Cashless Economy – Short Essay
Cashless economy represents an economy in which transactions are not carried out using money in the form of physical coins and banknotes for payment of goods and services but in the electronic form. This type of economy has become popular all around the world.
The trend of the cashless economy has started with the development of electronic banking, during the nineties of the 20th century.
Cashless economy means a complete reliance on online payment like bank transfers or with the help of payment gateways or credit cards. Some of the examples of these intermediaries in purchase include so-called digital wallets, PayPal, smartphones, electronic cards, etc.
Advantages of a Cashless Economy
Some of the advantages of the cashless economy include:
- Very efficient and simple – accelerates the process of a financial transaction;
- The possibility of insight into each transaction – an improvement on the transparency. That’s because all payments made online are accounted for and thus make the flow of money across the economy transparent. This diminishes the scope of the parallel economy.
- Easy tracking – every transaction is recorded.
- Tax coverage – since all online payments are accounted for, the tax coverage to becomes simple, and evasion becomes difficult.
- Financial Integration– With the help of technology all financial dealings can be integrated into the system, i.e., calculation of income tax, GST, and the necessary information for filing returns, etc. can all be done in one system.
- Cost of maintaining currency – The cost of printing and maintaining currency goes down if less of it is used.
Disadvantages of a Cashless Economy
Disadvantages of the cashless economy include:
- Privacy issue – any institution can potentially have insights into the customer’s information;
- Not applicable to all populations – this type of payment can’t be used by the illiterates, and the elderly. For instance, the small wage earners or vendors for fruit, vegetables, etc. might not find online payments possible or efficient.
- Overhead costs – there might be overhead costs for online payments or bank transactions.
- Cost of setting up the technological network – although it’s a one-time cost, however, it has to be incurred to cover an as much geographical area as possible.
The cashless economy in India
The economy in India is still largely based on an exchange of money in banknotes.
The Indian government is working intensively on a program to reduce the use of banknotes and to increase cashless economy. Intensive work is being done to educate the population of India about safe Internet payment, as well as to reduce cyber-crime.
Cashless Economy is certainly an ideal situation for an economy. However, it must be introduced gradually.