“Cashless” Equals Inconvenience!

The surge in cashless transactions since Nov. 8th is not a sign of India moving towards a cashless society. It is merely a sign of merchants making do, while situation the gets better. From what I see, the "situation" has gotten worse and is expected to be that way until the new Rs. 500 notes get into wide circulation.

When I make a cashless transaction these days, I avoid the possibility of long queues at ATMs or banks and perhaps some fringe benefits, aka cashback. But I am also shifting my inconvenience to the merchant with whom I am transacting.The merchant, in turn, could shift their inconvenience to their employees.

Consider a sudden increase in cashless payments made at a small establishment such as a bakery. The money from such transactions eventually hits the owner's bank account. She then has to pay her employees - the baking and cleaning staff. These are real Indians - no smart phone, no internet, no atm card - who lives are peppered with small cash transactions made at small shops.

During normal times, the baker's cash reserves should be enough for paying salaries in cash (in change, to be exact). During normal times, the bank would provide cash in Rs. 100 stacks and lower to shop owners. But these are not normal times. If the bakery is forced to go cashless in fear of losing business, the inconvenience gets passed on to the employees. And then there are people who buy a Rs. 10 cup cake, hand out a Rs. 2000 note and expect change!

cashless

A similar reasoning applies to the agency who sends a caregiver each day to look after my mother. Recently they got themselves a card machine. So I could swipe out the Rs. 15,000 or so payment that I owe them by month end. However, 70% of that money would go to the caregiver, another real Indian who problems that I do not bother to think about. How will the caregiver get paid if banks have only Rs? 2000 notes? How will agency manage to pay its employees if all their clients used their cards? Can I simply say, "not my problem" and pass on my troubles to others?

My point (which is going to met with a lot of criticism esp from younger readers) is, that a cashless society may (or may not) be a step in the right direction. However, an economic shock should not be and cannot be the catalyst for such a shift.

The real India (who will never read this) is not ready for it.  The real India is a fish out of water in an ATM kiosk. The real Indian does not know how to fill up an application form. The real Indian needs cash. Sorry, make then change.

This is the real problem. The real India has run out (or is fast running out) of change. The far-removed-from-reality Indians like me are busy calculating cashback benefits, feeling proud on social media about a digital India and do not have change. Banks have run out of change - Rs 100 and lower denominations. The good news is many ATMs are now working. The bad news is they are spewing out Rs. 2000 notes and nothing else (besides printing "cannot process" receipts).

In the first week (since 8th), finding a working ATM was tough. In the second week, finding working ATMs, that provide Rs. 100 notes, is  proving difficult.

The demonetization announcement was well-timed: post-Diwali and eight days into the month. However, we only have about 8 days left in the month. However, come Dec. 1st or first week, salaries have to be paid - in cash to real Indians. Hopefully with the new Rs. 500 notes and at least a few Rs. 100 notes.  Else they are going to face the heat.

What do I care, I got me a nice wallet that offers 50% cashback. Thank God, I don't have to stand in line. Let me go tweet about it.

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38 thoughts on ““Cashless” Equals Inconvenience!

  1. MURALIDHARAN

    While the transition is very painful, it is time that India moves to digital for a major portion of their transactions both for tax purposes and health issues created by physical money. Bank notes of 500 denomination are being airlifted and will be fixed soon. However, people need to stock less of cash. Indian population will learn digital banking once they are forced into it. Many towns and villages have smartphones and people currently use it for watching videos. They can start learning to use Bank apps. Let us not dilute the effects of the journey. I am in no way refuting the pain. We need to give different solutions to manage this temporary issue; but the journey is a MUST.

    Reply
  2. Ramakrishna Sripathy

    agree with your article. the real India in villages is something i have seen from close quarters ( my father was mostly posted in small villages in AP) & cash forms the basis of their everyday life. removing this from the hands & makes their life miserable. many who are 50+ have a difficult time even SMSing from their phone leave alone transacting online/using cards & they do not understand how someone can defraud them using their ATM card/ online transaction. forcing people to shift to "digital" without understanding the loopholes ( security/fraud) is a dangerous step. It is good to have a digital option - slowly people will move towards it & will become a majority in coming years.

    Reply
  3. kirti rana

    Going Digital and forced to using Debit/credit cards does not mean India has progressed. Financial literacy and educating the real Indians was the way. Boring and Time consuming therefore No headlines For The PM, no tears to shed for his life wont be in danger.

