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CASHLESS ECONOMY
ABSTRACT
In an attempt to curb-out black money, money laundering, and to have a sound economy, the
central government of India has embarked on the cashless economy. It is the birth of a new era
in the nation with life with digital money. This paper is going to conceptualize the meaning of a
cashless system, explains online banking techniques in India, schemes by government to
spread the cashless system in India and highlights the challenges of the cashless economy and
electronic payment systems. The objective of this study is to examine the significant challenges
that are faced by Indians on the way towards cashless.
INTRODUCTION
cashless economy is a situation in which the flow of cash within an economy is non-existent
and all transactions are done through electronic media channels such as direct debit, credit
and debit cards, electronic clearing, payment systems such as Immediate Payment Service
(IMPS), National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS).
Today, credit cards and online payment services are becoming increasingly popular in urban
India but paper currency notes are still an essential
62 Mangalmay Journal of Management & Technology Volume 7, November 2, July-December,
2017 part of daily life. Cash may be defined as any legal medium of exchange that is
immediately negotiable and free of restrictions. Indians are the fourth-largest user of cash in the
world. The rate of cash to GDP is the highest, i.e. 12.42 percent in India. Cash in circulation
to private consumption ratio in India is 20 percent, and Card transactions account for 4
percent of the personal consumption expenditure. As most of people are illiterate, poor,
engaged in small transactions and having less banking habits. For them cash is the most
convenient and easy form of medium of exchange, free from hassles . A cash transaction is
immediate and doesn’t involve any intermediary. Cash provides individuals and families with
liquidity .One need not to worry about a computer system crashing, power going off, and losing
transaction midway. Use of cash doesn’t involve any extra cost as in the use of debit/credit
cards . Even in the most cashless countries like France and the Netherlands, cash still
accounts for 40 percent or more of all consumer transactions. Usually cashless economies
have low corruptions and less black money. Almost every country is bracing towards cashless
economy, and many countries have made significant progress. It is just a world trend which
India is trying to catch up. With the announcement of the Government of India (GoI) on
8th November 2016 about the demonetization of existing INR500 and INR1,000 currency
notes and introduction of new notes, the country is trying to move towards a cashless
environment and the initial awe and confusion have given way to a flurry of concerns. The
emphasis on online transactions provides convenience and tangible benefits to the people or
just add to stress and additional transaction charges is still a matter of debate.

Literature Review 01
(Pathania, 2016) in his article mentions some of the benefits of cashless transactions to
nations like increased GDP by using cards and reduced social cost, increased in financial
inclusion due to acceptance of e-payments, reduces the shadow economy, reduced in cash
payment enables e-commerce growth and facilitates trusted transactions online. He says that
at 1.7% of GDP, India incurs a much higher cost of cash compared with most developed
economies.
Ever changing digital world had a huge impact on Human resource. It had created an
impacts on their jobs and their workplaces. He mentions five challenges that the human
resource has to be in the present as well as in the future. The five challenges are- (i) figuring
out when processes should be automated, versus when a human face or voice is the best
route, (ii) better communicators in order to effectively leverage the digital space, (iii)
simplifying the data and provide a clear picture of their current workforce as the data are
scattered among multiple systems and acquired in varied formats, (iv) fear from the legal
department of using social media and (v) HR has to evaluate what function can be
automated and provide desired level of services. (Lauby, Mar 23, 2011)
(Hunt, 2014), Talked about the critical role to be played in ensuring the efficient and
effective transition and transformation from Industrial Era models and processes to their
Digital Era upgrades. He further said the social and digital technologies are transferring
talent management. In addition to transforming talent management, social and digital
technologies are changing the nature of work itself which have extensive human capital
management implications, ranging from human capital strategy, organizational structure,
and staffing - to job design, training and development, performance management, and
compensation.
