Cashless Economy Advantages and

Disadvantages
Government is trying to create a cashless environment in the country.
Demonetisation appears to be a stepping stone in that direction. To help facilitate
this, government even launched its own app BHIM built for the same purpose. It
even came up with a number of discounts and freebies on digital transactions.
However, this poses several questions. What are the benefits? Is there any drawback?
Here are the answers to these and several other questions.
 

Benefits of Going Cashless or Digitisation

Light but deep pockets

The ease of conducting financial transactions is probably the biggest motivator to go
digital. You will no longer need to carry wads of cash, plastic cards, or even queue up
for ATM withdrawals. It’s also a safer and easier spending option when you are
travelling. The benefits are enormous if you leave out the low-income group, which
will face a huge challenge. For the rest of the country, it is constructive and simple.

It will be especially useful in case of emergencies like in hospitals. You have the
freedom to transact whenever and wherever you want. You don’t have to be
physically present to conduct a transaction or be forced to do so only during office
hours.

Discounts and freebies

The recent waiver of service tax on card transactions up to Rs. 2,000 is one of the
incentives provided by the government to promote digital transactions. This has
been followed by a series of cuts and freebies. Government also announced lottery
scheme for people making digital transactions. Add to these the cashback offers and
discounts offered by mobile wallets like Paytm, as well as the reward points and
loyalty benefits on existing credit and store cards, and it could help improve your
cash flow marginally. It’s a good time to take advantage of these and increase your
savings.

Easy expense tracking & documentation

Making transactions digitally makes it easy to keep track of your finances. It can also
make personal budgeting easier. It can also help in filing Income Tax Returns and, in
case of a scrutiny, you will find it easy to explain everything to the taxman.
Reduced risk of losing money
If stolen, it is easy to block a credit card or mobile wallet remotely, but it’s impossible
to get your cash back. In that sense, the digital option offers limited security. This is
especially true while travelling, especially abroad, where loss of cash can cause great
inconvenience. Besides, if the futuristic cards evolve to use biometric ID (finger prints,
eye scan, etc), it can be extremely difficult to copy, making it a very safe option.

Disadvantages of Going Cashless or Digitisation

 
Increased risk of identity theft
The biggest fear is the risk of identity theft. Since we are culturally not attuned to
digital transactions, even well-educated people run the risk of falling into phishing
traps. With the rising incidence of online fraud, the risk of hacking will only grow as
more people hop on to the digital platform

Losing phone means losing all your money

Since you will be dependent on your phone for all your transactions on the move,
losing it can prove to be a double whammy. It can not only make you susceptible to
identity theft, but you could also be rendered helpless in the absence of physical
cash or any other payment option. This can be especially problematic if you are
travelling abroad or in smaller towns or villages with lack of banking infrastructure or
other payment options. Another drawback is that you need to keep your phone
constantly charged. If the phone dies on you, you will be stranded, particularly if you
are in the middle of an important purchase or dealing with an emergency.

Adapting is difficult for tech-unsavvy

Digitisation has two major requirements, internet and smartphones. India has a low
Internet penetration and smartphone users but this is just a practical roadblock.
Besides this, a bigger hurdle is the psychological shift. You are suddenly jumping
three generations to the digital medium. It’s a problem for the older people, who
may suddenly find themselves locked out of their accounts if they can’t download an
app or don’t have cash. The digital medium may prove a challenge for the tech-
unfriendly people, who will need more time to adapt or the availability of other
options to conduct transactions.

High chances of overspending

The convenience of net-banking, m-banking, card or mobile wallet transactions can
make you a spendthrift. Behavioural finance theorists say that people find parting
with physical cash more difficult than plastic money. So in a way, using cash actually
helps us put a leash on our spending habits. Hence, there is a good chance that
going digital may disrupt your budget or at least make it more difficult to keep a tab
on your expenses.

The success of government’s digitisation movement highly depends on its ability to

put cash out of circulation in the economy. People will choose the most comfortable
way available to them for making transaction. So, digitisation can only be successful
if government makes it widespread and convenient.
Cyber fraud

Demonetization gave a massive push to the digital economy in India – people started
using mobile wallets, people who were scared to use ATMs started warming up to the
concept of ecommerce, and suddenly there was a boom in total number of digital
transactions happening all over the country.

But with this action, there was also a reaction – cybercrimes.

As per recent data available with Ministry of Electronics and Information Technology
(MeITY), ever since demonetization kicked in, there has been an increase in the
instances of cyber crimes as well.

And the increase is so substantial, that Govt. is now planning to create a special Digital
Payments Act, for regulating e wallets and other modes of digital payments in the
country.

Will regulation work?

Cybercrimes Increase Post Demonetization

As per studies conducted by RBI, Ministry of IT and National Crime Records Bureau
(NCRB), it is clear that cybercrimes and frauds related with online transactions has
increased, especially since November 2016, when demonetization kicked in.

senior Home Ministry officials have revealed that 22.3 million online financial
transactions happened before November 2016, which has increased by 23% as of May
2017.

At the same time, cyber crimes, such as fraud related with online payments, bank
transfers and online shopping have also increased substantially. During 2015-16, RBI
reported 16,468 cases of cyber crime, which is an increase from 12,317 a year earlier.

A senior official said, “While the government is enthused by the growth in digital
payments and transactions, it acknowledges the higher risk of financial fraud it comes
with. The challenges include password theft through fraudulent phone calls, e-wallet
frauds, email spoofing and Phishing attacks, etc. We seek to prepare our law
enforcement agencies to deal with the same,”

Regulation Of eWallets Is The Answer?

At a time when Indians are spending Rs 24000 crore to fight cyber criminals, when every
Indian is paying on an average Rs 16,000 for each cyber crime incident, then the issue is
indeed serious.
Ministry IT along with Ministry of Finance is now planning to create an exclusive set of
regulations, which will focus only on cyber crimes. Digital Payments Act may soon be
created, which will have all the regulations and protocols, which eWallets must comply
with.

Besides, a strong force of 27, 500 police officers would be created, who are experts in
forensic science, and cybercrime; a separate judicial task force of 13,000 officers would
be also created, to tackle such cases of cybercrime.

A state level central nodal agency would control this task force, and take action against
the culprits.

Govt. has asked the Ministries to create a special inter-ministerial committee, which will
look into the legal aspects of forming such a Digital Payments Act.

Earlier, in 2015, Govt. had announced creation of a special team called IC4 to stop
cybercrime incidents.

We will keep you updated as we receive more details. 1

https://economictimes.indiatimes.com/wealth/spend/a-look-at-various-cashless-options/articles55508641
visited on 14 March 2019

https://www.techopedia.com/definition/2387/cybercrime visited on 14 March 2019, 07:55 PM

https://economictimes.indiatimes.com/small-biz/security-tech/technology/are-digital-
payments-in-india-making-the-country-a-soft-target-for-cyber-criminals /

https://trak.in/business/2017/09/21/ewallets-digital-payments-regulations-cybercrime/ visited on 14 March

2019 , 8:10 PM
Pierluigi Paganini ” Analysis of cybercrime and its impact on private and military sectors”
https://securityaffairs.co/wordpress/4631/cyber-crime/analysis-of-cybercrime-and-its-impact-on-private-and-
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https://unichange.me/articles/advantages_of_electronic_payment_systems

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