The following Paper Illustrates the effects of Cashless Economy and how this payment methodology influenced modern day Society and How has Cashless economy influences a countries Growth.

1. AIMS Institute of Higher Education
Peenya,
Bangalore
Paper presentation on
CASHLESS ECONOMY
AND
ITS IMPACT ON MODERN SOCIETY
Presented by:
Ashwas.S
Raghav Kulkarni
III MBA ‘C’
November 2016

2. Cashless Economy and its Impact on modern society
AIMS Institute of Higher Education, Peenya 2
ABSTRACT
In this modern era where people have ample number of opportunities to do business with paper
currency, a new method of doing transaction evolved over the time and now is one of the most
prominent ways of exchanging the legal tender through means of digital currency. As global
economy unknowingly ventures into time when everything becomes cashless, we discuss how the
coexistence of cash with plastic money serves more and rather bigger purpose.
By this using paper currency as a legal tender would become obsolete and amid all these cash
would no longer be the king in the market. Cash transaction has paved a way we see the growth of
countries economy, European countries has extensively adopted the use of digital currency for its
transactions. It is truly an uphill task for the government to totally change the country’s economy
to cashless and make everything digital but it has its own benefit and losses, it is not just about
curbing black money out it is transformation of whole society mind set to do business cashless.
With the help of growing technology, a cashless economy isn’t far from us, in recent turn of events
in India where demonetisation of most prominent currency notes of Rs 500 & Rs 1000 took place,
it shows the ample of opportunities to cash it in digital currency sector.
This paper recommends a society which adopts hassle free model which simplifies the exchange
of the money with help smart and innovative technology more over not to attach any tangibility to
it. This has also cemented many paths for payment banks or we call it as payment gateway to be
the market leaders in cashless economy, it also has its ill effect but examples like Sweden, Belgium
have shown the world that the country can sustain when majority of population uses digital
currency to trade.
KEY WORDS: Digital currency, cashless economy, Modern Society, Payment
gateways.

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INTRODUCTION
As we prosper ourselves towards new age of currency transaction , evolving from barter system to
exchange of cash and now in this modern age where we use plastic money as legal tender and are
slowly moving towards cashless economy. Indians traditionally prefer to save and spend in cash,
and a vast majority of the more-than 233 million (Source-Livemint) population doesn’t have a
bank account. So far cash has empowered millions of unbanked families and many others, do day
to day business and are done with hard cash rather than shifting to digital currency.
But in recent turn of events since May of 2014 the new government has extensively focused on
making people have bank accounts. These initial steps to make India digitised in each and every
field, includes shifting of liquid cash to digital cash. The finance minister of India, Mr. Arun Jaitley
said in one of his speeches to make India a cashless economy with aim of curbing the flow of black
money in the economy.
Whenever governments have printed more currency than reserves, the value of the currency has
depreciated. This has made people to lose faith in paper money and this situation has repeated
often. But the reliance on notes and coins in India is likely to diminish, as spending habits change
and financial services reach more people, said the Google-BCG report. It expects cash-based
consumer payments to fall to 40% to 45% by 2025. Many European countries like Sweden,
Germany, Belgium, UK have already adopted cashless economy as majority of its population uses
digital currency to do business transactions. This model has allowed many business to carry out
their operation more efficiently and because of this Transparency can be maintained.
The idea of making the economy cashless is an uphill task not only for the government but also
for the people as they have to acclimatize to new scenario where cashless economy would replace
the conventional cash economy.

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AIMS Institute of Higher Education, Peenya 4
Cashless Economy
A cashless economy is one in which all the transaction are done using cards or digital means were
the circulation of physical currency is minimal. If people or citizen of the country do transactions
with cheque and net banking, the total expenditure on printing and handing of currency can be
minimized. Cashless economy is not a fairy tale, many countries have adopted cashless economy
and this model has also influenced many companies to use this opportunity to flourish themselves.
Such economies have brought transparency within the systems as the user cannot cheat with the
digital currency. When the majority of population uses physical currency to do transactions, there
are chances that they can be cheated by distributing counterfeit notes and many unethical activities.
The era of cashless economy started with introduction of Debit and Credit cards which allowed
people to carry the plastic cards which are embedded with microchip which are loaded with
account details of the card holder. This led to evolution of payment systems in our country from
Card to Electronic payment gateways. But this did not reduce the use of physical money for
payments but certainly effected the way citizens do business.
Majority of the Indian mind set thinks that having cash amounts to greater wealth & royalty and
this mind set has not changed even in the modern society. But in recent turn of events like
demonetisation and businesses getting ready to accept cashless payment for the service, this mind
set is about to change.
Impact on Customers & Retailers
The cashless economy has greater impact on these two section of the society where the actual
business happens with physical cash whether it is big store in shopping mall or small departmental
store. They both share different customers & outlooks but both get affected by the cashless
economy as big merchants & stores in malls have to get acclimatized to use digital currency. Many
small departmental stores are sceptical to use this form of payment as the trust is the major concern
and lack of knowledge of using such kind of cashless payment exist on both retailers and
customers.