(Team, 2016), paper clarifies the impact of Demonetization on the availability of credit,
spending, level of activity and government finances. The impact of the shock in the medium
term is a function of how much of the currency will be replaced at the end of the
replacement process and the extent to which currency in circulation is extinguished.
(Sharma, 2017) Conducted a survey to understand the potential for cashless economy in
India, through an extensive household survey of Jodhpur city. It was estimated the extent to
which households made non cash expenditure. It was also identified the bottlenecks which
prevented households to make non cash payments like Security, internet connection, loss of
card, hackers activity, lack of technology are worries of customers towards switching to
cashless economy.
(Kumari D. N., Impact of Cashless Economy on Common Man in India), The paper meets
an attempt to know the awareness about smartphone and the use of Smartphone in rural
India. The low literacy rates in rural India, along with the lack of infrastructure like internet
Access and Power make things extremely difficult for people to adopt e-transaction routes.
(Kumari & Khanna, Cashless Payment: A Behavioural Change to Economic Growth, 2017),
The study examines the effect of adopting cashless payment on economic growth and
development of the developing countries. The paper discovered that the adoption of the
a cashless economy policy can enhance the growth of financial stability in the country. It
appears that much has already been done in making the people aware of the cashless

economy and that a sizable proportion of the people are actually awaiting the introduction
of the cashless economy. Cashless economy initiative will be of significant benefits to
developing economy; hence the cashless system will be helpful in the fight against
corruption and money laundering. One most significant contribution of the cashless
economy is that it is expected to reduce the risk associated with carrying cash.
(R., 2016), in his paper what is the relationship between cashless economy and knowledge
economy. Cashless economy is the basic way to eradicate black money, but it also used to
create awareness about the knowledge economy among the common people. It improves
the way of thinking and use of their intellectual capital rights in a proper way. Cashless economy
is the basic way to eradicate black money, but it also used to create
awareness about the knowledge economy among the common people.
(Kumari D. , 2016), her paper spread the light on the basic concept of cashless transaction
its security issues. She says that insufficient infrastructure is also a major barricade for
cashless transaction. Illiteracy is one of the major issues in the path of cashless transaction,
as per UNESCO report. Hacking is one of the issues for cashless transaction as per the
Economic time is the major challenge in cashless transactions.
(Gupta, 2017), The main of the paper was to find out scheme, achievements and challenges
of the Haryana government for the cashless transaction. She says that in order to promote
cashless transactions in India Central Government has also launched Lucky Grahak Yojana
and Digi Dhan Vyapar Yojana in which monetary benefits will be provided to citizens using
cashless means for transactions. The Haryana government has decided to observe a
‘Cashless week’ from January 20 to January 27 to promote digital payment in the state. The
government has also decided to engage college students and staff (both teaching and non
teaching) to promote the mission.
(Garg & Panchal, 2017), her paper led light on the views of people on cashless economy in
India. Responses from respondents shows that cashless economy will help in curbing black
money, counterfeit’s fake currency, fighting against terrorism, reduce cash related robbery,
helps in improving the economic growth of our country. Major challenges that can hinder the
implementation of the policy are cyber fraud, High illiteracy rate, attitude of people, lack of
transparency & efficiency in the digital payment system. The study shows that the introduction
the cashless economy in India can be seen as a step in the right direction. It helps in growth and
development of the economy in India.
Conclusion
Demonetization led by Shri Narendra Modi, to eradicate the menace of black money from
the Indian economic ecosystem by embracing one of the boldest decisions by a government
post independence- Demonetisation. Post demonetization, cash deposits saw an
unprecedented surge which left behind a trail of unaccounted cash. As many as 17.73 lakh
suspicious cases were identified where cash deposits didn’t match the tax profile. There was
also a surge in suspicious transactions which were reported by banks and FIs. The move also
led to a drastic decrease in high denomination notes by almost 50%. The innumerable cases
of false registrations and unaccounted property came to light with Benami assets worth Rs
1626 crore seized.

