Cashless Economy will lead to a Starving Economy


A 2015 Ernst and Young report said that India had the dubious honour of having one of the lowest PoS (Point of Sales) terminal penetration with only 693 machines per million people. Do we have enough people with mobile connections in India? The answer is big "NO". Just 22 percent of Indians use the Internet "at least occasionally" and only 17 percent have a smart phone. The number of mobile connections that are data-enabled is only around 30%.

What we've seen with demonetization and the increase in usage of cards and online payments is that somewhere in the value chain, banks and/or payment gateways were not in a position to handle the load. Transactions failed and we were told that Visa wasn't able to handle the load. At present, there isn't sufficient capacity to accommodate escalated usage if everyone starts transacting digitally. More importantly, do we have the network capacity to deal with this? What happens in an emergency situation when networks are down because everyone is trying to call everyone, as we've seen previously in India? If you don't have cash, and there is insufficient connectivity, how will you be able to buy anything or use public transportation, for instance?

A switch to living cash-free means that each and every transaction is tracked and documented. This is great for governance but there is no protection for citizens with regard to who owns that data, whom they can share it with, and how it will be utilized.

If I'm using an e-wallet, where is the law that prevents the usage of that data for advertising? By switching to cash-free transactions, you're not giving users a choice. India doesn't have a privacy and data protection law and, shamefully enough, the Indian government has gone to court arguing that there isn't a fundamental right to privacy in the country. To quote the Attorney General of India speaking in August last year, "Violation of privacy doesn't mean anything because privacy is not a guaranteed right."

Most mobile handsets don't have an Indian language interface and that's the case for most mobile apps and services, too. Apart from Snapdeal, no e-commerce company has tried going the Indian language way. There's a part of the population in India which still isn't able to read and write, let alone read and write English. The digital divide here is massive and that's why physical notes worked.

Digital payments can lead to major security risks and currently there aren't adequate processes in place to address issues among either merchants or customers. Above all, not enough is being done to educate the consumer. The weakest link in the chain is the cyber security. Is 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?

Since the day demonetization 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.

The internet cost in India is still substantially high. There is no Wi-Fi 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 Wi-Fi should also be provided at public places.

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? Why to pay 2% extra on Debit/Credit card transactions when we are going for cashless India?

Computer literacy among the people is still low. Even in urban areas 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 smart phones, computers for e-transactions.

Smart phones are not affordable for most of the population in the country. More affordable options should be launched by the government for people to buy smart phones for cashless transactions.

India still lacks when it comes to infrastructures 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, your mobile battery drains, you are out of network area, a natural calamity cripples all networks - what will you do if you are CASHLESS?

The point is that we're not ready yet. Many of the issues mentioned above will be addressed one by one: connectivity will (hopefully) improve; Indian language interfaces and operating systems should be developed, security and customer care can also be improved and smart phone prices will come down. But the idea to force people into adopting cashless payments is foolish and unnecessary when you don't have the wherewithal to meet the demand at that scale so quickly. People are hurting, and there are no means of meeting the high demand in the near term.

In a scenario where just over half of the nation's adults having bank accounts, roughly 98 percent of all transactions in cash, with only 11 percent of consumers using a debit card in 2015, while most retailers don't accept cards, talking about cashless economy is a big joke and nothing else. So, conceptualization of cashless economy will lead to starving economy.

Alok Kumar,
Senior Journalist & Analyst



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