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Best example to justify this theory is a recent event where demonetisation took place Retail
industry had to incur loss of Rs 3150 cr and sales went down by almost 50%. These figures were
staggering as the need to be a cashless economy become important to overcome this loss. Major
winners in this tough times were those who got along with the need of having different payment
gateways to ease the business via digital currency.
Increased smartphone usage in India and people using payment gateways like Paytm, Freecharge
which is used both by Consumers and retailers. Paytm, the largest digital wallet provider in India
saw app downloads going up by three times and payments for offline transactions by five time in
the first two days following the government's move. MobiKwik, which has around 35 million
customers, said there was 100% growth in customer numbers day-on-day in the past few days
(Source-Times of India). Big losers during the stint of demonetization were local taxi & auto
drivers, retail shops and small restaurants owner who had to incur loss not only with currency but
also with the raw materials.
Advantages of Cashless Economy
Cash facilitates drug trafficking, human trafficking, extortion, money laundering and illegal
immigration. In a cashless society, people would be forced to remove savings from under their
mattresses and keep them in the bank. No cash means safety from burglars, recently the cases of
robberies have reduce drastically. For the government and the banking regulator, much is at stake
as the two have sought to move in concert to harness the digital revolution to advance socio-
economic policy objectives.
Electronic payments will help business people grow their customer base and resource pool, far
beyond the limitations of their immediate geographic area. It will help users control reckless
spending and improve personal accountability. It would bring down the cost of printing, managing
and moving money around. Cash being material, can be prevented from circulation but electronic
channels alleviate this friction and increase circulation of currency. The expansion of telecom and
smart phones would provide a digital shift to the economy in near future.

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AIMS Institute of Higher Education, Peenya 6
The private sector the driver of this change. Government is also mulling to provide incentives for
electronic payments for example waiver of tax when electronic settlements are used. Expansion of
telecom and smart phones would provide a digital shift to the economy in near future.
Drawbacks and Challenges
Erratic power supply and communication link - power failure negatively affects e- banking
infrastructures like ATM, network failure of communication link due to much congestion, change
in weather also affects the policy.
Non- existence of computer back-up: there is bound to be total loss of data on customers’ accounts
if there is no back up and the entire file is damaged. This may lead to misappropriation of
customers’ account, hence bank should maintain back up of all its information outside the bank’s
premises.
Low acceptance by the public: many people have burnt their fingers as a result of fraudulent
withdrawals from their accounts through the use of ATM by unscrupulous individuals who believe
in using master cards to withdraw money from unsuspecting individuals. Not to mention situations
whereby customers are debited by the ATM with withdrawals not supported by cash that fail to
drop down from the machine as expected. Customers are discouraged to use the machine as it takes
longer time before the wrong debit is reversed if it does not end up unsolved.
Insufficiency of fund to invest in information technology: most banks find it tough to fund
procurement of modern equipment’s needed for e-banking. Nevertheless, there has been incredible
improvement in automation of bank operation in the country but there are still rooms for further
expansion so as to catch up with hi-technology. Security concern is major issue, cashless economy
will open new market for cyber security experts to improvise online security and evade hackers to
get the database of the users.

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AIMS Institute of Higher Education, Peenya 7
Conclusion
As the usage of smartphones and internet are on the rise in the country, the scope for further
development of cashless methods of transaction are high. Government has to bring reforms to the
rules allowing for digital transactions at a huge scale and encourage adoption of digital currency.
For retailers and businesses, lower tax rates on cashless transactions will be a boon and thus the
adoption will increase.
Electronic payment systems are capital intensive, therefore banks should be encouraged to
collaborate to finance some of the infrastructures needed for the smooth implementation of the
policy by sharing cost to reduce the initial cost of setting up electronic banking.
For the nations as a whole, switching to cashless economy will help speed the growth, though
initially various sectors are expected to take a hit because of lesser availability of cash. When more
merchants accept digital transactions and the payment gateways are allowed to grow, the country
can really make the leap necessary to move towards a better economy.

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REFERENCES
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demonetisation/articleshow/55388855.cms
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indias-drive-for-cashless-economy-chinese-media/articleshow/55596809.cms
4. http://www.totalpayments.org/2013/07/08/top-5-cashless-countries/
5. http://www.thehindu.com/business/Move-to-cashless-economy-a-key-motive-behind-
notes-ban/article16444482.ece
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cashless-economy.html
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8. https://www.bloomberg.com/view/articles/2016-11-09/india-gets-rid-of-cash-too-soon
9. https://www.bloomberg.com/view/articles/2016-07-21/india-s-cashless-future
10. http://www.moneycrashers.com/biometrics-cashless-society/