A cashless society could easily be the utopia of our times. Over the last few weeks, we have mentioned many new and upcoming technologies that are changing the way we do banking. Be it the cards, Near Field Communication Technology (NFC), Augmented Reality (AR) or Face Recognition, technology in various forms is constantly transforming our banking experiences.
Gen Y has almost started living in this idyllic world as their usage of physical currency is already subsiding. They actively leverage on the advantages offered by cashless transactions via their cards, online banking, mobile banking, etc. Moreover, countries like Sweden and Iceland are paving the path for this future with their dwindling cash usage. In Sweden, four out of five transactions on an average are completely cashless. To give you an example of the extent of cashless penetration in certain Nordic countries, even a magazine sold by homeless people on the streets of Sweden are now trying out credit card readers. Everybody wants to be a part of this utopia.
It is easy to apply the same example and evaluate in the context of developing countries like India. Many small businesses, establishments, local shop owners, etc. can easily lose out if they do not offer cashless modes of transactions to their consumers. And going cashless is completely in-sync with our glorious digital story. “Rarely do we come across a market that’s growing 89 percent year-on-year. But smartphone growth in urban India has taken off and it looks like the sky is the limit. A whopping 51 million people in urban India were using smartphones in 2013—outpacing our initial estimate of 45 million—up from 27 million in 2012,” says a report released by market research agency Nielsen in 2014.
While there is no denying that cash has its own importance and it fits in perfectly well in certain situations in life, there are indeed many advantages of going cashless.
Security can be one of the biggest advantages. With a myriad of cashless transactions including mobile and internet banking, credit and debit cards, cards with microchips (which require an even stronger authentication process) and biometric identification, your money has a higher probability of being secure. Additionally, with less cash, there are fewer opportunities for counterfeit money to enter the formal system.
Another huge advantage is obviously the exponential rise of comfort and convenience with the minimum usage of cash. People are already shopping, paying bills, transferring money - basically getting a quick access to their money - from the comfort of their houses, with just a few clicks and taps on their computers, tabs, mobile phones or their debit/credit cards. It’s obviously much easier to transact with digital mediums as you can avoid the crowds and queues, considerably decrease the time used for transactions, minimise the chances of transaction errors, and you don’t have to scramble for cash/change. What's more! With a galore of offers available while transacting online, one can save money too.
A cashless (or less cash) society can also be effectively used to promote financial inclusion in the world. Financial Services Secretary GS Sandhu, while talking about the Pradhan Mantri Jan Dhan Yojana (PMJDY), had said in The Economic Times ‘Financial Inclusion Summit 2014’, "It has to be beyond just a bank account. The idea is to convert cash economy into a cashless and digital economy." So clearly the idea of digital is closely interlinked with the idea of financial inclusion. The digital graph is directly proportional to the access that people in the remote areas get to their banking services. Even a simple mobile phone could possibly connect a person in a village to his/her bank.
ICICI Bank has been working relentlessly towards achieving Financial Inclusion. It has tied up with telecom providers such as Vodafone and Aircel to reach as many people as possible in the rural areas of India and allow them to transact using their mobile handsets. It has also opened ‘Branch on wheels’ which is a bank branch literally perched atop a vehicle. Moreover, the bank also introduced Tab banking for their consumers; an executive visits a prospects house/office to open a bank account or service a loan which considerably reduces the time to get the details and documents. The bank has also been working on integrating its financial inclusion with the above-mentioned Jan Dhan Yojana.
LESS CASH MANAGEMENT COST
Yes, cash management and handling costs can be really expensive. According to a report by The Asian Banker, banks in emerging markets regard security and cost as key concerns of cash management, with 36% of the respondents citing it as a key concern. Clearly, going cashless can bring these costs down considerably.
Like we said earlier, we probably can’t completely do away with cash, but we are not far from a future where cash and its related expenses can be phenomenally minimised.
The cashless scenario is not only advantageous for the customers, it is equally beneficial to the banks and financial services industry and the overall economy.
As former civil servant Dharmarajan Krishnan argues in an article in The Economic Times, if banks support cashless transactions more and more, it can help increase transactions transparency, thereby increasing the efficiency rates in financial transactions and giving a boost to the economy. The banks need to seriously consider incentivising their customers though for creating an economy which is as cashless as possible.
Soon, we might be living in the cashless utopia. Or a version of it, at least.