Mankind has evolved tremendously. The fact that all facets of human lives have undergone astounding changes cannot be denied. One of these changes is the use of money and how we trade with each other.
Once the concept of currency was established, the exchange of goods through the barter system collapsed. With time, the concept of currency shifted from coins to paper/plastic money, and eventually to cashless monetary transactions. Now, we have reached a state where a completely cashless society looks achievable.
You may think that a cashless society is something out of fiction, but it’s already on its way. Several financial ecosystem players such as the government and large financial institutions are working towards building a cash-free society. However, no society has gone completely cash-free, just yet. In addition to challenges in proper planning, several social issues need to be solved before cash can be given up totally.
As our country has started to move towards a cashless environment after demonetization, the confusion and awe have given way to a flurry of concerns. Will the emphasis on digital transactions provide tangible benefits and convenience or just add to additional charges and stress?
The list below can give you an idea of the myriad of benefits of going cashless. Before we jump into the benefits, let us understand what exactly is a cashless society.
What does a cashless society mean?
A cashless society is one where all or most financial transactions are executed digitally, without the physical exchange of bank notes. In a cashless society, electronic forms of payment such as debit and credit cards, payment apps, mobile wallets, internet banking, and other forms of digital payments are used.
The concept of a cashless society is being discussed widely, mostly because the world is experiencing an increasing and rapid use of digital methods of recording, exchanging, and managing money in an investment, commerce, and daily life. Historically, the transactions which would have been undertaken with cash are now undertaken electronically.
The beginning of the cashless society
The trend of non-cash transactions began during the 1990s with the popularity of electronic banking. By 2010, various digital payment methods were widespread in many countries, with examples including intermediaries like PayPal, contactless and NFC payments by smartphone or electronic card, electronic bills and banking, and digital wallet systems such as Apple Pay.
At this point, cash had become unfavorable in some kinds of transactions- the ones which would be very ordinary to pay with cash in the past. Larger cash amounts were even treated with suspicion because of its ease of use in financing terrorism and money laundering.
By 2016, the value of cash transactions started to decline. The move away from cash can be attributed to technology. With the advent of smartphones, everything has become convenient- from buying groceries to transferring money internationally.
Benefits of a Cashless Society
There is no denying the fact that we are already moving towards a cashless society. This brings us to the question ‘Why do we even need a cashless society’? Well, the answer is pretty simple – it has many benefits.
Primarily, cashless transactions are quick and very convenient when compared to cash transactions. Furthermore, the need to carry and count cash before every transaction is eliminated in a cashless society.
However, like all other things in life, a cashless society also has its pros and cons. But in this case, the pros definitely outweigh the cons. The benefits of going cashless are enormous and constructive.
We may feel content knowing there is cash in our wallets, but there are greater advantages of going cashless.
The ease of conducting digital transactions can be considered the biggest motivator for going cashless. You will no longer need to carry cash, cards, or even stand in queues at the ATM for withdrawals. It is also an easier and safer spending option while you are traveling.
Going cashless gives you the freedom to transact whenever and wherever you wish to. You won’t have to be physically present for conducting a transaction or be forced to make a transaction during office hours only.
The government provides incentives like a waiver of service tax on card transactions up to Rs 2,000 to promote digital transactions. There are several other cuts and freebies. So, it is the perfect time for you to increase your savings and take advantage of these. For instance, there is a 0.75% discount on the purchase of fuel through digital payment methods.
Similarly, paying through digital means can help you cut your costs and save on highway toll, purchase of insurance, or rail tickets. Add to these the cashback offers, discounts, and rewards offered by mobile payment platforms like PhonePe, Paytm, HOP as well as the loyalty benefits and reward points on credit and store cards.
Lower Crime Rates
People that carry cash make an easy target for pickpockets. Cash registers or tills have been a source of violent crime. It puts bank and shop employees at risk of hold-ups. This risk is substantially lowered by going cashless. It also means that businesses don’t have to employ security guards or cameras. Also, once the money is stolen, it becomes difficult to track that cash or prove that it was yours.
