How Cashless Your Life Would Be

Last updated on 4 Jul, 2017 | 1 comment

Cashless

Cashless Economy is the new mantra India chanting frequently after the demonetisation drive by the Govt. of India. Though not a new concept yet majority of the Indian population has aversion to banking transactions for day to day life.

This article will elaborate the concept of cashless, its effective uses and also the anticipated changes or upgradations in this sector by the Govt.

What is Cashless Economy

Its better be termed as ‘Less-Cash’ economy. It is one where majority of the transactions in an economy is done through digital mediums rather than using hard cash. The circulation of physical currency is minimal.

The Indian economy is cash driven economy and about 95% transactions are done through cash. An interesting fact is 86% of the total currency circulation represents in notes of big denomination like Rs. 1000 and Rs 500. What Govt. is aspiring? Govt. wants to reduce the usage of physical currency especially the big notes in the economy through augmented usage of digital payment system

%

Transactions in India Done in Cash

Why Govt. Is Doing So

Though there are lots of reasons that can be cited in favour of digitisation of payment system, a few prominent points we can focus on are-
1. Bringing transparency in monetary transactions by bringing majority of the transactions under the banking purview.
2. Close estimation of GDP for better planning.

3. Minimising the corrupt practices especially in public sectors.
4. Stop tax evasion upto a significant level.
5. Reducing the cost of logistics in transportation and printing of cash.

Save Environment

Moreover, there are some social benefits too, which can be materialised on successful implementation of digital payment system. Such as-
1. The fear of theft and burglary will be reduced as minimal physical currency is involved.
2. Less circulation of counterfeit or fake currency.
3. Reduction in cash dowry practices which is a curse of our society.
4. Augmented saving habits for those who tend to spend more with physical currency in their wallet.
5. Reduction in black marketing of commodities due to low involvement of hard cash payment through banking system.
6. Environmental protection as less trees will be used for making currency paper and so on.

What are the Digital Payment Options

With the advancement of technology lots of payment methods/options have evolved to ease monetary transactions in an economy. Such as-

1. Banking Cards: They are Debit cards, Credit cards, Cash cards etc. These type of cards are operated through secure PIN and OTP. These cards can be used for making payments, transferring funds, paying utility bills, withdrawing money and lots more.

2. AEPS: Stands for Aadhaar Enabled Payment System. You only require an AADHAAR card to be registered with the bank along with the KYC (Know Your Customer) prerequisites. You can do banking transactions like balance enquiry, cash withdrawal and deposit fund transfer etc. at Micro-ATMs.

3. USSD: Stands for Unstructured Supplementary Service Data. In this system a person can do mobile banking transactions without having a smart phone or internet connection. The bank account holder simply have to register his mobile no. with the bank branch and can do mobile banking by dialling *99#. The MMID (Mobile Money Identifier) and MPIN (Mobile PIN) will be provided by the bank itself.

Dial *99# for Banking Transactions from Mobile Phone

4. Mobile Wallet: It is the digital way to carry cash. You have to load money using either Debit card or Credit card or Internet banking. One can register as a consumer or merchant, means you can both pay and receive money in your digital wallet as and when required. The options are Paytm, Freecharge, Ola Money, Airtel Money etc.

5. Point of Sale: Point of Sale (POS) is the place where sales are made. A business entity can receive payments from a customer on sale of a good, whereas a customer can buy a product or service without involving physical currency. For a POS, the merchant requires a handheld device with card or bio-metric reader, telephone connection and a merchant bank account.

6. Internet Banking: Under this system a customer needs to apply to the bank for an internet banking id and password. An internet banking account holder can do almost all the banking transactions without visiting his bank. Starting from fund transfer to opening fixed deposit accounts, from bill payment to stock trading everything under one facility.

7. Mobile banking: It is almost same as internet banking with a difference that it is mobile compatible and the customer has to apply specifically for this to the bank.

