RESEARCH

“The Effect of Cashless

Transaction”

By: Apple Key M. Tenio

ABM 12-18
 Introduction

Cashless settlement of accounts is premised on the assumption that all organs and

enterprises concentrate their money funds at banks. It is related to the characteristics of

the cashless settlement of accounts. The cashless settlement of accounts excludes

settlement by cash in goods transactions; it is realized by enterprises completing

payments between them by means of transfer through their bank accounts. It should be

noted here that cashless settlement of accounts indeed materializes not involving cash

but in the form of computation involving bank accounts, but this does not mean that

movements of money funds occurring in bank accounts could deviate from movements

of goods. If there should be phenomena of inconsistency in cashless circulation, they

are caused by an inevitable factor preventing the movement of money and that of goods

from occurring in a coordinated manner in terms of timing. To see to it that the possible

phenomena of inconsistency between the movement of goods and that of money are

overcome in a timely fashion and that the cashless circulation thus proceeds smoothly,

under the condition that the cashless circulation proceeds through the cashless

settlement of accounts, it must be ensured that organs and enterprises concentrate their

money funds at banks so that their bank accounts always offer security for their

payments for goods. If they should fail to do so, the duty involving the security offered

for the promises of payment between the user and supplier falls on the bank in the

cashless settlement of accounts through bank accounts. Only when organs and

enterprises concentrate their money funds at banks is it possible to do away with

phenomena of acquiring things without money, to ensure that money circulates

smoothly according to plans of goods supply, and to save banks from the obligation of
fulfilling the payment duty on behalf of user enterprises. In enforcing discipline to ensure

that all monetary transactions are done through banks, it is important to see that

monetary transactions between organs and enterprises, including those for major goods

purchases, are done chiefly by the method of cashless settlement of accounts. In cases

monetary transactions between organs and enterprises are done chiefly by the method

of cashless settlement of accounts, it is possible to thoroughly prevent the phenomena

of them illegally engaging in goods transactions while holding lots of cash in their hands.

(North korean economic journal views circulation of money. (2007, Feb 12). BBC

Monitoring Asia Pacific)

Cashless literary cash less, less or no money will behold by a person, the money

circulation will allow by the used of cards and electronic devices. The practice of

cashless society was one of the biggest issue that our government This research will

lead to further explanation about the effects of cashless transaction in comparison of

both local and foreign studies.

 Local Literature

-Telcos and banks battle over Philippines cashless payments

Banks vs telcos

Access to a reliable and convenient cashless payment system remains an issue in the

Philippines, however. For instance, bank account holders are unable to conduct online

cash transfers from one bank to another. Governor Nestor Espenilla Jr of the Bangko

Sentral ng Pilipinas (BSP), the central bank, said online banking platforms “operate like

a silo”.

This is also true for the country’s telecoms duopoly, Globe Telecom and PLDT, which

have entered the cashless payment business with their mobile payment apps. Globe’s

GCash and PLDT’s PayMaya are two of the most popular (see chart), but they are

incompatible with each other.

This lack of compatibility has hindered cashless payment penetration. The BSP’s vision

is to enable consumers with a single e-wallet or online account to carry out a cashless

transaction anytime, anywhere. “The goal is that anyone should be able to transact

financial services using a smartphone,” Mr Espenilla told FTCR.

To that end, the central bank is introducing a platform that will allow interbank electronic

fund transfers. Starting this month, the rollout will be gradual, covering 33 banks and
other mobile payment institutions, but the BSP expects more players to participate as

demand increases. This will sustain the growth of cashless transactions, which has

been strong since 2010 (see chart).

The central bank is also planning a platform that from next year will allow real-time

online transactions. These developments are taking place as the banks face a

challenge from telcos, which are also forging ahead with new technology.

Last month GCash launched a system that allows smartphones to scan Quick

Response (QR) codes for payments in shops,mirroring developments in other Asean

countries. This came after Jack Ma’s Ant Financial Services Group bought a 45 per cent

stake in GCash’s holding company last February. PayMaya, meanwhile, tied up with

Facebook so consumers can send money and pay bills through the social network’s

Messenger app.

Local telco alliances with foreign players should lead to higher investment in technology

and allow them to expand their cashless payment services. GCash and PayMaya

currently only have five million and one million users respectively, much lower than their

mobile customer base.

Fragile bank security

Meanwhile, banks are having to upgrade their technology to improve cyber security.

