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Moving from Cash to Cashless: Challenges and Opportunities for India

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Abstract

In a first of its kind study, we estimate the amount and potential for cashless payments made by households in India. Through an extensive household survey across 8 cities (4 metros) involving 3066 households, we estimate the extent to which households make non cash expenditure. We also identify the bottlenecks which prevents households to make non cash payments. Our key results are; • 1.38% of all household expenses are done via non cash instruments (2.92% in urban and 0.55% in rural). • Approximately 7% (12% in urban and 3% in rural) households make cashless transactions in one or more items. • For urban India, more than half the households who make cashless transactions spend 5% or more through cashless and almost a quarter of the cashless households spend more than 10% through cashless. • For urban India, approximately 80% of the households make cashless transactions in only one item • If the households have an incentive to keep records of financial transactions, they will have higher chances of incurring non-cash expenditures. • Supply side constraint (that is unwillingness by the seller to accept such payments) is the biggest deterrence to cashless payments Thereafter, we develop a predictive model of cashless payments. The results put together gives us an important policy direction towards what can enable increase in cashless payments. We employ logistic regression to identify factors that help us to understand what makes a household go cashless (in terms of Socio Economics, payment frequency and network effect), what factors explain the ‘perceived constraints’ by the households (income status etc). We then clearly spell out te role of the policy makers and Goverment in promoting cashless instruments. JEL Classification: G18, G29, O53 Keywords: Cashless transactions, household survey, network effect, predictive modeling
... Cash facilitates drug trafficking, human trafficking, extortion, money laundering and illegal immigration (Bappaditya Mukhopadhyay, 2014). In the cashless or less cash economy, these will choke and results in increased tax collections of government. ...
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The dream of cashless economy becomes unreal due to the lack of awareness of cashless economy and demerits of cash transitions. This paper aims to focus on the significance of awareness among the society for the cashless transitions and reduce the cash transitions. For the same paper, the data and information is collected from news papers, articles, magazines, internet websites, and expert interviews. The results of demonetization leads to the cashless economy but its effectiveness decreased due to the lack of awareness among the society and created the need of awareness the betterment of Indian economy.
... Cash facilitates drug trafficking, human trafficking, extortion, money laundering and illegal immigration (Bappaditya Mukhopadhyay, 2014). In the cashless or less cash economy, these will choke and results in increased tax collections of government. ...
Article
Full-text available
The dream of cashless economy becomes unreal due to the lack of awareness of cashless economy and demerits of cash transitions. This paper aims to focus on the significance of awareness among the society for the cashless transitions and reduce the cash transitions. For the same paper, the data and information is collected from news papers, articles, magazines, internet websites, and expert interviews. The results of demonetization leads to the cashless economy but its effectiveness decreased due to the lack of awareness among the society and created the need of awareness the betterment of Indian economy.
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Full-text available
India is basically a cash based (approx 98%) economy with out-sized percentage of funds (unaccounted money) blocked outside the banking economy as adjacent to the developed world where the money (in cash form) in circulation is for example. Recently under Popular E-Campaign-"Digital India", our Honorable Prime Minister Narendra Modiji's dream to become India a cent percent "Cashless Society" like Sweden. Although it was the hard move to implement and bring economy at smooth track as before the demonetization but present government has taken this highly risk oriented step with proper planning of supplying substitute currency in the economy. Present study presents an overview on cashless economy and tries to include the opportunities and challenges before Indian Economy. The primary objective of this study is to investigate the challenges & opportunities before India to become cashless economy. The present study is an endeavor to examine the cashless economic system so as to assess its feasibility in India with regards to timeless, preparedness and adequacy against the backdrop of our level of development both technologically and educationally. For the purpose a self structured questionnaire was developed and chi square test of independence was applied to analyze the primary data. The output of this study may be helpful to the ICT practitioners/professionals to manage and improvised their E payment from this new perspective in context to present need.
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Full-text available
India is basically a cash based (approx 98%) economy with out-sized percentage of funds (unaccounted money) blocked outside the banking economy as adjacent to the developed world where the money (in cash form) in circulation is for example. Recently under Popular E-Campaign-"Digital India", our Honorable Prime Minister Narendra Modiji's dream to become India a cent percent "Cashless Society" like Sweden. Although it was the hard move to implement and bring economy at smooth track as before the demonetization but present government has taken this highly risk oriented step with proper planning of supplying substitute currency in the economy. Present study presents an overview on cashless economy and tries to include the opportunities and challenges before Indian Economy. The primary objective of this study is to investigate the challenges & opportunities before India to become cashless economy. The present study is an endeavor to examine the cashless economic system so as to assess its feasibility in India with regards to timeless, preparedness and adequacy against the backdrop of our level of development both technologically and educationally. For the purpose a self structured questionnaire was developed and chi square test of independence was applied to analyze the primary data. The output of this study may be helpful to the ICT practitioners/professionals to manage and improvised their E payment from this new perspective in context to present need.
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