By announcing a ban on the old Rs 1,000 and Rs 500 notes and by putting a cap on withdrawals from banks and ATMs, Prime Minister Narendra Modi floated the idea of a cashless society. But is India ready for a cashless society yet? While online transactions will allow the government to keep a check on payments and lessen the possibility of black money in the economy, is it feasible to be dependent on online transactions rather than cash payments in India?
While transactions of higher amounts may be done through cards, shopkeepers are unwilling to use soft money for transactions which of a lesser amount.
In a series of tweets, Modi and his government ministers have been educating people on how to move towards a cashless society how will people who are not tech-savvy access these tweets? Encouraging people to go cashless after announcing a ban on notes is like starving people and then telling them how to go on a diet.
Making payments simpler. pic.twitter.com/FqgdyYB18o
— PMO India (@PMOIndia) November 28, 2016
Your phones can become your e-wallets. pic.twitter.com/jcKKgXYIxz
— PMO India (@PMOIndia) November 28, 2016
Here are some of the problems which stand in the way of India becoming a cashless society
1. Cyber security: In October 2016, the details of over 30 lakh debit cards was feared to have been exposed at ATMs. It was believed that the card and PIN details might have been leaked due to which customers were advised to change the PINs of their ATM-cum-debit cards. Stringent steps issuing new cards were also taken. Just a month later, the PM is motivating people to move to a cashless society. Is the cyber security in place? While a card is cloned, it takes several months to recover someone’s hard-earned money from the banks. How can people be assured that swiping cards at small shops and vendors will not be a risk to revealing our card details?
2. Network connectivity: Since the day demonetisation was announced, people are trying to use more of card transactions to save that dreaded trip to the bank and to save the last penny of the hard cash in hand. However, a sudden surge in card transactions has led to connectivity issues. Several people have faced trouble while standing in line to pay for a transaction at a shop when the card machines have stopped working due to an overload on the network. Connectivity issues must be resolved before dreaming about a cashless society.
I’d love to move to a cashless economy but given the reliability of connectivity in J&K & the absence of points of sale I fear I’d starve.
— Omar Abdullah (@abdullah_omar) November 27, 2016
3. Internet cost: The internet cost in India is still substantially high. There is no Wifi at public places and if people do not get their monthly data packs recharged, there is no way they can be connected to make online payments. Internet connectivity is needed even for the e-wallets. In order to convince people to do cashless transactions, the cost of the internet should be lowered and free WiFi should also be provided at public places.
4. Charges on cards, online transactions: Heard of convenience charges? of course, you would have if you do online transactions. These are additional charges that are levied by the vendors when they offer an online payment facility. But when the government is forcing us to go cashless, shouldn’t this compulsory fee on online transactions be taken off?
— Lalit Garg (@LalitGarg_LG) November 29, 2016
5. Non-tech-savvy: While the new generation is glued to their phones and gadgets, computer literacy among the people in the over-50-age group is still low. Not many people are comfortable using computers or mobile phones and depend on their children when it comes to using the gizmos. Before promoting a cashless society, efforts need to be taken to educate people on how to use phones for transactions.
6. Smart phone affordability: Several companies have come up with new and inexpensive phones but they still not affordable for most of the population in the country. More affordable options should be launched by the government for people to buy smartphones for cashless transactions.
7. Infrastructure/phone battery: India still lacks when it comes to supporting a mobile society. It is extremely difficult to find a public charging point if the phone battery discharges. Even metro stations or railway stations in the tier one cities do not provide that infrastructure. So what happens if you have cash in your wallet, but you are out of battery after travelling on the road for a day? Is there any alternative that we have then?
If power fails, ur mobile battery drains, ur out of network area, a natural calamity cripples all networks-what will u do if u are CASHLESS?
— James Wilson (@jamewils) November 29, 2016
8. Not enough bank accounts: Most people still do not have bank accounts. Most often there is just one account per family which also limits the number of cards people can have individually. A family of even four people cannot be dependent on just one card for all household expenditure.
9. Internet blockage: States like Jammu and Kashmir often face crackdown where the internet is the first thing that is blocked. In such circumstances, neither is it possible to use cards for transactions nor is it possible to use e-wallets. Any alternatives there?
10. Are banks ready?: A cashless society needs a proper infrastructure. The banks need to be fully equipped to handle the surge in e-transactions. Infrastructure is also needed in terms of opening more accounts in the banks.
11. Encourage people to spend: Spending by cards often encourages people to spend more. giving cash by hand helps people keep a check on their expenses but paying by cards gives people a free hand. Not just through credit but even the debit cards give that impression that you can make that payment immediately.
A cashless society is a welcome idea but not without preparation. There is a precursor to taking such steps without which a move such as this would be more harmful that being beneficial. A cashless society, for now, seems like a distant dream but a less cash society can be appreciated.