Automatic Paper Trails
Similarly, there are great chances that financial crimes will dry up as a result of going cashless. Illegal transactions like gambling or drug operations, mostly use cash as it leaves no record of the transaction, and also cash is easier to launder. Money laundering becomes difficult when the source of funds is clearly identifiable. It is also hard to hide income or evade taxes when there is a clear record of every payment made or received.
When all the transactions are recorded, it becomes easier for people to keep track of their expenses. Going cashless also helps while filing income tax returns. It also makes it easier for people to explain their expenses during audits.
With the help of the apps such as ‘Hop-Money Matters’, people can track their expenditure at a glance. The expenses are categorized to make it even more convenient for its users. It helps them in understanding where their money is spent, where they need to cut down, and where they can spend a little more. Basically, it gives them the power to analyze and understand their expenses and develop useful habits like budgeting which is favorable for them.
As we already know, going cashless leads to records of each transaction you make. These records help you in keeping tabs on your expenses which gradually results in better budgeting.
When the amount of cash that flows out does not equal to what flows back in and people keep track of their expenses on mobile wallets and cards, it will result in budget discipline. Controlled spending may also result in higher investing.
Going cashless seems to make everything so much convenient! While traveling, you need to exchange your Rupee for the local currency. However, if you’re traveling to a country that has moved towards cashless transactions, you won’t have to worry about the exchange rates or how much local currency you’ll need to withdraw. Instead, apps such as ‘Hop-Money Matters’ app, help you to use your mobile device for hassle free currency exchange.
Going cashless lowers the risk of theft and fraud. If stolen, blocking your mobile wallet or card is very easy. This is helpful while traveling, especially abroad, where if you lose cash, it can cause great inconvenience. Apps now a days allow you to block/unblock, freeze/unfreeze, and reset your pin with just a tap.
Besides, futuristic cards may evolve to use biometric IDs like fingerprints, eye scans, or others. This will make it extremely difficult to commit frauds, making it a very safe option.
Your money grows
Going cashless helps you earn a little extra. If you put your earnings in even a bare-bones savings account, you will earn some interest. Plus, you can also make investments in mutual funds, fixed deposits, and others which can get you good returns over some time. Also, the value of cash diminishes over time because of inflation and so, investing your savings is considered the best option. Example: Rs 500 will buy you fewer things today than it would have before five years.
What Does a Cashless Society Look Like?
Going cashless leads to electronic payments. In a cashless transaction, you authorize the transfer of funds from a bank account to another person’s account instead of using paper and coins to exchange value. The logistics are still under processing, but these are a few hints as to how a cashless society will evolve.
Debit and Credit cards are the most popular alternatives to cash that is used today. But, cards alone are not enough to support the cashless society completely. Mobile devices are likely to become a primary tool for cashless payments.
Electronic payment apps like the ‘Hop-Money Matters’ app, is very helpful in making person-to-person or person-to-business payments. Also, there are many bill-splitting apps that allow friends to split bills and pay very easily.
Mobile payment services and wallets like the Hop app wallet, GooglePay, Paytm, and many others provide secure, cash-free payments. Many nations that use cash sparingly have already seen mobile devices become a common tool for payments.
Cryptocurrencies have also been a part of the discussion. They’re already being used for money transfers, and they also introduce innovation and competition that helps in keeping costs low. However, there are some risks and many regulatory hurdles (in India) that make them impractical for many users, so they may not be available for widespread use, yet.
The bottom line
The Modi Government’s decision about demonetization for curbing the black money menace has proved that going cashless is possible in India. Post demonetization, India has seen a 55 percent rise in overall digital transactions, with mobile-banking rising by a whopping 122 percent. The government’s agenda in building a ‘cashless’,’paperless’ and ‘presenceless’ economy certainly seems to be taking shape.
Since the demonetization, the Indian Government has been encouraging going cashless like never before, giving the digital currency a new hope. Programs like Digital India and Pradhan Mantri Jan-Dhan Yojna (PMJDY) have been successful in getting more people under advanced banking.
Better internet speeds, increasing mobile usage, affordable data plans, and fast-spreading awareness are among other key drivers of going cashless in India. More helpful plans must be in the making to drive this going cashless trend in India, provided there is equal support from the regulatory bodies.
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