Is cashless economy possible in India?
(this set of text is copied from a comment by Vatsal Thakkar on an article written at Civils Daily. It is so beautiful that I can't resist to share here)
I would like to bring a completely different and quite down to earth concept of cashless economy. And that is 100% possible in India with its diverse cultural backgrounds, various business practices and many different ways of cash transactions.
Before introducing the system, I would like to present a scenario of typical mumbaikar lady. Just imagine a case; while going for shopping; she is taking a best bus from her home to reach nearest Mumbai Metro station and after reaching her destination station, she hires an autorickshow to reach the nearest mall where she finds her desired outlet of Shopper’s Stop. After finishing shopping she had some refreshments at McDonald in the same mall. now, she chooses to take a taxi to back home and calls for the phone taxi. On her way home, she also stops to buy her daily needs at her favorite grocery shop near to her home.
Now, let’s have a look how she paid for all her bills? She used her BEST payment card for the bus fare, and similarly Mumbai Metro card for her metro ride, and paid cash to autowala after reaching the mall. She made her payment through Shopper’s Stop’s payment card for her purchases and used her credit card to pay to McDonald and since she didn’t have enough cash left for her daily needs purchase, she is using her mobile money option for the payment to Taxi and again producing cash for the payment to grocery shop near to her home.
She therefore has to carry minimum of 4 Smart Cards – BEST, Mumbai Metro, Shopper’s Stop and her Bank Credit Card, despite carrying all these cards she also needs a cash and a smart phone with data connection to make payments.!!! This is how, cashless economy is not much popular in India. Even in a city like Mumbai, where a common thelawala knows about technology and can use a smart phone and smart cards, we do not have any user friendly network to introduce Cashless Economy.
Now, I will present a case of typical Hong Kong citizen She is living in Sha Tin in New Territories and today afternoon she has to see her friend at Tsim Sha Tsui in Kowloon area of Hong Kong. She has to take MTR metro, but, she needs to take local bus to reach metro station. Well, she boarded the bus and instead of paying by coins, she just touched he Octopus card at the receiver on the bus. She again used her Octopus card to board the train, and after reaching Tsim Sha Tsui, met her friend and both went to nearest restaurant to have some snacks and coffee, her friend paid bills through her Octopus card. When Meeting was over, this lady remembers to buy something for her needs back at home, but she needs to go to Central station where she can find the outlet of Park-n-Shop of her choice. She now chooses to go by water transport to save time and money; she walked up to nearest ferry station; again used her Octopus card to board the ferry and made her purchases at Park-n-Shop again through Octopus card. Now, she took a taxi to the nearest MTR Metro station and paid taxi fare by Octopus card. But, it was denied when she tried to board the train at the Central Station because of the low balance. So, she just walked up to the “value loading machine” at the station’s arena and load her Octopus Card through her bank’s Debit Card. When she finally reached near to her home after boarding MTR and bus; she was tired and needed to have some iced tea to drink, she simply stopped at the 9-11 store and got the Iced Tea and paid by Octopus again..!! Not only that, her Metro rides were discounted in comparison to single journey ticket, her Park-n-Shop purchases were also discounted because she paid by Octopus card and in addition she collected lot many Loyalty points as per Octopus loyalty program.
Life is so easy there in Hong Kong. Why not in India??
It is 100% possible in India as per existing RBI policy and its guideline for PPIs (Prepaid Payment Instruments) operated by NBFCs. We need a versatile payment card which can be used at any of our desired outlets as well as all possible passenger transports. We need a smart card without requirements of Bank account. The card which anyone can avail after producing simple KYC (know your customer) documents, and can register on the system in matter of just few minutes, and can use this card for all required payments within a matter of minutes after registration. The card should be used at any outlets including a panwala, autorickshaw, barber shop, vegetable shop, laundry shop or a grocery shop.
Now, imagine, most of the unaccounted money is not in middle or upper channels, but, it is moving in lower channels.
What if, these vendors also use such versatile card for payment collection and operator make the settlement through banking transaction, all money will be accountable and all transactions could be traceable. Financial corruption and parallel economy can be controlled.
What if, your all small and medium civic services payments are also done through such smart card, then there is no cash transaction at government offices, it may help curbing the corruption as well.
What is the benefit to consumer/ user? He/she is not now carrying bulky wallet; No need to fight over change, crumpled currency notes or coins; now no one has to receive chocolates in lieu of change at Super Markets. You don’t even need a smart phone or a data network to use this payment system. Its easiest to use as well, just touch or get it near to the receiver and your payment is done.
Merchants don’t need a separate data line or not to wait for servers to respond. All transaction data is stored in the receiver and can be collected at any point of time..!! Its easy to reload also, it can be reloaded at any outlet or even at the value loading machines or even on-line in exchange of either cash or credit/debit cards or even net-banking!! Receivers comes with 8-12 hours battery back-up, so no need to have constant power supply to operate. No need for wired or wireless network, its stand alone device to load / receive money.
Security: I believe that such type of card can be used by anyone so it is not much secured. Yes, it is as secured as cash in your wallet OR as unsecured as cash in your wallet. But, certainly, no one can hack your card, and after all its your money and you have to protect it. However, protecting a single card loaded with lots of cash is easier to protect than many more currency notes.
There are many indirect benefits also, like, saving time and energy for payments and counting collecting change; no need for currency notes — no need to print it anymore!! Its wiered but true that we are abusing our notes up to the level of making it an instrument to spread even many disease..!!
It can be used by practically any person anywhere, without any fear of being cheated or looted. And in addition you are not paying any extra charges (as in the case of Credit Cards). No one can withdraw cash from this card (not even a user) so, there are little chances of malpractices. Because, all other transactions are stored and traceable. Moreover, any one who try to steal such card, can use it only up to the limit of the remaining balance on the card!! It more secure compare to Banking cards!!
Along with all other ways of cashless economy, India strongly needs such instrument to popularize cashless economy in country.