Mobile Banking

8. Micro ATM: Micro ATM meant to be a device that is used by a million Business Correspondents (BC) to deliver basic banking services. The platform will enable Business Correspondents (who could be a local kirana shop owner and will act as ‘micro ATM’) to conduct instant transactions.

The micro platform will enable function through low cost devices (micro ATMs) that will be connected to banks across the country. This would enable a person to instantly deposit or withdraw funds regardless of the bank associated with a particular BC. The basic transaction types, to be supported by micro ATM, are Deposit, Withdrawal, Fund transfer and Balance enquiry.

What’s Coming Next

This major demonetisation drive has instigated the both the Govt. and people of India to go for digital payment system. Hence, to popularise and smoothen the digital payment systems Govt. has initiated various schemes and options and is further planning new schemes in near future. Some of the anticipated plans are:

1. Implementation of Bharat Bill Payment System (BBPS): BBPS, which is being set up to provide an accessible multi-tier infrastructure facilitating anytime, anywhere, any bill payment, will be made operational.

2. Implementation of the Trade Receivables Discounting System (TReDS): TReDS, which is an institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers, will be made fully operational.

3. Toll Collections through digital payment system: Electronification of the toll collection systems on a pan-India basis in an inter-operable environment will be encouraged for digitisation of toll plazas.

4. Image base clearance: Working towards eliminating paper-to-follow arrangement for cheques issued by the State Governments so that clearing of such cheques is also based on cheque images.

5. Migration of cards to EMV Chip and PIN: Banks have been advised that all new cards issued by them should be EMV Chip and PIN cards instead of Magnetic strip cards. Initiatives will also be taken to install ATMs with EMV chip processing facility.

6. Payments for Mass Transit Systems: Migrating traditional cash payment system in the area of mass transport (Road Transport, Metro Rail etc.) to electronic payment system.

Though the digitisation of economy is a praise-worthy step, yet it has lots of shortfalls especially in commensurate with the economic conditions of India, the literacy rate and communication infrastructure across the country.

It requires a great amount of planning, co-ordination and co-operation from all the related parties to make it successful and obviously it would be a milestone in the economic history of the Country.

Cashless Economy is the new mantra India chanting frequently after the demonetisation drive by the Govt. of India. Though not a new concept yet majority of the Indian population has aversion to banking transactions for day to day life. This article will elaborate the concept of cashless, its effective uses and also the anticipated changes or upgradations in this sector by the Govt.

What is Cashless Economy

Its better be termed as ‘Less-Cash’ economy. It is one where majority of the transactions in an economy is done through digital mediums rather than using hard cash. The circulation of physical currency is minimal.

%

Transactions in India Done in Cash

The Indian economy is cash driven economy and about 95% transactions are done through cash. An interesting fact is 86% of the total currency circulation represents in notes of big denomination like Rs. 1000 and Rs 500. What Govt. is aspiring? Govt. wants to reduce the usage of physical currency especially the big notes in the economy through augmented usage of digital payment system

Why Govt. Is Doing So

Though there are lots of reasons that can be cited in favour of digitisation of payment system, a few prominent points we can focus on are-
1. Bringing transparency in monetary transactions by bringing majority of the transactions under the banking purview.
2. Close estimation of GDP for better planning.
3. Minimising the corrupt practices especially in public sectors.
4. Stop tax evasion upto a significant level.
5. Reducing the cost of logistics in transportation and printing of cash.

Moreover, there are some social benefits too, which can be materialised on successful implementation of digital payment system. Such as-
1. The fear of theft and burglary will be reduced as minimal physical currency is involved.
2. Less circulation of counterfeit or fake currency.
3. Reduction in cash dowry practices which is a curse of our society.
4. Augmented saving habits for those who tend to spend more with physical currency in their wallet.
5. Reduction in black marketing of commodities due to low involvement of hard cash payment through banking system.

