Thoughts on Cashless Economy

Cash
Cash

 

Thomas More, in his classic thought of a society where there was no money, where there was no private property, which would eliminate all reasons for bribery and a just and equal society. Utopia was published in early 16th Century, to be precise, published in 1516, five hundred years before 2016.

If this was a book on just and equal society, there was another novel, written by George Orwell, in 1949, titled Nineteen Eighty Four. A seminal work, which holds true even in Snowden and Wikileaks era! In that, the Party controls people’s life – including history and language. (If you are reminded of something, I am not to be blamed. Blame Orwell)

Evolution of money:

It’s a common knowledge that people exchanged one good for the other – barter. It evolved into something else where commodities were used as money. We have instances of salt, rice, barley, cattle, leather as medium of exchange. That means, you can buy many things with salt, rice etc. We then moved to metals, famous of which being Gold and Silver. From there we moved on to coinage in various parts of then developed world – China and India. The first paper notes were issued in China and from there we are here with what is known as “fiat money,” meaning, our money is not backed by anything. It’s a trust and promise.

From there, the latest evolution is what many colloquially know as Bitcon, generically called as crypto currency.

What this evolution tells us is that, no one can stop a technology (or an idea like Victo Hugo said) whose time has come. Also, no one can stop the evolution in money. Every stage of evolution of money has been led by a major theme – utility. In this context, the technology driven crypto currency or digital form of present day cash is just an extrapolation of that idea of utility. The Royal Mint in the United Kingdom will offer its Gold trade using block chain technology which is the basis of Bitcoin. This is the quintessential merger of last millennium meeting this.

Note: India after Demonetisation has moved the goalpost to become cashless (or less cash) economy. This must not be confused with crypto currency because this is not what the government is talking about. Also, this is not the first step in moving to crypto currency, because, you don’t need this step. The government is using all its energy to promote this idea of cashless economy and hence will come up with all the positives of this form, which is real and must be considered with open mind.

The other side of the coin:

With the risk of being called a corrupt, black money hoarding, anti-national, here are some thoughts on negative risks of digital cash.

It must be understood that what our government calls as ‘cashless’ or ‘less cash’ is nothing but porting our cash in digital form through:

  1. Internet (or Mobile) Banking – full fledged digital banking operations
  2. Payment Banks – a new concept promoted by RBI with limited utility
  3. Payment Wallets – short of Payment Banks

 

Freedom of choice:

Perhaps the most important argument to be placed against government sponsored push of ‘a’ form / ‘a’ medium of currency over the rest is our freedom of choice. Forget the platitudes of backing of constitution for this. What is to be understood is our inherent right to choose what we call as money. Remember, we, as species had used salt as money. We have already surrendered to the government the right to create money, without any backing. The papers that we carry, are worth nothing but the value we attribute it with. Now, are we going to let the government tell us in which medium, must it be used? If someone asks me “why do I need to spend as physical money,” the answer is always “because I want to.”

There is an inherent hypocrisy in this. The ‘anti-cash’ movement presents this as a great leap which will help the nation in the long run. Now here is the irony. Most of them express their overnight economic competency from a Chinese manufactured phone or laptop. India runs close to $48 Billion trade deficit in the previous fiscal and its nobody’s guess that most of it are in electronics. Now, if my choice of using Indian Currency in paper form is detrimental (without any proof) to nation, how does using imported phones a patriotic act? Now, who decides which freedom is more important?

Think.

Security:

Between “my twitter hacked, hence digital is bad” and “banks are perfectly safe,” lie the truth. The truth is banking is safer than many other transactions. It’s a comparative. Not the superlative. The ugly truth is that India doesn’t have any demonstrable defences or offenses against sophisticated attacks. In adoption of any technology, bad boys conquer first. And bad boys show off their prowess. Israel, China, Russia, USA and North Korea are in this league, not us. Computerweekly, as early as 2012, published an article on the security lapses in major banking websites. In 2016, 32 lakh debit cards were compromised. It is true that we do not stop travel because there are accidents on roads. But, lets be sure of the risks and use protective measures. Before we punish, yes, punish people to go digital, we must strengthen our defences.

A BJP MP is sure on not allowing private banks in GST Network. The reason stated is that the trade data will be available to their foreign partner. Now, how come our financial data, not just available but can be manipulated be acceptable?

State control:

Just imagine the state control that we currently have. All our hard earned money is in the bank. We have to stand like beggars (or proud nationalists like me) in a queue with a ration limit per day and per week, to access our own money. Now, remember, this control is possible because deposits have become digital. What if we go fully cash less? Don’t you think that the state can block our accounts (already blocked many accounts even now under the garb of suspicion)? If someone says that no government cannot do that, remember, in the same land, our precious freedom was curbed. And even now, our access to cash is curbed. So never say never.

Cost of physical cash vs digital:

Another reason being quoted to go digital is to reduce the cost of printing physical cash. Let’s do a calculation. If, by this exercise the government reduces 5Lac Crore in physical cash and move to digital what will happen? Under UPI, the cost of digital transactions is pegged around 45 paise per transaction. If each transaction on an average is Rs 1000, then the total per year cost will be Rs 225 crore. Now, this is just the least and conservation estimate. And we are assuming that we will transact 1000 only once a year. Now you can do the simple multiplication. We do not know how much will it cost in other networks. As and when the number of transactions increases, the cost of digital increases, not for the physical one.

Privacy:

Every transaction is a row in a database and personally, I do not want to be in that list many times, exposing my spending habit. For someone who had read Pavlov and see his theory being applied by all corporations, it’s a nightmare to expose our entire transactions to corporations and not knowing how it can be manipulated. It’s a personal choice and caution is advised.

Dispute resolution:

For all digital transactions, from Amazon to Airtel, how many times have we called customer service with an issue? There are instances where a credit card payment doesn’t reflect on time because of a technical glitch and we are penalized in the next statement. If we go digital, we need a law, system and processes for perfect dispute redressal. Remember, this must be accessible to the illiterate as well because, we expect them to use as well. Losing Rs.100 in a transaction may not be important for us, but for a daily wage labourer earning 400, that is a big amount.

There are other problems as well. For example, the recent natural disaster in Chennai has shown the limitations of current digital network. There is a convenience of cash. But from room sized machine to iPhone, we have come a long way in technology and all these technical hurdles will be shattered. But when we do (not if we do), we must choose what is right for us and what we want, not what we are forced with.

Digital cannot be a destination because some moron’s calculation went wrong. It has to be a journey which should not and cannot be forced with current infrastructure (physical and otherwise), knowledge and literacy.

So, after five centuries of Utopia, we are still struggling to build a society will will eliminate all evils and will pave way for an egalitarian society.

 

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