    Reply
  4. Shweta

    Very well written sir. These ' let me tweet' & 'update a status' ppl are not going to agree no matter what. They might be quick in expressing the necessary sympathy, but empathy is nowhere to be seen.You talked abt common ppl & the way their lives actually run. The ppl who say ppl should be forced into it ,let them go penniless & foodless & technology less ,ask them to wait for their turn in queue at some remote rural area ,so that their & their children's next meal could be possible - and then see how smoothly they accept the 'change' then.

    Reply
  5. Prasanth Prabhu

    Overall agree with your theme sir. However, here is another perspective - We Indians will not change our habits unless we are "forced" to do so. Govt has been trying their level best to get everyone a bank account, incentivising using banking and digital channels by DBT etc. However, the mindset is hard to change unless a "shock" is administered and that is what this demonetisation has done.

    Reply
    1. freefincal

      The only habit we need to develop is to account for everything and pay tax. Nothing wrong in having such cash and using it.

      Reply
  6. Yogesh Mahla

    First of all, demonetisation is done for other reasons (which writer can find through out the Internet or newspapers) and not for promoting cashless transactions. Increased cashless transactions are a byproduct of this step by the government. Further, the inconvenience being faced by the public is a very less price to pay for the benefits attainable due to demonetisation.

    Reply
  7. Adaikkappan Arumugam

    No doubt, people are going through pain. Esp the people in unorganized sectors. But I also see the better side of it. Just as in the example the bakery guy.
    1. He starts the file income tax
    2. Pay proper sales tax
    3. To reduce his tax out go, he starts to provide medical insurance, group term insurance, pf and other benefits so he can write of those as expenses.

    Good for everyone. As you said, honesty, ethics and compassion for others is what needs to be taught and imparted from young age.

    Reply
  8. Rajan Thomas Choondal

    Many of the senior citizens are not used to digital transactions, but they too were forced to stand in queues to withdraw their own hard earned money lying in their accounts. Now these are a category of people, where it is a little late to improve their financial literacy. They need some compassion in treatment - because not all senior citizens are lucky like those that are related to us and whose needs are taken care of by us.

    Reply
  9. ourabh

    Great thought process however there is one point you are missing and I like to add that. With GST around the corner many have to shift from unorganised to organised sector so considering this, many have to changed their way of doing transactions, However there are few how could and they are not willing to do it. Let me give you the example In Farm Mandi many people do agent make large amount transactions with cash but now they have to move to cheque or card payment while small farmer will get paid via cash rest big tickets will have to be cashless.
    Another one is in logistics many companies have tie with petrol pumps so truck always visit these specific pumps where they get discounts or some are settled on monthly basis.

    The low amount transaction will/should happen in cash and remaining will/should move to the cashless. Yes I agree come Dec when salary have to paid many will see the heat of this movement. Yet some have to to cashless transactions. This Sunday in Pune I saw many vegetable venders accepting payment via cards. Not sure how this is happening in villages though.

    The point is the big transaction can/should move to cashless. Yes there are hiccups and there will be more come the salary period. Let see how it pans out.

    Reply
    1. freefincal

      GST will not force a person on the street to go cashless. Besides, it is only a choice. There is nothing wrong with using cash. By avoiding a trip to the bank and using e-wallets were transferring our hardship to others.

      Reply
  10. kamalgarg1958

    "India is overwhelmingly a cash economy and there is nothing wrong in it. Cash is not a crime.
    India is not just salaried employees in Bangalore using PayTm and credit cards to pay for Uber rides and buy from bigbasket.com".
    And btw, Uber is not the end or rather beginning of life.
    Seriously, people are standing in queues and government is saying these are duplicate people standing as a 'front' for somebody else. May be right. What about villages. An aged person will not know how to deal with debit card or a digital payment interface. Does any body know that there are crores of people in India who despite having a mobile phone, do not know "how to make a phone call from a mobile phone". What they know is "how to receive a call".

    Reply
  11. Tim

    Please delete the earlier comment for the typos. This is what I wanted to post:

    Excuse me but who cares for the stupid villagers who set their fields on fire and pollute the air? As long as I get food on the table, and can pay off my servant (as little as possible), I am all set. I will continue to look for ways to cheat the govt of taxes in all possible ways (there will always be a Mallya to justify my act), go to social media to congratulate the government for getting back at Pakistani counterfeiters (what better way to display my patriotism, now that there is no Devyani Khobragade). Come Diwali, I will still burn crackers, dismiss the Air Quality Index data as US propaganda to discourage Indian manufacturing and contribute towards killing my children (slowly), and then justify it all by saying its only a day. And of course I will save as much as possible for my children and therefore read this blog with a lot of interest. We really are an interesting lot.

