Quick Read: Electronification of Cash

Ever since cash replaced the barter system of trade, it has been the most preferred mode of transaction. It is convenient, simple, quick to use and leaves no audit trail.

blog 25 June 2012

However, like any other payment instrument, cash has multiple costs that of cash handling, infrastructure as well as risks of fraud and counterfeits. Cash also fuels the “shadow” economy, i.e., commerce outside the tax net, a key concern for governments.

Globally, governments have created “electronification” charters and are at various stages of implementing solutions to tackle this problem.

The challenge is to create awareness on the true costs of cash in the economy and pave the way for more convenient, cost-effective and efficient electronic payment solutions.

What are the benefits of electronification? It lowers the cost of printing and managing currency, increases transparency in commerce by nipping money laundering in the bud, eliminates the parallel economy, leading to higher tax revenues and plugs leakage to final recipients of subsidies. E-payments will increase the utilization of many subsidy schemes.

Governments can target multiple electronic channels to pursue their electronification strategy. Some of these are cheques, electronic fund transfers, pre-instructions for recurring payments, payment cards—prepaid, debit and credit cards. A pragmatic electronification strategy combines all these modes to drive financial inclusion in a secure and suitable way.

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