Progress of India Towards Cashless Economy – An Overview

International Journal of Economics, Commerce and Research (IJECR) ISSN (P): 2250–0006; ISSN (E): 2319–4472 Vol. 10, Issue 1, Jun 2020, 77–84 © TJPRC Pvt. Ltd.

PROGRESS OF INDIA TOWARDS CASHLESS ECONOMY – AN OVERVIEW A. AYSHA MUZAMMILA Assistant Professor, Department of Business Administration, Wavoo Wajeeha Women’s College of Arts and Science, Tuticorin, Tamil Nadu, India ABSTRACT The grand task of Indian Government to move forward India towards a cashless economy was boosted with major initiatives such as demonetization, BHIM and Direct Benefit Transfers and many more schemes. The objective of these steps is to restructure our vulnerable economy and control corruption. After demonetization process, most of the people in India started electronic payments for their transactions. Everyone from the small merchant to neighbouring shopkeeper is taking steps towards digital financial system. Cashless economy is a condition where the usage of currency notes is insignificant and most of the transactions are performed through electronic channels. Major problems that can obstruct the implementation of the digital transactions are rate of Higher illiteracy, mind-set of people, cyber frauds, ambiguity and inefficiency in digital payment system. This article will elucidate on the basic concepts, modes of digital payment and the measures taken by Government to create cashless environment. This paper will also examine the perspective of people

KEYWORDS: Cashless Economy, Fake Currency, Black Money, Digitalization & Digital Payment System

Received: Oct 21, 2019; Accepted: Nov 11, 2019; Published: Jan 23, 2020; Paper Id.: IJECRJUN202011

INTRODUCTION

Original Article

regarding cashless economy.

The Digital India agenda is a flagship programme of the Indian Government with a dream to convert our nation into a powerful digital society. “Faceless, Paperless, Cashless” is one of apparent role of Digital India.

A cashless economy illustrates an financial position whereby financial transactions are not performed with money in the type of currency notes or coins, but done through transferring the digital data (money in electronic representation) between the transacting parties. The Government of India is running towards rising the share of cashless transactions by demonetizing the higher denominated currency notes of Rs. 1000 andRs.500 from November 8, 2016 and drive India in the direction of digital future. Although digital transactions have increased these days, Indian financial structure cannot entirely become a cashless economy because of its higher percentage of ignorance rate in digital transactions and more cash transactions. However, the entire procedure of move ahead from cash-driven economy to cashless economy has someway been assorted with demonetization that was intended to dig out liquidity from the present system to uncover the black-money. Due to the emerging implementation of electronic payments, mostly done through e-commerce and m-commerce, there is a rising demand for quicker payment services which in turn, smooth the progress of ease in doing financial transactions.

Licenses for opening small finance banks and payments banks were issued by RBI recently which are anticipated to take to financial inclusion and to pioneer banking clarifications. National Payments Corporation of India has recently launched Unified Payment Interface which makes electronic transactions easy. Even the Reserve

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bank of India has also recently revealed a document, “Payments and Settlement Systems in India: Vision 2018”setting out a plan to promote digital transactions and to facilitate India to move in the direction of the digital economy in the medium and long term basis.

LITERATURE REVIEW •

Ananya Mitra, SonaliRath and Jayant Kumar Nayak (2017), in their research paper, “Impact of Demonetization on Cashless Transaction” examined the status of Jan DhanYojna before, during and after demonetization.

Infrastructure facilities and POS terminals were increased during demonetization but this growth lasted only for a few months. Demonetization pushed Indian economy on the digital track but this change disappeared after new high denomination currency notes came into the market.

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Pranjali A. Shendge, Bhushan G. Shelar and S. S. Kapase (2017), in their research paper, “Impact and Importance of Cashless Transaction in India” pointed out that benefits of cashless transactions are driving India towards digital economy. They have studied impact of digital society on economic development, education and in business processes.

•

Sunita Avula (2017) in her research paper, “The Cashless Economy in India: Prospects and Challenges” discussed the programs initiated by Indian government to bring economy on track of digitalization and incentives offered to public to attract them towards digital transactions. Government needs to focus on digital literacy, penetration of POS terminals and improved internet connectivity to make India a digital society.

•

Rashmi Gujrati (2017) in her research paper “India’s march towards faceless, paperless, cashless economy” elucidated the different types in cashless payments and has evaluated merits and challenges of cashless economy.

OBJECTIVES OF THIS STUDY •

The purpose of this Research is to study about the cashless economy.

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To spot out the impact of digital Transaction System.

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To highlight the significance of cashless financial system.

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To evaluate the steps taken by Indian government to bring economy on the track of digitalization.

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To investigate the outlook of people towards digital economy.

RESEARCH METHODOLOGY Data Collection Methods: Both primary source (in the form of structured questionnaire) and secondary sources like journals, newspapers, magazines and websites were used for the collection of data.

Research Type: Research is descriptive in nature.