Though the demonetization had made people uncomfortable, but it has also helped in
mobilizing digital payment, granting rights to poor’s, uncovering fake notes, Gaining
Momentum in Savings etc.
Literature on the cashless policies is rather scarce, but recently the topic has gained more
attention both by central banks and academic researchers. In this section, this study reviews
some existing studies as follows; Electronic Payments as argued by (Cobb, 2005) have a
significant number of economic benefits apart from their convenience and safety. These benefits
when maximized can go a long way in contributing immensely to economic development of a
nation Automated electronic payments help deepen bank deposits thereby increasing funds
available for commercial loans a driver of all of overall economic activity. According to (Cobb,
2005), efficient safe and convenient electronic payments carry with them a
significant range of macro-economic benefits. The impact of introducing electronic payments is
akin to using the gears on a bicycle. Add an efficient electronic payments system to an
economy, and you kick it into a higher gear. Add better-controlled consumer and business
credit, and you notch up economic velocity even further. (Cobb, 2005) In a
similar narrative by Hord, 2005 electronic payment is very convenient for the consumer. In most
cases, you only need to enter your account information such as your credit card number and
shipping address once. The information is then stored in a database on the retailer's Web
server. When you come back to the Web site, you just log in with your username and password.
- -Completing a transaction is as simple as clicking your mouse:All you have to do is confirm
your purchase and you're done (Hord, 2005). Recent empirical studies such as Kriwoluzky and
Stoltenberg (2010) attempted to estimate the cashless and monetary economy in US by
employing Bayesian estimation techniques. The data set, which was split into two parts, ranged
from first quarter 1964 to third quarter 2009, as done in Lubik and Schorheide (2004); Clarida et
al (2000). Whilst treating GDP deflator, output per capita and real wages as observable, its
findings suggest that interest rate policy was passive in the monetary but active in the cashless
economy. According to Gali and Gambetti (2009), volatilities in output and inflation declined due
to observed loss in the predictive power of money in a monetary economy. A similar conclusion
was also reached by Stock and Watson (2002) , Kim and Nelson
(1999) for most developed economies.
Conclusion
The government needs to take the necessary steps and make some policy considerations when
they are preparing for a cashless economy. The payment systems have to be protected from
the cyber-attacks which are the major threat for cashless transactions. Also, the government
should be able to serve the under banked as well. Everyone from the society should have
access to an electronic system that they can use for such transactions. Government should take
measures to increase liquidity into the system so that people face less inconvenience.
Government should also try to improve overall infrastructure so that more and more
people can come into banking net and internet.Society has also to play its part. They have to

understand the importance of cashless economy and appreciate measures taken by the
government. As a conclusion, it can be said that going cashless provides a lot more benefits
than just convenience to people, businesses and the government in particular.
Review of literature paves way for a clear understanding of the areas of research already
undertaken and throws a light on the potential areas which are yet to be covered. Keeping this
view in mind, an attempt has been made to make a brief survey of the work undertaken on the
field of Cashless economy. The reviews of some of the important studies are presented below.
Cashless economy is not the complete absence of cash, it is an economic setting in which
goods and services are bought and paid for through electronic media. According to
Woodford (2003), Cashless economy is defined as one in which there are assumed to be no
transactions frictions that can be reduced through the use of money balances, and that
accordingly provide a reason for holding such balances even when they earn rate of return. In a
cashless economy, how much cash in your wallet is practically irrelevant. You can pay for your
purchases by any one of a plethora of credit cards or bank transfer (Roth, 2010) observed that
developed countries of the world, to a large extent, are moving away from paper payment
instruments toward electronic ones, especially payment cards. Some aspects of the functioning
of the cashless economy are enhanced by e-finance, e-money, e-brokering and e-exchanges.
