The trend toward the use of non-cash transactions and settlement in daily life began during the 1990s when electronic banking became common. By the 2010s digital payment methods were widespread in many countries. 


A cashless economy involves all transactions being carried out electronically utilizing Debit or Credit cards, mobile wallets, and e-payments with a minimum circulation of physical currency.


The COVID-19 pandemic has had a significant impact on the Indian economy through lockdown, but social distancing has also changed consumer habits. Businesses made adaptations to reduce close contact with and among consumers, and one result of this has been a shift toward contactless forms of payment.

 Over the last few years, demand for cash has been falling, but the start of the pandemic marks a significant shift. As much of the Indian economy closed during the lockdown, cash withdrawals from ATMs in April 2021 plummeted almost 55% compared to April 2019. However, even as the economy has begun to reopen, demand for cash withdrawals has remained considerably below the level of recent years.

Cashless transaction through debit or credit cards


If the government upholds the promise made in the recent budget, India stands a chance to progress towards a cashless economy with investment in infrastructure, electrification, and cybersecurity.

In a country where sentiments have a stronger hold than reason, the progression towards a cashless economy can be achieved only after the socio-economic upliftment, which also calls for a changing of mindsets as well as skill sets through education.

While the cashless economy cannot be entirely implemented in the ‘here and now, there is still scope for it in the future; as India has the potential but lacks the immediate resources and many systematic changes are required to lay the groundwork for a cashless economy.

Cashless India's Success Story


Cost reduction:the cost of printing and circulating money into the economy is cut down.

Convenience: e-transactions are convenient for both banks and customers. This kind of transaction can take place in any corner of the world, 24*7*365.

Control on black money: digital transactions have proven to cut down the black money problem in India due to higher transparency in transactions.

Lower Crime Rates:  people who can carry cases make an easy target for pickpockets. Cash registers or tills have been a source of violent crime. It put the bank and shop at risk of hold-ups. The risk was substantially lowered by going cashless. It also means that businesses don’t have to employ security guards or cameras. Also, once the money is stolen, it becomes difficult to track the cash or proved that it is yours.

Online payment methods in India

DEMERITS  OF CASHLESS ECONOMY-Less Availability of Device-

Another issue in the implementation of digital mode of transaction in India is the affordability, availability, and efficiency of the devices which support online transactions, such as computers, smartphones, and Point of Sale devices. Only 15% of India’s population uses the internet. With such a meager number of people being exposed to the internet, digitization can’t be made universal, not at least in a short period.


Corruption, despite being one of the points for establishing digitization of monetary transactions, can’t be guaranteed to decline. This is merely speculation but A person taking a bribe in cash right now might demand it in kind in the future, say a mobile phone, or a computer. 

Economic Inequality-

If the traditional payment style gets converted into the cashless system entirely, chances are that buying smartphones or devices will become mandatory. In a country like India, where a huge part of citizens strives to arrange their daily food, buying a smartphone is a luxury that all cannot afford.

Cyber Security-

India will have to tighten its cybersecurity owing to the instances of hacking into banks and personal accounts occurring globally. A country like India, being at its nascent stage in terms of cybersecurity might be more vulnerable to such threats.

Dependent on Smartphones-

Complete dependency on the smartphone is another drawback of the cashless economy. Since for making every transaction, people have to depend on their mobile phone, losing it will lead to complete cashlessness.

Along with keeping the mobile safe, another thing to keep in mind is to keep the phone always charged because one can not meet their needs if the phone turns off.

E-wallet transactions by scanning the QR code


  • Attack on the parallel economy

Cash being the paper form of money is difficult to trace. Its transaction provides secrecy enabling the people to carry out illegal activities. According to the govt, the amount of black money circulated within the country goes up to 16Lakhs.

  • Increase the Tax Net

All the transactions that are done can be monitored and traced back to a given individual. If officials from the tax department smell something fishy then they can trace the money transaction back to the individual.

  • Effect of Demonetization

Going cashless helps to curb corruption hence increasing the economic growth of the country. With the demonetization that took place in 2016, a large step was taken to initiate this concept. According to the Union defense minister after demonetization, the crime rates in Mumbai have dropped to half.

  • Digitalization of currency

Just by scanning a QR code, you can easily pay bills for local vegetable vendors, auto-rickshaws, etc. Paytm saw a 700% increase in the overall traffic and a 1000% increase in the amount of money added to its account in the first two days of post-demonetization.

  • Improvisations in the policies

When people go digital, a large amount of data is generated for every transaction that takes place. This means that we can find patterns in this data to improvise and analyze the government policies.

  • Benefits of cards

During this period of a global pandemic, the concept of being cashless has been a very big boost to the economy. There is no direct hand-over of cash through which there can be a possibility of the virus spreading.

Debit and Credit Cards


  • Challenges with digitalization

India is a country having major business in the agricultural sector. Expecting this sector of the population to suddenly adapt to the cashless trade is unadvisable.

  • Connectivity issues

For using mobile wallets, it is necessary to have a secure internet connection, which is usually not available in rural areas. Also, for transacting using cards, a stable internet connection is important.

  • Effect of GDP on cash

The rate of cash to GDP is the highest in India (12.42%). In other large economies, the average cash to GDP ratio is 5%. The year 2015 saw 78% of all consumer payments in cash in India.

  • Threats of using cards

The use of cards is dangerous if one doesn't have adequate knowledge about them. The card can also be misused in cases of theft as the only thing you need to know for using a card is the 4-digit pin.

  • Transaction Fees

The transaction fees charged by some banks are humungous. Also, the minimum balance policy of the banks is not affordable to all.

  • Count of ATMs

India currently has only 2.3 lakhs ATMs. This is a very less count as compared to the population and area of the country.

  • Monitoring transaction fees

The banks must make sure that the transaction fee is either free or affordable to all.

  • The minimum balance issues

The banks must encourage the opening of zero balance accounts to encourage the poor to make use of the bank accounts.

  • Ensuring internet connectivity

Internet connectivity is a major issue in rural areas that should be treated by the govt as a priority to ensure secured connectivity for all.

  • Promoting the use of cards

There must be sessions promoting the use of cards, and tutorials to the illiterate about how to use the card and what precautions.

Thus, making India cashless is a very strong concept, but it needs the support of proper infrastructure, tutoring as well as a stepwise plan to succeed!

Creating Opportunities in the Global Economy of Cashless Transactions – The  Fresnel Companies


The cashless economy has its own sets of merits and demerits. In huge democratic countries like India, before implementing the system, the government should count on expert opinions to analyze strategies and work on the implementation of such plans for better economic growth in a sustainable way.

By – Adree Dutta

Third Prize in Blog Competition, organized by the International School Of Management Studies.

Image Attributes: Google

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