Sampling: A sample size of 50 units from in and around TIRUNELVELI and TUTICORIN DISTRICT, TAMIL NADU is selected using convenient sampling method. The sample includes literate as well as ignorant people from urban and rural areas. Data has been collected through structured questionnaires.

Impact Factor (JCC): 6.5424

NAAS Rating: 3.27

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Benefits of a Cashless Economy •

Due to the replacement of cash driven transactions by the growing usage of digital payment, would facilitate a more comprehensive records of all the transactions which have been taken place in the society will let to more transparency in business dealings and funds transfers which will obviously reduce tax evasion and money laundering.

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Rotation of fake currency which has a massive bad impact on our economy can be evaded by doing electronic transactions.

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The cost of banking services can be avoided by going digital payments.

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It will reduce the robberies related to cash and other offenses correlated with cash.

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Majority of illegal money is invested in Real estate which increases the cost of Real estate markets. Cashless economy helps in limitating the usage of illegal money and it will reduce the rate of real estate markets.

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Transparency in digital transactions will lead to drop in Corruption.

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By going digital, amount spent by RBI on printing the currency notes can be reduced and can be utilized in some other creative scheme for welfare of our country.

Challenges in the Implementation of Digital Economy Although the digitalization of Indian economy has benefited more to the country, a lot of problems has to be faced while put in to the practice of changing India into a cashless financial system. Following are the some of the challenges being faced: •

The primary necessity of electronic transactions is the usage of Smart phones and internet applications. Doing transactions with the use of mobile phones and internet to pay bills are not in a position to reduce its dependence on cash. Almost 90% of the workers, who produces nearly half the country’s output, works in rural sector. It will be a complication for this sector to become cashless immediately.

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Deficiency insuitable infrastructure in terms of ATM machines, POS machines etc

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Huge part of the population is still in the exterior scope of Net banking, using credit and debit cards.

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Due to the deficiency in cyber security, people are frightened about cyber scam.

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Personal information would be exposed to a possible data breach.

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Technical issues can lead the customers to ambiguity in getting processed amount.

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The economically weak and those without bank accounts will have complexity in paying and receiving digital transactions.

Modes of Cashless Payments •

Demand Draft: This is a secure way of receiving payment as it is signed by the banker. There are no chances of default as it is a prepaid instrument.

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Cheque: This is one of the familiar methods of cashless payment. The transactions carried through cheques are getting saved and so there is a evidence for each payment.

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Benefits of a Cashless Economy •

Due to the replacement of cash driven transactions by the growing usage of digital payment, would facilitate a more comprehensive records of all the transactions which have been taken place in the society will let to more transparency in business dealings and funds transfers which will obviously reduce tax evasion and money laundering.

•

Rotation of fake currency which has a massive bad impact on our economy can be evaded by doing electronic transactions.

•

The cost of banking services can be avoided by going digital payments.

•

It will reduce the robberies related to cash and other offenses correlated with cash.

•

Majority of illegal money is invested in Real estate which increases the cost of Real estate markets. Cashless economy helps in limitating the usage of illegal money and it will reduce the rate of real estate markets.

•

Transparency in digital transactions will lead to drop in Corruption.

•

By going digital, amount spent by RBI on printing the currency notes can be reduced and can be utilized in some other creative scheme for welfare of our country.

Challenges in the Implementation of Digital Economy Although the digitalization of Indian economy has benefited more to the country, a lot of problems has to be faced while put in to the practice of changing India into a cashless financial system. Following are the some of the challenges being faced: •

The primary necessity of electronic transactions is the usage of Smart phones and internet applications. Doing transactions with the use of mobile phones and internet to pay bills are not in a position to reduce its dependence on cash. Almost 90% of the workers, who produces nearly half the country’s output, works in rural sector. It will be a complication for this sector to become cashless immediately.

•

Deficiency insuitable infrastructure in terms of ATM machines, POS machines etc

•

Huge part of the population is still in the exterior scope of Net banking, using credit and debit cards.

•

Due to the deficiency in cyber security, people are frightened about cyber scam.

•

Personal information would be exposed to a possible data breach.

•

Technical issues can lead the customers to ambiguity in getting processed amount.

•

The economically weak and those without bank accounts will have complexity in paying and receiving digital transactions.

Modes of Cashless Payments •

Demand Draft: This is a secure way of receiving payment as it is signed by the banker. There are no chances of default as it is a prepaid instrument.

•

Cheque: This is one of the familiar methods of cashless payment. The transactions carried through cheques are getting saved and so there is a evidence for each payment.

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for making payments.

The prime reasons for unsteady use of e-payments are less speed of internet in semi-urban and rural areas and lack of POS machines at trader’s end.

Table 3: Perspective towards Cashless Economy Statements Responses Frequency Strongly Agree 12 27 Cashless economy is necessary Agree for growth of nation and Neutral 5 should be introduced in India.

Disagree 2 Strongly Disagree 4 Strongly Agree 10 Agree 21 It will assist in curbing Neutral 8 generation of black money.