These all refer to how transactions and payments are effected in a cashless economy (Moses-
Ashike, 2011). Marco and Bandiera (2004) argue that increased usage of cashless banking
instruments strengthens monetary policy effectiveness and that the current level of e-money
usage does not pose a threat to the stability of the financial system. However, it does conclude
that central banks can lose control over monetary policy if the government does not run a
responsible fiscal policy. According to a 2015 report by Price Water House Coopers, India’s
unbanked population was at 233 million. Even for people with access to banking, the ability to
use their debit or credit card is limited because there are only about 1.46 million points of sale
which accept payments through cards. A study by Boston Consulting Group and Google in July
noted that wallet users have already surpassed the number of mobile banking users and are
three times the number of credit card users.
Conclusion
However, the benefits of this more have now started trickling in with more and more people
switching to digital mode of receiving and making payment India is gradually transitioning from a
cash-centric to cashless economy. Digital transaction are traceable, therefore easily taxable,
leaving no room for the circulation of black money the wholenization in money transaction with
e-payment services gaining unprecedented momentum A large number of businesses, even
street venders, are now accepting electronic payments, prompting the people to learn to
transact the cashless way at a faster pace than ever before.

According to Mukhopadhyay (2016) 10 ,‘Moody’s Analytics’ which is part of the Moody
Corporation11 and provides credit ratings, research, tools and analysis contributing to
transparent and integrated financial markets, in its study of the ‘impact of card usage on the
gross domestic product (GDP) of 51 countries’ found that electronic card usage added
USD 1.1 trillion in real dollars to private consumption and GDP from 2003 to 2008. In addition,
according to the report, a one percent increase in card transactions would increase
consumption by 0.039% and GDP growth by 0.024% and thus, according to Mukhopadhyay
(2016), similar benefits may be expected in India. In another study, according to Zandi et al.
(2013), who studied 56 countries over a period of 2008-2012, calculate that $983 billion were
added to these countries’cumulative real GDP due to an increase in card usage12. Whilst
Hasan et al. (203), found that there is a positive correlation between migration from paper to
electronic retail payments to the real economy. They argue that an increase of card penetration
ratio in the European Union (EU) by 1.2%, would result in an increase of around 0.07% increase
in the GDP13. Whilst according to Bolt et al. (2008), cashless payment instruments have the
potential to save a lot of bank costs involved in handling paper money14
.
On the basis of the literature reviewed as part of the study, the question which the current paper
tries to focus on is how going cashless is beneficial for the Indian economy? Secondly, what are
the challenges that may pose problems in making the transition from relying on paper based
currency to a cashless economy and how to overcome the challenges?
Conclusion
For India, the roadmap towards creating an environment of secure and a user-friendly digital
payments infrastruc-ture has the potential to immensely increase the financial inclusion of the
people currently living on the fringes of the society and the development ladder and that is
perhaps one of the most important reasons that the government must vigorously work towards
promoting and developing a cashless economy
Jain, P.M (2006) in their article “E-payments and e-banking―An Analysis of Growth Pattern of
Cashless Transaction System”. Taking fullest advantage of technology, quick payments and
remittances will ensure optimal use of available funds for banks, financial institutions. He also
pointed out the need for e-payments and modes of e-payments. P Manivannan (2013) in his
research paper “Plastic Money a way for cash Less Payment System” examined that Plastic
Money i.e. usage of Credit card was measured a luxury, and has become needed.
Zandi et al. (2013) studied whether the long-term shift to credit and debit cards stimulates
economic growth of 56 countries worldwide. They discovered that electronic card payments can
increase efficiency and boost consumption of the economy. Mieseigha & Ogbodo (2013)
Moreover, the adoption of electronic transaction is essential for transparency, accountability and
reduction of cash related fraud, the fundamental elements of economic growth and
development.Liao and Handa (2010).Electronic payments will replace cheque payments
extensively but cash-based payment will persist to a substantial extent

Conclusion
The need to move towards a cashless economy in India is immense. One, it will save a huge
amount of money that is spend annually in printing and maintaining currency. Currently less
than 1% of all consumption expenditure is incurred through cashless instruments. The arrival of
malls, multiplexes, online shopping stores and shopping complexes encourage the customers to
make use of plastic cards. The government needs to take the necessary steps and make some
policy considerations when they are preparing for a cashless economy. The payment systems
have to be protected from the cyber-attacks. Going cashless provides a lot more benefits than
just convenience to people, businesses and the government in particular. Increasing use of
electronic payments boosts consumption and GDP. This move by the Government along with
the implementation of the GST will eventually make the system more accountable and efficient.
