The Cashless Economy

The eradication of physical cash in transactions and digital methods is known as a cashless economy. Most of the countries in the world have already steadily progressed into a cashless economy. Particularly in countries where corruption is at its peak and there are ways to forge fake currency, a cashless economy helps uplift the financial situation. However, turning a country completely cashless is a challenging task. It isn’t easy to spread awareness among people in rural regions who do not have access to the web in countries like India. 

Advantages of Cashless Economy

• In today’s era, underground markets and black economies have become popular in developing countries where corruption and low literacy are at their peak. The introduction of a cashless economy would enable the maintenance of records of all transactions in a database, making it difficult for the black economy to sustain. Maintenance of transactional records will mean a crystal transparent economy.
• One of the main aspects of corruption is forged physical currencies. This is a severe problem for a country’s economy if forgery is not stopped. People could easily use fake notes for transactional purposes. Through cashless transactions, fake physical notes are not possible, and hence it helps reduce corruption. 
• Payment of taxes using physical currencies is challenging to monitor and audit. Taxes are paid by millions of citizens every year to the government and form an integral part in safe-siding the country’s economic welfare. Digital transactions have better transparency, are maintainable, and are scalable. Hence, cashless transactions enable easy monitoring of the tax system of a county.
• One of the essential features of cashless transactions is storing their records in cloud databases. This is highly useful for the government of a country as they can analyse the past data to plan a budget for every year. Using this budget, the government can plan energy management, real estate, etc. 
• A cashless economy means less use of physical currencies and coins. This means the production of paper currency and coins will decrease. The costs and human resources incurred in producing physical currencies are reduced. The government can use this money for the welfare schemes and the country’s industrialization.

Some Methods of Cashless Transactions

• Mobile wallet: Various mobile wallets from different service providers are available on android and IOS. This is a virtual wallet where digital currency can be stored and used. Debit cards or credit cards can transfer money into the mobile wallet. Net banking can also be used for the same. Hence card details need not be entered or saved every time a transaction or a purchase is made using the wallet.
• Plastic money: Plastic money includes prepaid, debit, and credit cards. These cards can be issued by any bank when a user opens an account with that bank. Prepaid cards can be recharged using net banking for online purchases, gift cards, etc. These cards are used explicitly for three reasons. Physical money withdrawal from ATMs, online purchases, and card swipes at various places form the three primary purposes. 
• Net Banking: Net banking uses a particular web portal specific to any bank for transactional purposes. Opening an account with a particular bank provides the user with a user name and a password for net banking. The user can log in to the web portal and carry out transactions at different sites using these credentials. It is mainly used for online purchases and money transfers to other beneficiaries. 

Some Challenges in Switching to a Cashless Economy

• Cash dependency: Most B2C transactions in India are still carried out in physical cash, and awareness is very little about using the above methods in rural areas.
• Cyber security: Cyber security is crucial for setting up a digital system. In its absence, the digital infrastructure risks cyber attacks, fishing, cyber threats, etc. This is one of the most difficult challenges that an economic system must face to transition to cashless fully.
• Low Literacy rate: A country with a low literacy rate will find it difficult to spread awareness of cashless transactions. These include debit cards, credit cards, and net banking. Most of this population belongs to rural areas and still prefers to go to the bank to withdraw and deposit physical cash. Corruption is also high in these areas where people willingly use physical money for illegal activities.

Conclusion

A cashless economy needs to be the new reform for the economic welfare of all the countries. Although we have discussed several challenges a country faces while transitioning its economic infrastructure into cashless, it is still possible by spreading proper awareness through offline and online media. This way, a government can reduce the percentage of corruption by a considerable margin, thus improving its economic welfare. India is also on its way to becoming a cashless economy, challenged by some of the above-discussed factors. To ensure a smooth transition, the central government needs to incorporate compulsory training in rural and urban areas, especially for backward class people.