Disagree 7 Strongly Disagree 4 Strongly Agree 7 Agree 23 It will help to reduce Neutral 7 corruption.

Disagree 11 Strongly Disagree 2 Strongly Agree 10 Agree 26 Digital transactions convey Neutral 2 better transparency.

Disagree 6 Strongly Disagree 6 Strongly Agree 8 Agree 27 Major obstacle in adopting cashless economy is deficiency Neutral 4 of proper infrastructure.

Disagree 5 Strongly Disagree 6 Strongly Agree 15 Agree 28 There is digital illiteracy of epayment and cashless Neutral 3 transactions.

Disagree 2 Strongly Disagree 2

Percentage 24 54 10 4 8 20 42 16 14 8 14 46 14 22 4 20 52 4 12 12 16 54 8 10 12 30 56 6 4 4

Table 3 shows attitude of respondents towards cashless society. According to above table, 78% people agree that cashless economy is constructive for nation’s growth. Only few people contradict with this statement. Out of total sample, 62% individuals have given their consent that digital economy will help to control the rotation of black money and it will eradicate the problem of corruption in nation.72% public believe that electronic payments are transparent and accountable.86 % people stated that there is digital blindness regarding e-payments.

FINDINGS According to the above study, most of the respondents have shown positive response towards adoption of cashless economy but due to lack of proper infrastructure and access to internet, only few people are using electronic channels regularly. Another major issues in the functioning of cashless financial system in India are cyber frauds and illegal accessing of personal information. Even though a lot of steps have been initiated to smooth the progress of digitalized transactions in India and numerous schemes have been commenced, there is an immediate need for vast attention towards these steps as the target is very essential to attain. www.tjprc.org

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A. Aysha Muzammila

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Online Transfer- NEFT / RTGS: Unlike Cheque and DD this is the fastest method as it is done using internet facility. NEFT and RTGS are used for transfer funds between banks within a country.

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E- wallets: This method is used for fund transfer and online shopping but both end parties require Smart phones with internet connectivity. E-wallets are linked with credit or debit card using E-wallet id.

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Mobile wallet: This is a very convenient way of making small payments. Mobile wallets do not require debit or credit card linking. Money is loaded in wallet using Immediate Payment Service (IMPS).

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Credit/Debit card: These are used for making purchases but availability of swipe machines (POS) is limited. The amount of usage of debit cards is growing at a faster rate than credit cards.

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UPI Apps: Unified Payments Interface provides safety to user as transactions are made using virtual payment address. But these apps need an android phone and stable internet connection.

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USSD (Unstructured Supplementary Service Data): This is a banking service done through mobiles that does not need smart phones and internet facility. As it’s a universal method, this does not demand specific mobile phone. User need to dial *99# to avail this service. This option is provided by almost all banks. This service is for rural population who don’t have access to internet facility and it is available in 11 regional languages.

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Aadhar Enabled Payment System (AEPS): Before using this facility, bank account must be linked with Aadhar card. It uses fingerprint scanner and Smartphone for carrying transaction. Unlike cards and USSD, AEPS does not have any charges on transactions.

Table 1 depicts the non- cash transactions for two financial years and percentage increase in cashless

transactions.

Table 1: Digital Transactions in Year 2015-16 and 2016-17 2015-2016 2017-2016 Modes of Payments (Volume in millions) (Volume in millions) RTGS 98.34 107.86 Cheque Truncated 958.39 1111.86 System(CTS) EFT/NEFT 1258.88 1622.10 Cards 10038.67 12055.87 M-Wallets 603.98 1629.98 Mobile Banking 389.49 976.85 Source: RBI Bulletin

Percentage Increase 9.68% 16.01% 29.47% 20.09% 169.87% 150.80%

Mobile banking and M-wallet operations were multiplied by three times in year 2016-17. The growth rate of RTGS is minimum as compared with other digital methods. Although NEFT and Cards have shown moderate growth in year 2016-17, they are more popular among customers.

Table 2: How Frequently People Perform Digital Transactions?

Very often Often Sometimes Never Total 3 16 14 17 50 6% 32% 28% 34% 100% According to Table 2, only 38% of total respondents make electronic transactions repeatedly while 28% of people occasionally use digital methods of payment and 34% of total representatives have never used cashless instruments Impact Factor (JCC): 6.5424

NAAS Rating: 3.27

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17. https://en.m.wikipedia.org/wiki/Cashless_society 18. https://zenodo.org/record/1001142#.XV3cQ94zbIU 19. https://www.communicationstoday.co.in/digital-payments-cashless-india-could-be-a-model-for-the-world/

AUTHOR PROFILE

Aysha Muzammila, B.E., MBA., SET., Assistant Professor In Department of Business Administration, Wavoo Wajeeha Women’s College Of Arts And Science, Kayalpatnam. Having passion in teaching, Servng in teaching field for the past 8years, published papers with ISBN and ISSN numbers with great impact factors, have attended more international and national level workshops and conferences and presented many articles too in recent trends.

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