Review of literature paves way for a clear understanding of the areas of research already
undertaken and throws a light on the potential areas which are yet to be covered. Keeping this
view in mind, an attempt has been made to make a brief survey of the work undertaken on the
field of Cashless economy. The reviews of some of the important studies are presented below.
Cashless economy is not the complete absence of cash, it is an economic setting in which
goods and services are bought and paid for through electronic media. According to Woodford
(2003), Cashless economy is defined as one in which there are assumed to be no transactions
frictions that can be reduced through the use of money balances, and that accordingly provide a
reason for holding such balances even when they earn rate of return. In a cashless economy,
how much cash in your wallet is practically irrelevant. You can pay for your purchases by any
one of a plethora of credit cards or bank transfer (Roth, 2010) observed that developed
countries of the world, to a large extent, are moving away from paper payment instruments
toward electronic ones, especially payment cards. Some aspects of the functioning of the
cashless economy are enhanced by e-finance, e-money, e-brokering and e-exchanges. These
all refer to how transactions and payments are effected in a cashless economy (Moses-Ashike,
2011). Marco and Bandiera (2004) argue that increased usage of cashless banking instruments
strengthens monetary policy effectiveness and that the current level of e-money usage does
not pose a threat to the stability of the financial system. However, it does conclude that central
banks can lose control over monetary policy if the government does not run a responsible fiscal
policy. According to a 2015 report by Price Water House Coopers, India’s unbanked population
was at 233 million. Even for people with access to banking, the ability to use their debit or credit
card is limited because there are only about 1.46 million points of sale which accept payments
through cards. A study by Boston Consulting Group and Google in July noted that wallet users
have already surpassed the number of mobile banking users and are three times the number of
credit card users.

Conclusion
rom the above analysis it also appears that many people actually agree with the government on
the usefulness of cashless economy as it helps to fight against terrorism, corruption, money
laundering but one biggest problem in the working of cashless economy in India is cybercrime
and illegal access to primary data. Therefore it’s important to strengthen Internet Security from
protection against online fraud. Large number of population is still below literacy rate living in
rural areas .For smooth implementation of cash less system in India, the following measures are
recommended Government have to bring transparency and efficiency in e-
payment system, strategies used by government and RBI to encourage cashless transactions
by licensing payment banks, promoting mobile wallets and withdrawing service charge on cards
and digital payments. A financial literacy campaign should be conducted by government time to
time to make population aware of benefits of electronic payments.
The first major use of smartcards was by French banking association Cartes Bancaires who
saw advantage of using the technology in reducing fraud. By replacing magnetic striped cards
with smart cards fraud rates in France dropped tenfold then
Ashish Das, and Rakhi Agarwal, (2010) in their article“Cashless Payment System in India- A
Roadmap” Cash as a mode of payment is an expensive proposition for the
Government. The country needs to move away from cash-based towards a cashless (electronic)
payment system. This will help reduce currency management cost, track transactions,
check tax avoidance / fraud etc., enhance financial inclusion and integrate the parallel economy
with main stream
.
Vincent, L. (2005) in the article “Credit cards - Modern payment system”, provided information
about credit card functioning in India and settlement and concluded that it is a blessing to both
the traders and customers [9]. Jain, P.M (2006) in the article “E-payments and e-banking”
opined that epayments will be able to check black money. Taking fullest advantage of
technology, quick payments and remittances will ensure optimal use of available funds for
banks, financial institutions, business houses and common citizen of India. He also pointed out
the need for e-payments and modes of e-payments and communication networks [10]
.
