What is a cashless economy?
In this modern world, where everything is becoming digital and technology seems to have unlimited potential, a cashless economy is what every country is heading towards. Cashless economy is not the complete absence of cash; it is an industrial setting in which goods and services are bought and paid for through electronic media (Garg & Panchal, 2017). According to (Woodford, 2003), Cashless economy is defined as one in which there are assumed to be no transaction frictions that can be reduced through the use of money balances, and that accordingly provides a reason for holding such scales even when they earn rate of return. According to a study done by a firm GlobalData, Ireland ranked 8th in the entire world of becoming the leader of cashless payments by 2022 (Keane, 2020). The introduction of a Unified Payment interface-like application can help Ireland to reach that goal much quicker. Some of the benefits relating to cashless transactions are as follows (Balaji & Balaji, 2017) –
i. Cost-effective to the bank — Cashless transaction minimizes handling cost of handling the cash and other operations which in turn makes it more convenient for the banker and the customer
ii. Low time consumption — The customers transfer or receive the amount in a matter of minutes with the help of various options for cashless transactions and save time to visit and perform the operations in the bank branch.
iii. Safe and secure — Cashless transactions, especially when done on a smartphone, facilitates enhanced security by making use of fingerprints and One time password as critical measures.
iv. Upgradation of technology — The shift from conventional banking to cashless banking brings along a change in technology used by both the user and the bank. The bank may try providing the user with better technology for easy and convenient transactions.
v. Control on Black money and check on money laundering — In e-Banking, unlike the cash trade, there is a traceability function, so it’s easy to check the country’s anti-corruption laundering and black money circulation. This can help keep a check on the country’s financial scandals and stimulates the appropriate economic development.
Another view of a cashless economy is presented by authors Nissim Cohen, Anna Rubinchik, and Labib Shami in their paper where they construct a model that demonstrates misallocation of resources in a naturally segmented economy with official and unofficial sectors due to complete cash elimination (Cohen, et al., 2020). Cash elimination can have social-political and economic effects of inefficient investments in the economy, and the extra costs associated with eliminating cash imposed as a regulatory measure on transactions between formal and informal sectors. Still, in contrast, a move towards a cashless society has its positive effects (Cohen, et al., 2020).
REFERENCES-
Garg, P. & Panchal, M., 2017. Study on Introduction of Cashless Economy in India 2016: Benefits & Challenges. IOSR Journal of Business and Management (IOSR-JBM), 19(2), pp. 116–120.
Woodford, M., 2003. Interest & Price: Foundation of a Theory of Monetary Policy. Princeton University Press.
Keane, J., 2020. From apps to taps: Where Ireland sits in the march toward a cashless society. [Online]
Available at: https://fora.ie/ireland-cashless-4965404-Jan2020/
[Accessed 20 April 2020].Cohen, N., Rubinchik, A. & Shami, L., 2020. Towards a cashless economy: Economic and socio-political implications. European Journal of Political Economy, Volume 61.
