Note Ban

There has been a lot of hulla-gulla/shoo-shaa/noise on digital payments in recent times. Thanks to the note ban. Every body is driving their own agenda with digital payments.

• The government wants to stoop over all your transactions to collect more Tax in the name of black money clean up
• The wallets want to grab as much money in their eco system as they can
• Banks should ideally make hay while the sun shines but instead they are too busy handling the insane queues outside their branches
• Visa/Mastercard have Rupay to handle
• Network operators are jumping to this new financial business rather than actually setting up a network that works (read more about network on my article on Airtel’s Open Network). They are a critical player as anything digital needs a network
• NPCI is pushing its own half baked UPI
• Even E-Commerce players like Amazon are turning into wallet companies (#AmazonPay although this was just a rename of Amazon Gift Card balance to Amazon Pay Balance)

In this entire picture nobody is thinking about the end consumer. What does he really care about?

Before we try to answer this question let’s look at cash first. Cash is KING. Its as simple as that. Two reasons:

1. Nobody has a problem accepting cash
2. Nobody SEEMS TO HAVE a problem giving cash (well, until recently)

Lets go deeper into what these 2 things mean. A few instances of acceptance:

• A local roadside vegetable/fruit vendor accepts cash
• Mom & Pop stores accept cash
• My friends & relatives accept cash as gifts (I can’t give them quick gifts as otherwise I would have to ask them for their account details which they would never give if I ask them)
• Banks & Post Offices accept cash
• Government courts, RTOs, Municipalities, electricity providers, waterworks, gas providers, phone companies, schools & all public utilities accept cash
• Temples & other religious places accept cash
• Newspaper, cable guys, milkmen, servant maids accept cash
• NBFCs accept cash
• Daily wage & agricultural workers accept cash
• Restaurants, street food vendors accept cash
• Wholesale dealers accept cash
• Travel agents, railways, waterways & airways as well as toll checks, petrol pumps accept cash
• House owners accept cash as rent
• Event organizers, movers & packers, courier guys, caterers, launderers & all other service providers accept cash
• Hospitals, diagnostic centres, doctors & medical shops accept cash
• Stock brokers, insurance companies and all other NBFCs accept cash
• Jails accept cash (well if you need a bail 😉 )
• Money exchangers sitting in places like Beijing accept cash
• The guy serving Kashmiri Kawah to Amarnath Yatra devotees at 10000 ft accepts cash

As an accepter of Cash the only downside I see is the risk of receiving counterfeit Cash and of course the need to carry, count & manage it. Cash is physical!

Coming to the second point, well if the first point is so strong then it is natural that people are forced to give cash and they are already well used to now. Moreover the self reliant nature of cash makes it pretty easy to transact with. Self reliant in the sense it does not have any third party dependence for transacting – no machines, no network, no bank accounts, no wallet apps, no settlements, no transaction failures, no frills. Actually not really you still need a pocket, purse or at least your fist, essentially a little space, to carry it at least. The only downside of Cash as a giver of Cash that I can see is the it needs carrying and thus opening fears of theft. Cash is physical!

No doubt Cash is KING.

We are all living in an era of Fiat Money across the world. The cash we hold has no value in itself without the guarantee by the government. Yet cash is KING. Cash is physical and that gives everyone the feel that it is real ’cause they can actually feel it.

Now on the other hand Digital payments rely on virtual money. You can’t feel it. It is actually information money – information that is getting recorded somewhere whenever a transaction occurs. One can’t see it or feel it in any form apart from seeing some numbers in their account statements provided they trust the account statements from the banks.

It is directly guaranteed by the government. I guess everyone who has read the clause “I promise to pay the bearer the sum of ten rupees” undersigned by Governor of RBI on a ten rupee note understands that. Money that is guaranteed by the bank/provider of the payment service who has a license to operate such a service from the government. The government isn’t directly guaranteeing it.

Well summarising what cash brings onto the table –

• Acceptability
• No frills
• Physical feel
• Guarantee

Well there is the point of security and trust/comfort factor but that comes as a derivative of the above ones itself.

Now when it comes to digital payments we really need to encapsulate these aspects of cash transactions within individual digital transactions. Not quite an easy task!!!!!