Cashless

After the demonitisation, govt encouraged the use of E payment and said that their aim is to make the country a cashless society, as now internet reach has gone to villages and most of the citizens have now bank account. So people can use debit cards, net banking, credit cards etc to make the payment. With smart phones you can download so many apps like Paytm, Rupay, Google pay/duo, with which you can make payments to anyone by linking your bank account to your  smart phone or you can use your debit or credit card to make the payments through these apps.

Now many people use the net banking facility for making payments of the utility bills like phone bill, electricity bill, gas bill etc. By internet banking you can transfer the funds to any other bank account. Now most of the companies are paying their vendors/creditors in this fashion, as the requisite payable amount is directly transferred to vendors/creditors  bank account. Earlier you have to issue the cheque and the same was given to vendors/creditors to deposit in their bank accounts, and the amount was credited in vendors account after the cheque going through clearing process and this took almost 2 to 3 days. Now instantaneously amount is credited in vendors account.

Now a days in the metro city  like Mumbai you do not need cash for day to day needs. As most of the shop keepers have debit/credit card swipe machines, vegetable/fruit  and other small vendors can be paid through Paytm or with any other similar apps. Private cab operators like Ola/Uber also in their apps have the facility to make the cashless payments. Metro train or local train tickets can be purchased through Debit/Credit Cards. So with minimum of cash in your pocket you can survive in the city.

The above scenario looks very good in a normal life, as you do  not need cash to survive, but  imagine what will happen if a disaster struck city and power is cut off. In that case, if you do not have cash in hand and rely on Electronic Payment, then you are finished. The Cashless Society is difficult to face war and disaster.

Few months back in Japan, there was strong earthquake, which triggered a large scale power outage, and Sapporo city instantly became the dark capital. During the outage period, almost 1.95 million residents flocked to supermarkets and convenience stores to buy essential supplies. However, some of the people who usually only use their smart phones have lost the ability to pay and could not buy what they needed.

There was huge discussions in a big forum in japan, about this problem, and there was a big news headline which said ” The Sapporo who only uses electronic payment is finished.” And there was a article, where writer shared his experience, which is as follows:

” I usually used to pay through an app through my Apple phone, and go out without wallet and little cash. In the early hours after the earthquake struck, there was a power outage. I checked the fridge in my home and found only one carton of milk and little quantity of mayonnaise. I rushed to super market to buy essentials, and found that I had no cash at all. I looked at my apple phone with only 60% battery life. After picking up the supplies, when I came around at payment counter then the counter clerk told me that I could not use Electronic Payment. Same thing every where, I could not use electronic payment system, that night I sat alone in the house, with troubling hunger. As there was no power I could not withdraw the cash from ATM”

This earthquake gave everyone a lesson and now every one understands cash payments and cashless payments.

In Feb this year Sweedish Central Bank Governor Stefan Ingves warned and said, that cashless society is untrained in the face of war or natural disasters, and huge social and financial system will collapse in an instant. “Payment Functions” is one of the four functions that money needs to have. Cashless payment is just a supplement to the ‘payment function’because it can not be replaced by specific basic conditions.

I remember an incident which happened with me on 26th July 2005, when Mumbai was hit by unprecedented rain. I was working in a project near Mumbai Airport, there was a big power outage, with traffic at standstill due to flooding of roads. I just entered a 3 star hotel near by, when I saw the lights on( which meant that hotel had power back up system), and inquired about if we can get some tea/coffee snacks. The answer was yes provided you pay in cash, as card swipe machine has stopped functioning.

So in the end, cashless society is good in normal  circumstances, but in the case of natural calamity of if the large scale war breaks out and there is long term power disconnection or power outage then there will be serious economic implications.

Waiting for your views/comments/feed backs.

Anil Malik

Mumbai, India

16th Oct 2018.