"Cashless India an Utopian dream "
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Answer:
If you want an illustration of how hard it has been to implement a digital payments infrastructure in India, you need look no further than the long queues outside our ATMs ever since the demonetisation announcement. Each person standing in line at a cash machine has a debit card that can be used to make electronic payments. And yet, we stand there, willingly enduring inconvenience to fill our pockets with whatever cash we can coax out of the machine.
We do this because we know that, even in the most affluent sections of society, it is still virtually impossible to function without cash. The fact is, our goal of living in a country powered by digital payments will remain a utopian dream so long as there remains even a single transaction that cannot be concluded without cash.Their most obvious concern is the investments they need to make in order to participate in the digital economy. Apart from having to buy point-of-sale (PoS) machines and an Internet connection, they need to get used to paying MDR (merchant discount rate) charges of between 1% and 3.5% on each transaction. These costs have a significant impact on profits and, particularly for low-margin businesses, could make digital payments completely unviable. When compared with cash—which has no transaction cost—it seems almost pointless to change.But it isn’t just the costs that merchants worry about. India’s digital payment infrastructure depends on online authentication, and given our sometimes patchy network coverage, transaction approvals can take a while to come through. In areas where connectivity is poor, there is even a risk that transactions just won’t go through. Merchants worry that customers will either be unwilling to wait for the time it takes to get an approval or else shop in some other store if their transactions fail to go through. This sort of delay can be fatal for businesses that depend on high volumes of sales. In comparison, cash transactions are quick, offline and, being legal tender, never run the risk of not going through.As the government sits down to design the roadmap to take our country cashless, we need to keep in mind that any system we come up with will have to be, at least to start with, as closely equivalent to cash as possible.
Merchants do not like to pay transaction fees. If this is unavoidable, the government should ensure that they are not required to pay any more than a nominal flat fee for low-value transactions or a low percentage of higher-value transactions. Where possible, customers should be incentivized to share the transaction cost with merchants.
Explanation:
There is wild debate about the potential of India to move towards a cashless economy. Some programs and government bonds have encouraged digitisation, such as highway toll concessions, train fares, insurance and so on. The shift was facilitated through Online Payment Platforms, such as BHIM, M-Pesa, Aadhaar Enabled Payment System, and RuPay. Because of the consequences of India's high cash dependency, it is important to examine whether going cashless works or is a utopian dream
EXPLANATION:
If you want an illustration of how hard it has been to implement a digital payments infrastructure in India, you only have to look beyond the long queues outside our ATMs after the demonetisation announcement to demonstrate the challenge in introducing digital payments infrastructures in India. A debit card can be used to make electronic payments for every person standing in line at a cash machine. Yet we are there, willingly enduring trouble filling our pockets with whatever money we can take out from the machine.
We do so because we know that it is still nearly impossible to function without cash even in the richest sections of society. The truth is that, while there is a single activity which cannot be completed without cash, our goal of being in a country powered by digital payments will remain a utopian dream. The single biggest impediment in the way of India going cashless is the merchant who is still not too convinced of its benefits. A main concern is the money they need to make in the digital economy. Apart from the purchase of point-of-sale machines (PoS) and an Internet connection, MDR (market discount rate) fees must be used for each transaction between 1 per cent and 3.5 per cent.
These costs have a major impact on revenues, and could make digital payments totally unviable, especially for low-margin companies. It almost seems pointless to change compared with currency, which does not have transaction costs. But, it's not only the costs to merchants, Indian digital payment infrastructure is subject to on-line authentication and transaction approvals can take a while, despite our often patchy network coverage. There is even a chance that transactions are not going through in places where communication is low. Merchants worry that clients will either not wait until approval is received, or shop in another store if their transactions fail. For companies that rely on large volumes of revenue, this sort of delay can be fatal. By contrast, cash transactions are fast, offline and never risk being legally tendered.
Since the government has developed a roadmap to cash-free our country, we have to be mindful that any program that we create will have to be as close as possible to money, at least to begin with. Traders don't like paying transaction fees. If this is possible, government will ensure that the costs of low-value trading and a low percentage of higher-value transactions do not go past nominal flat fees. Customers should be encouraged, where possible, to share transaction costs with traders. Every system that we implement should operate offline to reduce our depleted authentication networks. No technological knowledge is required for cash transactions. For most consumers, it is technically challenging and a reason for avoiding the use of electronic payments to operate a digital wallet, Chip, pin credit card and even one-time password as a second authentication element. While this may not have prompted the government to demonetize, it's now clear that we can't turn India into a cashless economy simply by taking cash out. In order to do that, we have to implement intuitive solutions that dealers can easily buy in real life.
Electronic transactions are in the making in India, which could lead to several legal issues relating to contract creation. The State has yet to inform e-contracts of digital signatures and stamping procedures. However, because there is greater anonymity, transactions, particularly for minors, are difficult to verify. In certain cases online customers may be subject to unfair terms that are not negotiable because they have standard form contracts. Therefore, legislation has not yet been established and redress mechanisms for data fraud or identity theft have not been embraced. The transition to a cashless economy may be more a paradigm shift because of several inconveniences in terms of cultural and infrastructure perceptions than the Indian leaders envisaged. Some protections are still required to make this change tolerable, especially for the rural population: rural banking systems, Internet penetration, legal safeguards, Internet and banking literacy, and transaction security.
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