Digital India, a flagship initiative, aims to transform the nation into a digitally empowered society and economy. Despite the rapid rise of digital payments like UPI and mobile wallets, cash remains surprisingly resilient. This article explores the reasons why cash continues to hold significant importance in India, drawing parallels with other developed economies in the Asia-Pacific region (APAC) and beyond.
Persistent Relevance of Cash in India
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Large Unbanked and Underbanked Population: The World Bank estimates that 190 million adults in India remain unbanked (https://www.worldbank.org/en/publication/globalfindex). Limited access to formal financial institutions makes cash the only viable option for daily transactions, especially in rural areas.
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Lack of Digital Literacy and Infrastructure: Not everyone in India is comfortable navigating digital payment platforms. Limited internet penetration and unreliable connectivity in rural areas further hinder the adoption of cashless transactions.
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Trust and Familiarity: Cash offers a sense of tangibility and control for many people. Generations accustomed to using cash may be hesitant to shift entirely to digital alternatives.
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Microtransactions and Informal Economy: A significant portion of India's economy operates on a cash basis, particularly in the informal sector. Small street vendors, domestic help, and daily purchases often involve microtransactions better suited for cash.
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Security Concerns: Despite improvements in digital security, concerns around data breaches and online fraud remain. Cash eliminates these worries for some users.
Global Use Cases of Enduring Appeal of Cash
India isn't alone in its continued use of cash. Developed economies in APAC like Japan and South Korea, despite boasting high digital payment adoption rates, still witness significant cash usage. Here's why:
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Cultural Preference: In Japan, cash is deeply ingrained in the social fabric. Offering "Gohoubi" (reward money) to children or using "Shugi" (gift money) in envelopes for special occasions are cultural norms better served by physical currency.
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Privacy Concerns: Some users, particularly older generations, prefer the anonymity offered by cash transactions.
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Vending Machines and Small Businesses: Many vending machines and small businesses in developed economies still primarily rely on cash transactions due to the low cost and ease of use.
The Future of Cash in a Digital World
Cash is unlikely to disappear entirely. However, its role is likely to evolve alongside digital payments. Here's what the future might hold:
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Coexistence: A hybrid model where cash and digital payments co-exist will likely be the norm. People will choose the most convenient option based on the situation.
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Government Initiatives: Government initiatives promoting financial literacy and digital infrastructure development can further accelerate the adoption of cashless transactions, particularly in rural areas.
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Innovation in Cash Usage: Innovative solutions like contactless payments using physical cards or tokens could bridge the gap between the familiarity of cash and the convenience of digital transactions.
Cash remains a relevant part of the financial landscape in India and beyond. Addressing the reasons behind its continued use, along with promoting digital literacy and infrastructure development, is crucial to create a truly inclusive financial ecosystem. As India progresses on its digital journey, cash and digital payments will likely coexist, empowering people with more choices and flexibility when it comes to managing their finances.