payments for the product purchase are in trend right now. However, this trend can be found only in Tier I cities. Tier II and Tier III areas are still on cash on delivery options.
The payment option gap between Tier I cities vs. Tier II and Tier III was huge few years back. However, this gap is now narrowing due to the electronic payment initiatives by the government of India. There is high possibility that idea of a cashless economy can be successfully established in the future.
Challenges In The Idea Of Cashless Economy
- Financial literacy and internet connectivity
- Proper understanding and use of bank accounts
- Increase of interest towards digital payments
- Resources availability to invest in e-payment infrastructure
- Perception of unfair charge on e-payment
- Use friendliness of internet banking and digital wallets
According to the insights and stats of latest sales survey, customers usually prefer cash on delivery on their e-commerce product purchase. E-tailers are taking a step ahead to help India become a cashless economy by attracting customers to make online payments.
Internet Market offers attractive discounts on all pre-paid orders from all areas. This is to promote the cashless transactions in India. The stats show that people are attracted with discounts which made significant growth in digital transactions.
What Can Be Done To Encourage Cashless Economy?
In order to encourage the utilization of e-payments, it is necessary to spread the knowledge of the digital transactions. People need to understand what they can gain if they give up the use of cash in their daily purchase transactions.
Completely operationalized bank accounts should be opened. Most importantly, excess fee on card transaction should be removed. Interchange fee reduction can be the big step to encourage the use of digital transactions.
Electronic payment infrastructure should be completely safe and secure. If customers will get assurance of safety in their e-payments then it will help them to increase the use of e-payment options and discourage the cash utilization.
Future Of Cashless Economy Idea
There are some challenges that need to be managed in the financial sector before the cashless economy can stabilize. Unless the government makes the necessary improvement in financial standards, the cashless economy idea cannot be accomplished.
There are huge advantages of cashless economy if the shoppers of Tier I, Tier II and Tier III areas have required resources to manage and handle digital transactions. There are a few barriers in the success of transaction digitalization in the market. However, they can certainly be managed with efforts.
In short, the future of India can be cashless.
Since there are so many advantages of digitalized payments, there is no doubt that the awareness and improvement of payment methods will help people to give more preference to the digital payments.
There are several opportunities connected with the e-commerce advancement and financial market digitalization. If the process of transaction digitalization goes well, the product availability range and e-commerce popularity will gain customer inclination.
Currently, people are now beginning to gain awareness of digitalized payment sources. The application of digital transaction portals will also be a big advantage for the business sector. Overall, hopes of many are connected with the cashless economy idea. There is definitely hope for better future.