In this article, we have published an essay on cashless economy for students and children in 1000 Words. Here you read the role, advantages, disadvantages, types of payments and challenges in a cashless economy.
Essay on Cashless Economy (1000 Words)
Over the past few years, tremendous digitization has affected every area of our lives. Demonetization is a significant step towards a cashless economy in India.
Cash-free India is a great initiative launched by the government under Prime Minister Narendra Modi’s leadership to reduce the cash dependence of the Indian economy.
The role of the cash-free economy
The cashless economy has a significant role to play in the country’s development. With the help of this scheme, our country can get rid of corruption and counterfeit notes. Since cash-free transactions are notable, tax avoidance is unlikely. Under this system, India can get more taxpayers.
Advantages of a cashless economy
Some of the benefits of a cashless economy are:
- Efficiently and only – speeding up the financial transaction process;
- Possibility of insight on every transaction – an improvement on transparency. It is because all payments made online are audited, and the money flow in the economy is transparent. It reduces the scope of the parallel economy.
- Simple Tracking – Every exchange is recorded.
- Tax Coverage – Because all online payments are calculated, tax coverage becomes flexible, and avoidance is difficult.
- Financial Integration – With the help of technology, all financial transactions can be integrated into the system, such as income tax calculation, GST, and information required to file returns.
- Cost of handling the currency – If a currency is used sparingly, the cost of printing and maintaining it will be reduced.
Disadvantages of a cashless economy:
Some major disadvantages of cashless economy-
- Issues of confidentiality – any company has insight into customer information;
- The population does not apply to all people – this type of payment cannot be used by the illiterate and elderly. For example, small payers or sellers for fruits, vegetables, etc. may not find an online amount possible or practical.
- Overhead Expenses – There may be overhead costs for online payments or bank transactions.
- Cost to set up a technical network – this is a one-time expense but should be covered to cover as much geographical area as possible.
Cash-free modes and types of payments
1. Mobile Pocket or Wallet
This is a virtual wallet available on your mobile phone. You can store money on your versatile to make on the web or disconnected installments. Various service providers offer these apps via the mobile app, which can be downloaded over the phone. You can send or give them any certain amount of money to these wallets through these channels online using credit/debit card or internet banking.
2. Plastic cash
This incorporates credit, charge and prepaid cards. The last can be given by banks or non-banks and can be physical or virtual. They can be purchased and recharged online through net banking and used to make online or point-of-sale (POS) purchases,
3. Net Banking
This is an online method of transferring money from one bank account to another bank account, credit card or any third party. You can do so by computer or mobile phone.
Modes of Cashless fund transfer by RBI
RBI Mobile defines each mode of cashless fund transfer as a ‘prepaid payment instrument’ using a card or mobile phone. They can be given as shrewd cards, attractive strip cards, net records, net wallets, versatile records, portable wallets or paper Bouchers. They are grouped into four sorts:
- Open Wallet: They permit you to purchase products and enterprises, pull back money at ATMs or banks and move reserves.
- Semi-Open Wallet: You cannot withdraw or withdraw cash from these wallets. Right now, the client needs to spend what he stacks.
- Closed Wallet: It is very popular with e-commerce companies; When the product is canceled or returned, or in the case of a gift card, a certain amount is canceled with the merchant. An example is Flipkart and Book My Show Wallet.
- Semi-Closed Wallets: These wallets do not allow cash withdrawal or redemption, but it will enable you to purchase goods and services from listed vendors and provide financial assistance in listed locations. Paytm is an example of this.
Challenges in transforming a cashless society
1. Infrastructure and digital inclusion
Lack of adequate infrastructure is a significant obstacle in establishing a cash-free economy. The insufficient financial framework, weak advanced foundation, absence of web network, absence of solid computerized installment interfaces and poor access to POS terminals are a portion of the issues to be survived.
2. Financial inclusion
The necessary precondition for the elimination of a cashless economy is universal financial inclusion. Everyone should have a bank account with banking facilities and debit/credit cards and online banking facilities.
3. Digital and financial literacy
It is not enough to ensure economic and digital inclusion to switch to a cashless economy. Here, Citizens also need to be aware of the economic and digital tools available and how to transact using them.
4. Cyber Security
Digital infrastructure is increasingly vulnerable to cyber attacks, cyber fraud, and phishing and identity theft. The last cyber attacks are more sophisticated and organized and pose a clear and present threat. Therefore, it is necessary to establish secure and flexible payment interfaces to go cashless.
5. Habits Changing Habits and Attitudes
The Indian economy is mainly lack of e-payment modes, digital illiteracy of e-payment and lack of cash-free transactions, and the third habit of managing cash.
6. Urban and Rural Intersection
While urban centers have high-speed internet connectivity, semi-urban and rural areas lose a stable network connection. So, although India has over 200 million smartphones, rural India still has some time to process transactions via mobile phones. Concerning the presence of ATMs, POS terminals and bank branches, there is a considerable urban-rural divide. This gap is necessary to start a cash-free economy.
10 Lines on Cashless Economy
- You do not need to carry cash, plastic cards, bank or ATM lines in a cashless economy.
- By reward points and loyalty benefits, savings can increase in this economy.
- It is essential and helpful especially if you are going on a foreign trip.
- Cashless India is a mission been initiated by the Government of India under the leadership of Prime Minister Narendra Modi.
- Difficulties in implementing a cashless economy are natural, but it is necessary to start efforts in this direction.
- India is a vast country, and the facility of online transactions is not available in the entire region.
- There are several advantages of controlling cash flow with the help of digital technologies.
- Due to this facility, the government saves substantial costs in printing and circulation of currency notes.
- Tax collection becomes easy through cashless mode, and it accelerates the pace of economic growth,
- This move is gradually decreasing the tendency of people to depend on cash.
With significant challenges such as illiteracy and lack of adequate infrastructure before the country, it will be a critical task to make India one of the few countries for a cashless economy.
However, the benefits associated with a cashless economy outweigh the features. I hope you liked this essay on cashless economy.