Comparison: Options Available For Cashless Transaction

Published: November 13, 2016 at 10:48 am

Last Updated on

In this post, Anish Mohan discusses various options available to us for making cashless transactions. As always, Anish immediately responded to my request to write this article – a suggestion by Dr Ramesh Mangal. Thank you, Anish.

This is Anish’s fourth post at freefincal. Do check out the links to the other post at the end of the article.


In the backdrop of the surgical strike on Fake Indian Currency Notes (FICN), Rs.500 and Rs.1000 denominated bills have been withdrawn on midnight of 9th Nov. The next day, the honourable Finance Minister Shri Arun Jaitley has nudged all Indians to move to a cashless economy. The word cashless and economy said together first sounds like an oxymoron. However, they are possible and can be implemented with various degrees of patronisation towards various demographics of people. Surely a digital wallet is well adaptable to a Gen Y person in an urban setup compared to grocery shop owner in a rural town. But, insurmountable it may seem, I strongly believe, it is possible and I had always dreamt of it.

To demystify the oxymoron cashless-economy, let us first look at the various types of “Legal Tender”. A “Legal Tender” is a medium of payment recognised by a legal system to be valid for meeting a financial obligation. (Source Wikipedia). Now any such obligation, if satisfied, without an exchange of cash, is a Cashless Society. Refer to Wikipedia on Cashless Society  for a good read on it.

So, coming back from all the esoteric talking, let’s see the available options such that a legal tender can be satisfied without any CASH exchange.

  1. Credit Card
  2. Debit Card
  3. Prepaid Card
  4. Netbanking
  6. IMPS
  7. United Payment Interface (UPI)
  8. Digital Wallet

For the benefit of readers, I would refrain from crowding this post with individual definition, there are numerous posts to explain them. I would rather try to make a comprehensive comparison so that the user may decide the possible option depending on various situations. I hope that by the below factual comparison, the reader or the user shall be able to exercise discretion of merits and demerits depending on his behavioural traits.

Click to enlarge. You can also download the article word file to see the table better.

I have generally used all the above payment methods for various purposes. Like people who are on my payroll i.e. Driver, Maid, Babysitter, Cook, Gardener, Sweeper et al are paid via NEFT. I use UPI when I am required to align my account balance on a Saturday/Sunday or Holidays as NEFT is non-functional. However, when it comes to paying in Uber, Utility Bills, Bigbasket or Swiggy, it has to be Paytm due to cash back.

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Disclaimer: Please do not construe my last statement as promoting Paytm by any margin and it is incidental that I use this Digital wallet. There are other digital wallets and I have not tried them yet. You can choose anyone which you are comfortable with.


Payment by Cheque

I would like to add that cheque payments are still a good way to transact without cash in exchange for some services.

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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  1. The Article is good. Can you please create an article for comparision of the Digital Wallets.. We need better wallets in terms fo facilities as well as transfer to bank account. The charge should be minimum.

  2. Cash is anonymous. Most aspects of our life are already tracked. Going all-digital would also mean every aspect of your spending habits will be tracked. We do not have very strong privacy laws in this country. I would personally feel very uncomfortable if we are forced to go all-digital. Cash should always be an option.

  3. if PIN is comprised for a debit card, that transaction can also be disputed like a credit card and the money can be recovered. Though it might take more than in case of credit card.

  4. For KYC customer it is 1 %
    “customers & merchants that had completed their KYC could send money to bank at 1% without any waiting period. Customers & merchants that had not completed KYC had to pay a 4% fee “

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