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Plastic Money

From ‘Less-Cash’ to
‘Cashless’ Economy

Plastic money signifies hard plastic cards that are used to facilitate cash-less transactions,
without requirement of physical paper currency. In India, banking sector has kept pace with the
advent of Liberalization, Privatization and Globalization and has seen many technological
advances in the form of innovative products and methods like plastic cards, mobile banking and
internet banking. Plastic cards have become a key element of electronic banking. Through
plastic money, the barter system which uses money as medium of exchange has been redefined
and exchange can be done electronically without requirement of hard currency. Some of the
important variants of plastic cards include ATM cards, debit cards, credit cards and other smart
ATMs facilitate withdrawal of money without visiting a bank’s branch. With the passage of time,
in addition to withdrawal facility, ATMs and cash recyclers also facilitate deposits of cash and
cheque, balance enquiry, payment of bills, making donations to charitable institutions.

Debit card is a magnetically encoded plastic card which allows the customers to pay for goods
and services without carrying cash with them. Debit card is one of the best online e-payment tool
through which the amount of purchase is immediately deducted from customer’s account and
credited to merchant's account provided if that much amount is available in customer’s account.
Credit card is a plastic card issued to a cardholder, with a credit limit, that can be used to
purchase goods and services on credit or obtain cash advances. Unlike debit cards, credit cards
also provide overdraft facility and customer can purchase over and above the amount available
in his account. Interest charges are levied on the unpaid balance after the payment is due.

Plastic money holds importance after the recent debacle of ‘Demonetization’ in which currency
paper of Rs. 500 and Rs. 1000 has been ceased to be a legal tender and in turn a new currency
paper of Rs. 500 and Rs. 2000 has been introduced by the government. This move has led to a
huge hue and cry amongst the masses as the money which was in circulation has been stopped;
certain limits have been imposed on deposit and withdrawal of money into and from the account,
old 500 and 1000 notes to be deposited in bank accounts only which further cannot be
exchanged after December 31. Long queues can be seen outside banks and ATMs for withdrawal
of cash and most of the ATMs and bank branches wear a deserted look due to ‘less-cash’ being
available for circulation.

without involving the use of currency paper. With globalization.e to increase the circulation of plastic money through use of debit and credit cards for payments and settlement. The main reason behind the woes of masses is not less availability of cash but ignorance to the digital aspect of banking. a fact to be highlighted is that the people ignorant of the benefits of ‘cashless’ transactions have been the worst victims of ‘less cash’. ‘no-frill’ accounts were opened and RuPay cards were distributed to all the account holders of PMJDY. 500 and Rs. black money and fake currency have been effectively dealt with. Wi-Fi facility is being provided at pocket-friendly prices. radio. The bridge connecting ‘Less-Cash viz (Demonetization)’ to ‘Cash-Less viz (Plastic Money)’ Demonetization initiative was taken with a motive to curb black-money and catch hoarders of black-money. In the present scenario. Crores of black money has been seized from big industrialists and business houses which gives an insight into the amount of money that is kept idle in vaults of big businessmen and not put in circulation in the economy. 1000 denomination bank notes has led to significant increase in bank deposits within a span of 1 week of implementation of the initiative. The seeds to reap this fruit were sown 2 years ago through ‘Pradhan-Mantri Jan-Dhan Yojana (PMJDY)’ and many such initiatives that were formulated with the sole motive to achieve financial inclusion and financial literacy. e-banking. Under the scheme. internet banking and the like. The motive of government seems to be successful as withdrawal of legal tender of Rs. The need of the hour is to leverage on the platform by framing policies towards ‘Digital Literacy’ which would make the masses aware of the merits of cashless economy. Hence this is an effective initiative towards making the country digital. Similarly. telecom companies have made internet accessible at low cost and under the initiative of Digital India. Various banks are incentivizing their staff and third parties for boosting the usage of cards and educating the masses about online payment gateways. UPI are being broadcast and published in television. . the economy had already become ‘Boundary-Less’ but the initiatives being taken in the present scenario would set the platform for a digital economy in which transactions would become ‘Paper-Less’ and ‘Cash-Less’. All such tools enable payments without exchanging cash and the amount is directly credited to one’s bank account. E- banking includes not just payment by cards but using other innovative techniques like mobile banking. In order to achieve this. Mobile phones are available in all variants-from low cost push button phones to smart phones. advertisements highlighting the use of mobile banking (m- pay). which again are tailor-made as per the affordability of the masses. Post the draconian step of demonetization. the primary step is to bring each and every individual of a family into the gamut of banking. another long term aim of the initiative was moving towards ‘Digital India’ i. This can also be termed as a transition from ‘Branch-Banking’ to ‘Electronic Banking or e-banking’ through which transactions shall be done electronically. affording a mobile is no longer a dream for any citizen of the country. While corruption. social and print media.Taking a dig at the problems being faced by the people due to demonetization or less cash being available.

