CASHLESS ECONOMY

MERITS AND DEMERITS

 CONTENTS
o What is a Cashless Economy ?
o Merits of Cashless Economy
o Demerits of Cashless Economy
o Types of Cashless Payment
o Challenges to make India Cashless
WHAT IS A CASHLESS ECONOMY?

 A Cashless Economy describes an economy in which

transactions are not done with money in the form of
physical banknotes or coins, but instead through the
transfer of digital information or digital money between
the transacting parties.

 Cashless societies have existed from a Long Time and is

not a new concept, based on barter system and other
methods of exchange.
 Government is promoting Cashless Economy through
applications like BHIM app, AEPS, Digishala etc.

 Cashless economy requires digitalization on a great scale as

India still lacks in Digital Infrastructure.

 India is majorly cash driven economy where people prefer to

carry cash instead of cards however India is moving towards
cashless economy Rapidly.

 Cashless Economy helps Eliminate : Corruption, terror-

financing, human and drug trafficking, counterfeit-currency
etc. 
 It is a system where transactions are done through digital
means like debit cards, electronic fund transfer, mobile
payments, internet banking, mobile wallets, and other
newly evolved payment channels, which will leave very
little scope for flow of hard cash in economy.

 By making the economy cashless nation’s many problems

like black money, corruption, high taxes, unemployment
can be solved.
MERITS OF CASHLESS ECONOMY
 No Need to Carry Cash: An individual does not need to
carry cash with him or her everywhere which reduces the
chances of theft from wallet, reduces inconvenience and
gives freedom from the problem of change when
transaction is of odd amount.
 Eliminating Black Money: When transactions are done
through banks or online portals all transactions are
recorded and are visible to government due to which
illegal transactions are not possible.
 Increase in Tax Revenue: as the transactions are done
through verified sources illegal transactions cannot be
made and tax is collected on every transaction which was
earlier avoidable.

 Easier to maintain accounts: Banks provide facilities

like Bank Statements which contain all the transaction
record and as a result recording every transaction as in
case of cash is not Required.
 Production Cost: Production of coins and paper currency
is Certainly an expensive Task and the life span of most of
the paper currency is about 6 years. So, by using electronic
currency the cost of production gets reduced as well the
wastage.

 Malpractices of Elections: Majority of election funding is

done through Black money. Cashless transactions will
make it impossible for political parties to Buy votes by
giving cash and True democracy will come into picture.
 Slimming Your Wallet: Making online payments are
handy and it will lead to slim wallets as people need not
carry cash.
 Foreign Transactions: A person from India can buy
products from USA in Dollars without needing to get
currency exchanged using Mastercards.
DEMERITS OF CASHLESS ECONOMY
 Lack of Knowledge: The biggest disadvantage of the
cashless economy is that not everybody has the
knowledge of doing digital transactions and hence its
reach is limited to urban and semi-urban centers only.

 Illiterate Population: It is very difficult to implement

cashless economy in the big country where many
sections of the society in rural areas is illiterate and poor
Which is because not everyone is friendly with using
computers and phones specially the uneducated people.
 Lack of Security: Although it easy to do digital
transactions but at the same time it is very risky as
compared to cash related transactions as people having
half knowledge of digital payments are exposed to cyber
fraud and losing their hard earned money to online scam
and hacking of bank accounts.

 Transactional Fee: Digital mode of payments like

the credit card, wallet payments, internet banking
involves some transactions fee which is not the case with
cash transactions and hence an individual will not prefer
online medium of transactions due to extra costs. 
 Non-Functional Bank Account: Many of the rural people
and even some urban people do not have a functional bank
account in order to make online payments.

 Non-acceptance: There are still some places which take

cash and do not accept cards. Making a purchase at such
locations with card becomes difficult. Small retailers in
India still deal only in cash as they cannot afford to invest
in digital infrastructure.

 Losing your Card: If you lose your debit/credit card, it

takes some time to get a new one and someone can misuse
it too.
 Cyber-Crime: Hacking and cyber theft are challenging
problems which can be caused by online transactions.
Cyber Security measures have to be brought in place to
prevent money going into wrong hands.
 Poor Internet Facilities: Even in big cities, sometimes
online transactions cannot be made because of poor
internet facilities.
TYPES OF CASHLESS PAYMENT
  Cheques and Demand Drafts
A cheque is issued to a person or business for a specific
amount which is in written form and can be presented in a
bank to collect the money. Cheque is one of the safest and
oldest methods of cashless payment.

 Debit and Credit Cards

Debit and credit cards are plastic money which is basically
a card linked to your bank account and money is paid
directly through the bank.
 UPI Applications
UPI stands for Unified Payment Interface. Every bank
user has connected their bank accounts with their mobile
numbers and UPI applications Like BHIM, PhonePe,
Google Pay/ Tez allow the user to pay directly through
bank without entering any bank details.
 Mobile Wallets(Paytm)
Mobile wallets have become a convenient way of making
payments without cash. The most popular mobile wallet
that is trending is Paytm.
Paytm is a digital payments platform that allows you to
transfer cash into the integrated wallet via online banking,
debit cards, and credit cards, or even by depositing cash via
select banks and partners.
  NEFT & RTGS
National Electronic Fund Transfer and Real Time Gross
Settlement are electronic payment systems that allow
convenient fund transfer between bank accounts. Both
facilities are maintained by the RBI. The facilities can be
used to transfer money only within India.

 IMPS
IMPS is a service that allows transferring of funds between
2 accounts Instantly unlike NEFT.
IMPS can be done using the receivers MMID or IFSC code
and bank account number.
 CHALLENGES IN MAKING INDIA
CASHLESS ECONOMY

 INITIATIVES TAKEN BY RBI AND

GOVERNMENT

 WHAT ELSE NEEDS TO BE DONE?

CHALLENGES IN MAKING INDIA
CASHLESS ECONOMY
 Digital literacy: People are still lacking in digital
knowledge and do not know how to perform online
transactions and sometimes do wrong transactions.

 Availability of Internet: Internet is not present in all

areas or localities like villages.

 Lack of Resources: India is dominated by small

retailers who don’t have enough resources to invest in
electronic payment infrastructure like buying security
softwares.
CHALLENGES IN MAKING INDIA
CASHLESS ECONOMY

 Additional Charges: Payments done through debit

cards sometimes take additional charges which users
don’t like.

 Resistance Of People: People do not trust online

transactions specially the senior citizens and try to avoid
these channels of payment.
INITIATIVES TAKEN BY RBI AND
GOVERNMENT
 Licensing of payment banks.
 Government is also promoting mobile wallets.

 Government has withdrawn subcharge, services charge

on cards and digital payments.
 Government has also launched UPI which will make
Electronic transaction much simpler and faster.
 Setting up various Financial Literacy Centers.

 Opening accounts through Jan Dhan Yojana.

 Announcement of other various incentives.

WHAT ELSE NEEDS TO BE DONE?
 Need for mass awareness programme for :
1. Technological Awareness
2. Financial Literacy.

 Providing Services of Digital Infrastructure at Low Rates.

 Mechanism For punishing wrong Practices and providing

security of their money to people should be done by banks
and govt.

 Taking steps for Changing attitude of people so that they

Believe in safety of online transactions.
THANK YOU