The country’s two largest lenders in asset terms, BDO Unibank and Bank of the

Philippine Islands (BPI), in June suffered a systemic glitch in their IT systems, causing

panic among millions of customers and prompting a Senate investigation. The incident
illustrates the lack of trust among Filipinos in banking security. FTCR data showed 89

per cent of Filipinos were concerned about the privacy of their financial data when

conducting online transactions, the highest among the Asean-5 (see chart). Philippine

banks are healthy and profitable, but installing new cyber security measures is costly in

the absence of foreign investors. The central bank has been forced to extend the

deadline for banks to beef up their security and reporting procedures from January 2017

to June 2018. The slow pace of action suggests cashless innovations will take time,

dragging on consumer confidence in the sector.

Collaboration is key

A number of rural banks have tied up with GCash to allow farmers and fishermen

access to mobile banking. They have also forged a deal with PLDT’s FINTQnologies to

allow customers to get cheaper loans using a mobile banking platform. Major national

banks are also working with telcos of the same business group, as in the case of BPI

and GCash - both owned by the conglomerate Ayala Corp - to allow fund transfer

between customers. Such collaboration fits with the government’s development goal of

growing mobile payments in an archipelago where financial inclusion remains a

problem.

-Philippines : DBM - Cashless Purchase Card System may solve unliquidated

spending in government

Unliquidated expenses in government transactions? Process gaps in procurement that

leave wide room for graft and corruption? An administration-led project to use cashless

cards in government purchases may just be the solution.

Budget and Management Secretary Florencio B. Abad today said that the initial

implementation of the Aquino administration s Cashless Purchase Card System

program is the first step in preventing unliquidated spending in government, especially

in light of a Commission on Audit (COA) announcement that P5 billion in state funds

have yet to be accounted for. Cashless cards will play a defining role in ridding

government transactions of the corruption they’re notorious for. The cards will do away

with petty cash advances and payments in procurement, and the details of each

transaction will be recorded in real-time and on a web-based platform. Overall, the

digitization of the procurement process will be key in ensuring that every peso spent by

government officials and employees is well-spent and accounted for, Abad said. The

program which was launched in January this year is in its initial phase and is currently

being pilot-tested in the DBM and the Department of Defense-Armed Forces of the

Philippines (DND-AFP). The administration partnered with Citibank in rolling out the

cards, which will have features similar to most credit cards.

In the pilot phase of the Cashless Purchase Card System program, participating

agencies will use the cards to procure medical supplies, meals, transportation of official

documents, airline tickets, and construction supplies for minor repair projects. Abad said

that the administration expects to implement the program across all government

agencies next year, as well as expand the list of items that are eligible for procurement

through cashless cards. Automating government processes and switching to cashless

solutions doesn’t only save time and resources. By integrating and digitizing the

procurement process, we can seal off the gaps that make it easy for irregularities to
happen. In the case of cashless purchase cards, were tying together what used to be

separate transactions: procurement, payment, and auditing, Abad said.

Foreign Literature

-New ways to pay-Singapore

What should Singapore do to promote cashless transactions? How far should it go to

encourage electronic payments?

George Chang VP, Asia-Pacific Fortinet said BEING a technology innovator ourselves,

we are a natural proponent of harnessing technology to gain business efficiency and

improve lives. E-payment can help businesses slash processing costs and gain market

intelligence, and bring greater convenience to consumers. The government should do

more to encourage businesses, particularly SMBs, to embrace e-payment. One thing

the government can do is to better explain to firms how e-payment can create stronger

business outcomes and higher customer retention. For instance, e-payment systems

can gather data about customer preferences in different locations at different times - this

enables businesses to understand consumer patterns and better tailor products for each

market.

E-payment, however, comes with security risks. Enterprises leveraging it need to be

more security conscious, and put in place the right policies, practices and technologies

to safeguard their transactions and customer data.

Toby Koh a Group Managing Director of Ademco Security Group said I DON'T need

cash. I travel frequently in China with no need for cash. My WeChat payment is

accepted literally everywhere, from the taxi to the convenience store to the hotel. The

convenience of using one app to do everything from messaging to payment to online

shopping is incredibly attractive. Why the high usage? I believe it is because WeChat is

the most popular messaging platform and everyone in China is using it frequently every

hour of the day. Payment transfer is immediate and so easy. Payment is made phone to

phone without the need for a special point-of-sale terminal.