    But seriously, like all of you, I do really hope that the intentions of doing it all were good, and while the government tries to tackle the resulting problems in a reactionary manner, these measures will at the minimum, contribute towards black money reduction i.e. something good needs to come out of all of these troubles.

    Finally, I am not an economist, but I read this article (link below) towards understanding the pros and cons of demonetization and intuitively, the arguments made a lot of sense to me ....

    https://ajayshahblog.blogspot.in/2016/11/trumping-black-money.html

    Reply
  12. sourabh

    The problem is not with cash the problem is with tracking/regulating things. Was there problem in cable TV earlier ? No, but it was difficult to regulate and track thing however with set top box it became easy right ?

    The point i'm trying to make here is about big transaction (50k-100k+) can/should move to cashless (cheque/dd/card/e-wallets) there are may ways.

    I understand that there is hardship and each one has stories to tell. There is no denying for that. Even I didn't like the way govt and everyone talking about those opposing are anti-nation, that is not the way to go.

    Reply
  13. kamalgarg1958

    But then, regulation - like what happened or happening in case of cable TV - does not mean either you switch to a digitised transmission from 'x' date or there will be a black out.
    No body is having any sort of doubt on the objective of this mission of eradication/unearthing of black money and of course the counterfeit money (whether terrorism funding or otherwise). What people are saying is that there could have been a gradual shift over a period of time. Say, for example, you could have said that no cash transaction/cash payment/cash receipt entry above say, for example, 1 lakh after , say 'x' date. Then gradually you reduce the limit of cash transaction/cash payment/cash receipt entry, effective from a particular 'x' date and keep on doing it and thereby give citizens of this country time to transition into a new non-cash world, learn the way this world operates and finally transition to a very low limit of say, for example, 5k for no cash transaction/cash payment/cash receipt entry. People are hardshipped and anguished for the complete lack of preparedness and planning on the part of GoI while taking such drastic measures. See, they are tweaking the rules of withdrawal and exchange, eligibility for cash transaction for marriage, seed purchase in case of farmers, in itself enough proofs that this Govt has failed in this mission in its entirety.

    Reply
  14. Sivakumar

    1. Personally i feel demonetisation with enough cash of 100's if not 500 or even 500 could have made situation better, so that very common man would not have faced the problem, because what people needs is some amount of withdrawal to manage with lower denominations.
    2. Regarding cashless society.. i dont think this move is going to abolish it.. its just temporary.. once the withdrawal limits are relaxed.. people are going to withdraw and business asusual..
    3. When we have 80% unorganized sector.. any of this move will not increase the organized sector.. it has to be gradual.. But country like india where the entrepreneaur ship is more moving to organized sector is scary.. For e.g let us not make vegetable vendors tomorrow to be killed and they start working in More/reliance or walmart...

    Reply
  15. Pradeep

    As someone already highlighted above, we Indians will not want to accept change unless forced to do so. So this is a required push by govt.
    Firstly, before moving to digital wallets, people should use debit cards that are issued for their accounts. Majority of Indians use debit cards only to withdraw money from ATM. I would like to see the govt come out and waive off the fee the merchants have to pay for collecting payments using cards. This will encourage more cashless payments.
    There are several businesses that earns revenues of Rs 25,000 and above everyday and they are not willing to go cashless. They are also culprits of accumulating black money. Govt should force these businesses to go cashless.
    If we wait for all Indians to change and then implement demonetization, the civilization would have ended by then.

    Reply
  16. Rocky

    Govt has not banned lower denomination currencies. It will be in sufficient quantity into circulation soon. I think for ultier motive that much pain has to be taken.

    Reply
  17. Kashi

    Pattu Sir,

    There are benefits of going cashless in the chain of payments until the last leaf (the unbanked person, in this case, the caregiver / bakery staff). To the extent that you and other bakery/agency customers go cashless, the banking system (queues, physical cash) is less loaded. Bakery customers should be 100 times bakery staff. Caregiver agency customers would be 10 times caregivers? The bakery owner does not incur a 100n pain in the current banking painful situation.

