PayTM announced it's war on cash few years back, but cash continues its reign as the king of transactions. Government of India and Reserve Bank on 8th November announced the switch of existing currency notes with new one's. There is a 50 day deadline to submit existing Rs. 500/1000 denominiotion notes and switch to fresh currency. While there has been much brouhaha about this switch, the move doesn't help the transition towards digital transactions.

Currency swaps like this are not new, however given that these notes represent 85% of total cash in circulation in India, it will lead to a sudden fall in cash transactions. All this is expected to be temporary, and cash is presumed to remain default king of Indian economy.

Cash will remain preferred mode of transaction for multiple reasons. Anonymity is the primary one, even when ease of transaction factor for cash is rapidly falling. The mighty Uber had to give up its digital-only transactions policy and allow cash rides. I know several people who prefer to pay by cash over digital payments.

There are several systemic issues behind digital payments being the non-preferred mode of transaction. The key challenges are -

  1. Digital divide
  2. Lack of urgency to phase out cash transactions
  3. Lack of policy incentives for Digital transactions
  4. Business’ allowing both modes of payment.
  5. Preferring Cash for Tax evasion by both sides
  6. Majority of products and services available as cash-only, while it’s incredibly rare to find business’ which accept digital-only payments.

If digital transactions were superior in all aspects, business’ should simply stop accepting cash. Will Uber do a 360, and willingly loose business by reverting to digital only payments?

Can anyone point me to any large business who has switched to Digital-only transactions? If not, why not?

And final question, with this switch, are the citizens of India finally going to say no to cash? Will you refuse to pay and accept cash?

These are hard questions, with no easy answers. However payments sector remains an incredible opportunity in the long arduous march towards a digital-majority payments paradigm. As long as you will carry cash in your pocket, you will continue to propogate the staus quo. That is the lasting power of cash which refuses to go away.

All hail the king for a continued long reign : Cash.

Best, Umang