Jayaprakash Jagateesan the CEO of RHT Holdings Pte Ltd explained a CASHLESS

Singapore is only a matter of time, especially with a booming contactless market, but

more can be done to speed up the adoption of e-payments.

For businesses, incentives such as subsidising the costs of installing payment card

readers or reducing processing fees can push more merchants to offer cashless

payment options.

For consumers, greater awareness and reminders of the contactless payment options

available are needed till going cashless becomes a habit. The government may even

consider phasing out high-value notes or placing limits on cash transactions - measures

which may force more people to adopt cashless payments.

Although some may feel that this may cause a backlash for being too extreme, I feel

that over the years we have done well on the education front and this will be adopted
quickly and will be no different from the transition to cashless public transport fare

payment.

-Can cashless economy boost to financial inclusion by reducing cash

management in India?

A cashless economy encompasses the use of electronic payment systems to curb the

flow of black money and revenue leakage. From village banking infrastructure or

distribution of government-enabled benefits, India's existing payment systems are

unable to comprehensively meet the needs of the population. The inability of payment

systems to penetrate the country has resulted in a cash-driven economy with less than

5 percent of all payments occurring electronically, according to the National Payment

Council of India. In fact, India is the fourth biggest cash user in the world. But cash-only

payments have excluded millions of rural Indians from the country's incumbent financial

infrastructure. The only way to channel this last-mile gap is through the espousal of

electronic and mobile payment systems - following a trend of cashless transactions

increasingly adopted worldwide.

-Cashless Transactions Reducing Risk and Cost of Cash Management

Cashless transactions reduce the cost and risk associated with cash management. A

majority of the operating cost of a bank is from managing their retail cash business. For

instance, if a person goes to a bank counter to make a cash deposit, then the bank

encounters costs like cash counter employees, cash-handling branch support staff and

branch infrastructure.
India is a vast country, which means that the Reserve Bank of India (RBI) has to

disburse cash to far-flung locations every day. Banks spend enormous sums of money

maintaining ATM networks countrywide, while cheques and cash remain major modes

of payments. Maintaining a cheque clearing network is a highly labour intensive task

and expensive when compared to cashless infrastructure. Moreover, the costs

associated with money laundering, robberies and counterfeit money is staggeringly

high. Adopting cashless payment models will eliminate these unprecedented costs and

will funnel precious resources towards intended recipients. On top of it, each cash

withdrawal from the ATM costs anywhere between Rs. 14- 20 (without the cost of 24

hour security guard). As we can see its certainly not cheap.

-Bitcoin: Revolutionary Game-Changer Or Trojan Horse?

This is important because, in the current economic climate, the introduction of a

cashless society empowers central banks greatly. A cashless society, after all, not only

makes things like negative interest rates possible [background here, here, here and

here], it transfers absolute control of the money supply to the central bank, mostly by

turning it into a universal banker that competes directly with private banks for public

deposits. All digital deposits become base money.

Consequently, anyone who believes Bitcoin is a threat to fiat currency misunderstands

the economic context. Above all, they fail to understand that had central banks had the

means to deploy e-money earlier on, the crisis could have been much more

successfully dealt with.

Among the key factors that prevented them from doing so were very probable public

hostility to any attempt to ban outright cash, the difficulty of implementing and explaining

such a transition to the public, the inability to test-run the system before it was deployed.

Last and not least, they would have been concerned about displacing conventional

banks from their traditional deposit-taking role, and in so doing inadvertently worsening

the liquidity crisis and financial panic before improving it...

Almost of all of these prohibitive factors have, however, by now been overcome:

1) Digital currency now follows in the footsteps of a "disruptive" anti-establishment

digital movement perceived to be highly accommodating to the black market and all

those who would ordinarily have feared an outright cash ban. This makes it

exponentially easier to roll out. Bitcoin has done the bulk of the educating.

2) What was once viewed as a potentially oppressive government conspiracy to rid the

public of its privacy can be communicated as being progressive and innovative as a

result.

3) Banks have been given more than five years to prove their economic worth and have

failed to do so. If they haven't done so by now, they probably never will, meaning there's

unlikely to be a huge economic penalty associated with undermining them on the

deposit front or in transforming them slowly into fully-funded fund managers.

4) The open-ledger system which solves the digital double-spending problem has been

robustly tested. Flaws, weaknesses and bugs have been understood, accounted for,

and resolved.

The balance of the article describes how the central bank digital currency would be

launched, and Kazmina finds a plan developed by Miles Kimball of the University of

Michigan to be thorough and viable.