Save Environment

6. Environmental protection as less trees will be used for making currency paper and so on.

What are the Digital Payment Options

With the advancement of technology lots of payment methods/options have evolved to ease monetary transactions in an economy. Such as-

1. Banking Cards: They are Debit cards, Credit cards, Cash cards etc. These type of cards are operated through secure PIN and OTP. These cards can be used for making payments, transferring funds, paying utility bills, withdrawing money and lots more.

2. AEPS: Stands for Aadhaar Enabled Payment System. You only require an AADHAAR card to be registered with the bank along with the KYC (Know Your Customer) prerequisites. You can do banking transactions like balance enquiry, cash withdrawal and deposit fund transfer etc. at Micro-ATMs.

Dial *99# for Banking Transactions from Mobile Phone

3. USSD: Stands for Unstructured Supplementary Service Data. In this system a person can do mobile banking transactions without having a smart phone or internet connection. The bank account holder simply have to register his mobile no. with the bank branch and can do mobile banking by dialling *99#. The MMID (Mobile Money Identifier) and MPIN (Mobile PIN) will be provided by the bank itself.

4. Mobile Wallet: It is the digital way to carry cash. You have to load money using either Debit card or Credit card or Internet banking. One can register as a consumer or merchant, means you can both pay and receive money in your digital wallet as and when required. The options are Paytm, Freecharge, Ola Money, Airtel Money etc.

5. Point of Sale: Point of Sale (POS) is the place where sales are made. A business entity can receive payments from a customer on sale of a good, whereas a customer can buy a product or service without involving physical currency. For a POS, the merchant requires a handheld device with card or bio-metric reader, telephone connection and a merchant bank account.

Mobile Banking

6. Internet Banking: Under this system a customer needs to apply to the bank for an internet banking id and password. An internet banking account holder can do almost all the banking transactions without visiting his bank. Starting from fund transfer to opening fixed deposit accounts, from bill payment to stock trading everything under one facility.

7. Mobile banking: It is almost same as internet banking with a difference that it is mobile compatible and the customer has to apply specifically for this to the bank.

8. Micro ATM: Micro ATM meant to be a device that is used by a million Business Correspondents (BC) to deliver basic banking services. The platform will enable Business Correspondents (who could be a local kirana shop owner and will act as ‘micro ATM’) to conduct instant transactions.

The micro platform will enable function through low cost devices (micro ATMs) that will be connected to banks across the country. This would enable a person to instantly deposit or withdraw funds regardless of the bank associated with a particular BC. The basic transaction types, to be supported by micro ATM, are Deposit, Withdrawal, Fund transfer and Balance enquiry.

What’s Coming Next

This major demonetisation drive has instigated the both Govt. and people of India to go for digital payment system. Hence, to popularise and smoothen the digital payment systems Govt. has initiated various schemes and options and is further planning new schemes in near future. Some of the anticipated plans are:

1. Implementation of Bharat Bill Payment System (BBPS): BBPS, which is being set up to provide an accessible multi-tier infrastructure facilitating anytime, anywhere, any bill payment, will be made operational.

2. Implementation of the Trade Receivables Discounting System (TReDS): TReDS, which is an institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers, will be made fully operational.

3. Toll Collections through digital payment system: Electronification of the toll collection systems on a pan-India basis in an inter-operable environment will be encouraged for digitisation of toll plazas.

4. Image base clearance: Working towards eliminating paper-to-follow arrangement for cheques issued by the State Governments so that clearing of such cheques is also based on cheque images.

5. Migration of cards to EMV Chip and PIN: Banks have been advised that all new cards issued by them should be EMV Chip and PIN cards instead of Magnetic strip cards. Initiatives will also be taken to install ATMs with EMV chip processing facility.

6. Payments for Mass Transit Systems: Migrating traditional cash payment system in the area of mass transport (Road Transport, Metro Rail etc.) to electronic payment system.

Though the digitisation of economy is a praise-worthy step, yet it has lots of shortfalls especially in commensurate with the economic conditions of India, the literacy rate and communication infrastructure across the country. It requires a great amount of planning, co-ordination and co-operation from all the related parties to make it successful and obviously it would be a milestone in the economic history of the Country.