Reddy, Ramakrishna (2006) in his article “Card products in India”, commented about the
reasons for not attaining full growth potential among card products and suggest remedies for
growth in this field for the benefit of all players
Conclusion
The first and foremost question which was asked in the questionnaire formed for this research
purpose is whether respondents were aware about the concept of cash less transaction out of
total respondents 90% of respondents confirmed that they are aware about the aforesaid

concept.After that next question asked was from where respondents have heard about cash
less transaction, in this case 50 % respondents stated that they have heard from news channel
specially after demonetization effect. Moreover 63% of respondents have used cashless
transaction in one form of another
Murugesan (2007), in his Ph. D. thesisentitled “A study on bank credit card culture in
Chennaicity” analyses that thecredit card gives ample scope for the expansion and growth of
business. To reduce the burden of existing cardholders, reduction should be given in the
collection of penal interest and other charges, incentive scheme should be introduced to the
account holders of the bank willing to get credit card.
Vaisla and Bisht (2010), the article “SWOT analysis of e-initiative in Uttarakhand”, emphasis on
the e-initiatives levels and challenges associated with the service delivery initiatives to the
citizens using (ICT) in the State of Uttarakhand are the main focus of this research work. The
comprehensive review regarding e-initiatives experiences in India has been detailed in the
study. The perceptions of the experts towards the e-initiatives in
Conclusion
Currently, many laws defined commerce in order to avoid unfair deals, by the way to avoid
problems which might be dealt in the court. In today's world, every business-to Customer
Company tries to sell something, whether they are products or services.
Traditionally, the place to sell products in business-to-customer companies is a store.
Customers just go to the shop and buy what they desire. Aadhaar-enabled payment system
(AEPS) also used as cashless transactions. Government also promoting mobile wallets,
people does not need a debit card, credit card or internet banking password for making payment
using a mobile wallet. In this just load money in the wallet via IMPS and use it on the move.
People can download mobile wallet app from play store. 'Digital India' focuses on transforming
India in to a digitally empowered and knowledge economy. Bharat Interface for Money (BHIM)
App also launched by government to promotes cashless transactions.
E-Wallets: It is simplest cashless method. At present time mostly the online shopping payment
are done through e-wallets. Mobile Wallets: People do not need a debit card, credit card or
internet banking password for making payment using a mobile wallet. Just load money in the
wallet via IMPS and use it on the move. People can download mobile wallet app from play store.
UPI Apps: UPI is a mobile payment system which allows person to do various financial
transactions on your smartphone. UPI allows a person to send or receive money using virtual
payment address without entering bank information. Aadhaar Enabled Payment System:
Aadhaar Enabled In order to use this facility, it is mandatory to link a person Aadhaar card to
concerned bank account. People can use AEPS in order to perform transactions like Aadhar to

Aadhaar fund transfer, Cash withdrawn,Cash deposit, etc.
Conclusion
A less cash economy is feasible, practical and much more efficient than a cash-based
economy and a completely cashless economy. It can be observed that people are open towards
the
concept of a less cash economy and find it easier to adapt to. A less cash economy would boost
the
Nation‟s economy as the cost of making and handling paper money will be reduced. A less cash
economy reduces terrorist activities as most of the terrorist activities are fueled by unaccounted
money in hard cash and helps control the problem of fake money.
India is one of the largest markets for smartphones and mobile applications, providing a
easy transition towards a less cash economy. The local markets have already accepted the
transition
into paperless transactions. Banks and Payment Gateways are soon shifting towards payments
through smart phones. Therefore, it can be observed from the research that both at the
individual
and national level, there is a conscious effort to move from a cash-based society towards a
cashless
economy.

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