    So, I am afraid I do not think your argument is valid.

    Reply
    1. freefincal

      I did not say there are no benefits of going cashless. Just that one cannot expect them to change their ways and go cashless because it suits us.

      Reply
  18. Rocky

    Govt had given chance to open Jan Dhan Bank account to all citizens who had none right from the beginning. So no excuse for those who have not opened their account.

    Reply
  19. Usha S

    You are right, Pattu Sir! I deposited my driver's salary in his bank account and gave a cash advance to the maid and thought I have solved the problem. I do my vegetable shopping along with grocery (lucky I have an enterprising south Indian guy from Virudunagar who stocks both and has a swipe machine minimum Rs.150/) with a credit card. I also hoarded a few Rs.100 notes for reasons not known but they are coming handy now. But, my luck seems to have run out. The geyser blew the fuse and the bill was Rs.1200/ The guy wouldn't accept Rs.2000/ It is time to pay my maid Rs.1000/- I haven't stepped out since 8th Nov. I will need change for auto, taxi etc. I realize I had not solved but stalled the problem.
    The bottom line is: We can be a cashless society only for a short time until the cash system catches up with you. Like you say, we are only passing the buck or the cheque. The one who is left with the cheque or Rs.2000/ is the loser.

    Reply
  20. Usha S

    Can I raise another concern of mine in this forum? Newspapers announce the banks are flush with deposits. My understanding is the law-abiding tax paying citizens have deposited their emergency cash that was stashed at home now into their bank accounts and will soon withdraw them again to keep for an emergency. How come the SBI did not foresee this withdrawal and cut down the interest rate with all the banks following suit. The interest rate on my fixed deposit that are due for renewal have come down too. Has the inflation come down with the same alacrity?
    Those with unaccounted money are not in a hurry to deposit them in the bank and face queries. They will explore all possibilities before they decide to explain it or destroy it. This may happen in the last week of December, probably.
    My euphoria over end of parallel economy, real estate prices becoming affordable, disappearance of capitation fee in professional courses and rationalisation of doctor's fee is evaporating slowly.
    The only outcome I see in real terms is a decrease in interest income of senior citizens who have always declared their income!

    Reply
  21. sunderarajan p.

    chief, i fully agree with you. when a govt implements something, it should be bothered about the welfare of as many as possible. the whole exercise is totally uncalled for. It could well turn out to be the India shining moment for the present regime.

    Reply
  22. kamalgarg1958

    My euphoria is also not only not ending for parallel economy, but even degree of corruption in the country (see newspaper reports showing govt babus caught taking bribe in new currency notes) and terrorism funding (see newspaper reports showing terrorists caught with new currency notes). No way, capitation fee would come down. Real estate prices would come down for the interim period, naturally. The biggest unthought culprit is fall in the GDP of the country which after a very long and painful period, suddenly started looking up.

    Reply
  23. Kashi

    Usha mam,

    Is the cash situation becoming better wherever you are located? I am in Bangalore - queues are really coming down and 100s are freely available. new 500s - haven't seen one yet - not even someone with a selfie 🙂

    Reply
  24. Pradeep

    Please don't fall for media reports suggesting plenty of anti-demonetization stuff. Remember there will always be elements which will pay to poison the public about this initiative slowly.
    Any initiative will not work 100% because there are people who want to benefit out of it illegally and quite hard to get full success rate. Even if this drive eliminates 50 to 60% black money and adds those people to the tax base, India will benefit.
    Anybody who deposits their money and pay taxes will be pursued by IT dept in the coming years which will mean more will pay tax and hence overall tax rates gets reduced.
    If we keep thinking things will not work, then we might as well die now because we will anyway die at some stage.

    Reply
  25. Usha S

    Yes Kashi, I could get change for Rs.2000/ when I bought veg for Rs.100/. Shopkeeper says he does give change for regular customers. Haven't seen Rs.500 note yet. This is in Mumbai.

    Reply
  26. amarjeet singh

    85% of the money cannot be replaced overnight and now with around 8000 cr being added every day it will be in the next financial year that we will be getting cash from Banks, ATM on regular basis. Govt is giving cash as salary advance to its employees but what about private sector employees. The rural economy has just got a shock as everything was in cash. You want to make it cashless economy make the rural economy cashless but for that why force people to buy a certain level of phones for e commerce. There is something in the decision which does not meet the eyes.

    Reply

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