An important issue in front of the developing economies is the environmental impact of industrial development. Singapore ranks 8th. Hence a huge booty goes in making security measures which could otherwise have been used for other productive purpose. According to a research by transparency international [The Global Anti-Corruption Coalition] on corruption in countries. In nutshell.Though mobile phone companies have followed disruptive innovation which has made smart phones affordable for all. Canada ranks 9th.Cashless transactions. Some of the main challenges amidst going Digital are: . . Digital economies can be a change leader to address this issue as cashless transactions do not require physical cash.Cashless doesn’t signify being poor because of less availability of paper currency. Providing internet facilities in certain areas like hilly terrains.Another aspect of cashless economies is low levels of terrorism and corruption. The concept of ‘green-economy’ comes into picture while addressing the issue of environmental degradation caused due to developmental activities in the economies. Challenges of going Digital With every favorable impact come certain externalities that pose challenges in implementation of any initiative. . hence it is cost-effective. Norway ranks 5th. hence the cost of cutting the trees for paper and printing the paper currency is saved which could prove to be a small step towards achieving environmentally sustainable economies. POS machines and cash recyclers especially in remotest parts of the country to include every citizen in the gamut of cashless economy. But the end result offers certain merits which can be highlighted below: . United Kingdom ranks 10th.Generally. digital era would make the economy economically as well as ecologically sustainable. in terms of security measures to be adopted. concepts like ‘Kyoto Protocol’ and conferences like Rio and Rio+20 take place but the problem remains unresolved. Due to decline in activities financing terrorism in the valley (due to prohibition of 500 and 1000 denomination bank notes). instead it signifies smart. United States ranks 16th. there is high cost involved in safeguarding physical cash in banks and safety vaults. areas prone to natural calamities is also a major challenge which hinders cent percent achievement of making the economy digital and cashless. cashless economy faces no hassles of security or theft. yet a large section of the society is deprived of this technological .Technological constraints such as providing ATMs. . Australia ranks 13th. On the other hand. On similar grounds. The peace restoration in Kashmir valley post demonetization is an instance to prove the fact. it was inferred that cashless countries are in Top-30 amongst all nations. corruption free societies.A gateway for green and prosperous economy The path to make the economy digital is full of hurdles and any change is bound to receive resistance from the stakeholders involved. The research ranks Sweden on 3rd position as 70% of the transactions in that country are cashless and another remarkable achievement is the plunge in the number of bank robberies from 110 in 2008 to 16 in 2011. the life of the people in Kashmir valley has been restored to normal after months of curfew and bandh. . To address such issues.

The section of the society that is deprived of access to banking services would remain vulnerable to digital aspect of banking.Banking industry also faces acute threat of cyber security which is indeed a big challenge in the digital era. safer and faster.Another important aspect to reflect upon is that in our country.advancement and many of those who have access to technology lack awareness. Hence framing action plan for Digital Literacy is the need of the hour. This article has been authored by Aprajita Gupta . The facts highlighted with regards to the issue signify that the aim of making the country fully digital cannot be achieved overnight. Even if this issue is addressed. The recent debacle of thousands of plastic cards being blocked by banks due to security related issues highlights the gravity of the situation. Plastic money is more prone to cyber attacks in the form of password compromise or sharing of PIN. and improving the technology to aid digital payments and settlement. It requires proper planning and strategies to overcome the resistance of people. people to gain digital literacy.time from all the stakeholders i. still 40% of the population is deprived of access to financial services. the problem of spreading awareness about use of plastic cards would be present. . The input cost may be high but the end result would ultimately be cost-effective and would make the payment and settlement system simpler. banks and telecom companies to provide the necessary tools and technology to aid digital payments. The input factor includes time and money.e. . spreading awareness about the positive impact of digitally induced payments. making the masses digitally literate.