Author: R Murali a/l Rajaratenam

WHILE the growing shift towards digital payments is still being debated, the proliferation of new electronic and mobile instrumentshas opened the door to a possible revolution in the payments landscape. Yet, a national shift to a cashless society could prove more complex than apparent at first glance.To justify a withdrawal of paper money, the argument is that a fully digitalised system could eradicate tax evasion and money laundering, reduce transaction costs and enable financial authorities to stimulate economic growth. A cashless system can enable governments to track every transaction, leaving no loopholes for fraudsters to exploit. Moreover, central banks would be able to impose any desired monetary policy, including negative rates, as consumers would have no way to retrieve cash from the system.Governments would be able to exercise full control over the banking system. While this might be useful in the fight against crime, it will also impinge on the consumer’s right to privacy. Furthermore, no one would be immune in the case of a system failure, and a stolen or broken smartphone would immediately leave the victim without a payment tool.What will the cashless economy mean for the poorest people in society? Are we moving towards class stratification that is even more sharply divided, with those at the lowest echelons excluded from commercial life and a mainstream existence due totheir inability to participate digitally?In November 2016, India’s Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes would be removed from circulation. This was intended to force demonetisation of the country, pushing it toward a cashless economy and forcing the untaxed “black” economy into the light. The move also inadvertently moved the question of digital access for the poor to the top of the queue.Part of the answer for Modi is creating “smart”, connected cities with digitised public services and e-payment for bills. This works well when you’re buying from the government, but when you’re a small vendor hoping to sell your wares, it’s trickier. Card readers are an outlay some can’t afford, and using mobile phones to operate payment transfers might prove an uphill task for many. government, but when you’re a small vendor hoping to sell your wares, it’s trickier. Card readers are an outlay some can’t afford, and using mobile phones to operate payment transfers might prove an uphill task for many.