Across the world, consumers and governments are rapidly turning their backs on cash and moving forward with digital alternatives for convenience and speed. India is going through a series of unprecedented digital changes, moving closer to becoming a ‘Cashless India.’
On 8 November 2016, Indian Prime Minister Narendra Modi authorised a dramatic step towards creating a more cashless society. With demonetisation, 500 and 1,000rs notes were no longer legal tender. Being the country’s largest denomination bills, citizens across India flew into a frenzy of chaos and confusion.
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To help with the transition, those notes could be exchanged at banks for smaller notes. Trying to tackle corruption and fraud, Modi addressed the country in his monthly address:
“I want to tell my small merchant brothers and sisters, this is the chance for you to enter the digital world.
“It’s correct that a 100% cashless society is not possible. But why don’t we make a beginning for a less-cash society in India?”
“We can gradually move from a less-cash society to a cashless society.”
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By GlobalDataAccording to Credit Suisse, at that time, around 90% of consumer transactions were made with cash so this was a massive step in the governments’ digital strategy.
This strategy took flight in 2009 with the introduction of Aadhaar. Aadharr is a biometric database that consumers can authenticate by fingerprints and retina scans. Before it launched, many citizens did not have any form of digital identity, stopping them from opening up bank accounts.
As of 2016, around 95% of the population had a digital proof of identity and a whopping 270 million bank accounts were opened, bringing India forward into the ever-growing digital ecosystem.
While the aim of reaching a fully cashless India seems unrealistic, the Indian government has been striving hard to support consumers transitioning to electronic ways to pay.
In 2016, the government launched ‘India Stack’ to its digital strategy. India Stack made it easier for citizens to open up bank accounts, savings accounts, buy funds and share data by simply using their fingerprint or retina scan from Aadhaar.
The Digital India programme
As part of promoting cashless transactions, the Indian government launched ‘The Digital India programme’ in 2015. The launch reflected the government’s commitment to providing digital efficiency and transparency.
Offering various modes of digital payments, the programme ensures that citizens could access government services.
The programme urged people to use more mobile and internet banking. According to the ‘Telecom Regulatory Authority of India,’ (TRAI), in September 2016, 82 out of 100 citizens in India owned a mobile device so there was the incentive to move them over to using mobile payments rather than cash.
Benefits of a Cashless India
- Financial Inclusion: Financial inclusion not only accelerates economic success but also enables participation in the process of economic growth. Supporting cashless methods for all Indian citizens enables lower-income households to access services that were previously unavailable to them.
- Convenience: The seamlessness of conducting banking digitally is probably the biggest motivator to move further away from cash. Avoid queues at ATMs, access all accounts 24/7 and transfer funds in real-time.
- Tracking: Using digital methods will obviously leave a digital footprint. Transactions can be easily tracked and any unusual payments will be brought to the consumer’s attention quicker. Tracking spending can also help consumers manage their money and save where possible.
Hurdles
- Rural areas: Much of the Indian population live in rural regions of the country, making it difficult to access decent internet connection. Without good access, it is much harder for people in those areas to use digital payment methods on a daily basis.
- Security: Using digital methods to pay does open up the doors to different types of financial crime. Companies and consumers will still be vulnerable to security risks such as online fraud and cyber-attacks. Furthermore, adding more financial details online, along with the personal data already accessible, crimes like identity theft will increase.
Across the world, digitalisation is rapidly expanding. Countries like Sweden and India are racing ahead, but others are catching up. Electronic payments meet the desire for faster, safer and more convenient payment methods. The future of payments has endless possibilities and it’s clear that a ‘Cashless India’ is within touching distance.
