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BW Businessworld

Cashless Future

Digital currency is the new reality of India. The country must adapt to the demonetisation move with optimism

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Aflashback scene, as you remember the joys of collecting that weekly pocket money, the trinkets of change in the piggy bank, or being able to count all that’s collected and exchange it for something we have been yearning for. These will become memories of yesteryears, as our kids in 2035 will look back in hindsight. At this stage, we will be a cashless economy battling with new challenges from this evolved system.

With bank accounts staged from their birth, pocket money available through their smartphones, to be technologically more competent and equipped to handle the internet and online payments, these are the patterns of a generation that will experience cashless economy in its true sense. The economy will see true financial inclusion with the ‘eRupee’ being available to all, enabling universal digital access to financial services for all people with no regard to social/economic status. We are setting the pathway for generations to come, and while this will happen gradually, it is a first step in that direction.

The acceptance of a new concept often takes time but eventually becomes a rage. It is a phenomenon across industries. We have witnessed the evolution of the telephone to mobile phones, smartphones and much more in technological advancement. It is no longer about functionality but differentiation with features, reliability and dependability. In the auto industry, the introduction of driverless cars is reflective of a vision that was perhaps missing a decade ago, but now it is a reality. Our terms of exchange have evolved from a barter system, to paper currency, online payments, to the latest digital mint currency. At every stage, new challenges have highlighted the growing importance of the stages that follow. Black market and counterfeit are some issues that have drawn users towards the digital world. But the issue of trust and security comes up since most digital players are operated privately and lack adequate regulation. To counter this, e-currency is the next wave that will be a government issued sovereign currency, with its own identity, value, legal tender, interoperability feature with the ability to be adequately regulated for a better monetary policy. It is more functional than anything that has been witnessed before. It will not merely be a commodity of exchange but a transforming function that will change the way we see currency.

In the case of currency, India’s position has always been a cash centric economy and is deep rooted with more than 95 per cent transactions done in cash due to insufficient card machines or a simple reason of no bank accounts itself. In fact, India is the only country in the world for renowned players like Uber to accept cash for their rides. The trendy e-commerce target audience of more than 70 per cent also chose ‘cash on delivery’ as their preferred mode of payment, while shopping online. These observations makes it pressing for quicker actions to be taken for a smooth transition. With better public education and government support, India can emerge into a strong evolving nation.

While it is at a nascent stage of adoption, the surge in adaptability due to changing regulatory practices, know-how and feature of convenience, digital currency has become a strong reality, a dream for the India that we know that will thrive on digital democracy and identity. A reality that is sure to evolve from the present to a full sovereign digital currency in the future, setting new benchmarks, which will highlight our thought leadership in the global market. “There are many problems which our country faces, but there are also 1.25 billion people to solve these problems,” stated Prime Minister Modi during his speech on Independence Day.

The demonetisation campaign seems like a well thought out strategy, which at the outset will create its disturbance but collectively it will create a positive outcome. The confidence of working with the people in India, will urge the public to adopt new best practices.

With the recent demonetisation, Nandan Nilekani, in an interview, termed this as a “defining point in India moving to cashless”. Mobile wallets have had more traction, and it is possible that a large number of Indians will transition from cash to mobile wallets. A study by Boston Consulting Group and Google recorded that wallet users have already exceeded the number of mobile banking users and are three times the number of credit card users.

While different governments are exploring the feasibility of this currency, it is our prerogative to adapt to this change with optimism and willingness, as pointed out by the Reserve Bank of India and the World Bank.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Ajeya Singh

The author is former head of Lehman Brothers India and Credit Suisse India

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