CHAPTER 1: INTRODUCTION

(A)CASH ECONOMY

Cash is also known as money, in physical form. Although cash typically refers
to money in hand, the term can also be used to indicate money in banking accounts,
checks, or any other form of currency that is easily accessible and can be quickly
turned into physical cash.

Cash economy in the dictionary is an economic system, or part of one, in which

financial transactions are carried out in cash rather than via direct debit, standing
order, bank transfer, or credit card.

What is a difference between cash and money?

Cash is money in the form of notes/bills and coins, as opposed to cheques/checks or

electronic transactions or cash can be any of several low-denomination coins of India
or china, especially the Chinese copper coin while money is a legally or socially
binding conceptual contract of entitlement to wealth, void.

Pros & Cons of Cash based Economy :

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Advantages of Cash:

• Instant money in hand, except taxes of course. (Hey, nothing is entirely free!)
• There are no transaction fees with cash like there are with credit cards
• Minimizes bookkeeping, which means less stress & less hassle

Disadvantages of Cash:

• Money in the drawer can be tempting for some employees to steal

• A safe need to be on site or frequent trips to the bank for deposits must be
made, which takes time and money.
• Money at your location increases your risk for theft not just from employees
but criminals as well.

(B)CASHLESS ECONOMY

A Cashless Economy is an economy in which all types of transactions are

carried out through digital means. It includes e-banking (Mobile banking or banking
through computers), debit and credit cards, card-swipe or point of sales (POS)
machines and digital wallets. The paper under study tries to throw light on the rising
trend of digital transactions in India being carried out in various cashless modes over
the last few years but simultaneously being ourselves making alert of the negative
impact of going cashless thereby showing downside of digital India. As the people of
India are showing amazing response towards move of digitalization, it is the big
indicator of prosperous future for India to be cashless India. So the need of an hour is
to spot the weaknesses involved in cashless transactions and work out on them to
achieve the vision of Prime Minister Modi’s Digital India.

Cashless economy is based on transactions made by credit cards, debit cards,

wallets or digital modes. India is majorly cash driven economy where people prefer to
carry cash instead of cards however India is moving towards “less cash economy” -a
phase of cultural-economic transition. It is important to curb shadow economy,
corruption, terror -financing, human and drug trafficking, counterfeit-currency etc.

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 Cashless economy is cost effective, growth friendly, business friendly, pro-
financial inclusion, etc. Government is promoting it through BHIM app, AEPS, etc.
Cashless economy requires robust digitalization. It has various challenges-escaping
attitudes of people, poor transaction security mechanism, insufficient infrastructure
etc. it is boon to industries like UBER and OLA.

What is Cashless Economy?

Cashless Economy can be defined as a situation in which the flow of cash

within an economy is not –existent and all transactions must be through electronic
channels such as direct debit, credit cards, electronic clearing, and payment systems
such as Immediate Payment Service (IMPS), National Electronic Funds Transfer
(NEFT) and Real Time Gross Settlement (RTGS) in India.

Pros & Cons of Cashless Economy:

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1.1 HISTORY OF CASHLESS ECONOMY:

Ever since the age of agricultural productivity in ancient times, when people
have had excess production beyond self-consumption, we have had the need to give
this produce to someone and get something we seek in return.

• Barter System

Barter was the first system where Good A is given an exchange for Good B, and
the value parameters are negotiated. If a person do not want Good B, it is a problem,
and the transaction does not happen. Also, if the commodities being exchanged are
not of the same value it becomes difficult (Would you barter a kg of rice for a goat?)
It is better to share a store of value or medium of exchange i.e. money, so that one can
go and purchase Good C that I want from someone else in the market. Easily traded
goods like animal skins, salt and weapons served as the medium of exchange over the
centuries even though the unit values were still negotiable. Soon the need arose to
minimize negotiation of value, and standardize the value of money units.

• Coins, Banks and Credit

Coins issued by kings and rulers subsequently became medium of value

exchange and storage, i.e. money, used in trade and transactions. A coin is a small,
flat, round piece of metal or plastic used primarily as a medium of exchange or legal
tender. {Note cheques, credit cards are not legal tender.} Coins are standardized in
weight, and produced in large quantities at a mint in order to facilitate trade. In 600
B.C., Lydia's (in western Turkey) King Alyattes minted the first official currency. The
coins were made from a mix of silver and gold and stamped with pictures that acted as

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denominations. The Chinese moved from coins to paper money in 7th century AD (to
minimize hassle of carrying heavy strings of coins around) and this was widely
available by the time Marco Polo visited in 1200 AD.

Once coins or paper money were available, loans and credit became easier to
help finance the inputs of production. Banks evolved in the 14th century Renaissance
Italy to store coins safely, and aggregate / channel the flow of credit (primarily to
support agriculture and trade flows). Excess money was parked in banks, but coins
were still used for payments. "Interest" or a "price" of money was developed to
encourage the parking of excess money in banks, and to lend money to those who
needed it.

• Bank Notes & Accounting Ledgers

Venetian merchants realized that the money sitting in banks could also be
tapped for payments, and introduced paper bills essentially asking their banker to
make payments. A banknote (often known as a bill, paper money, or simply a note) is
a type of negotiable instrument known as a promissory note made by a bank payable
to the bearer on demand. In this sense, bank notes were essentially contracts, i.e.
promise to pay a specific amount of money, either on demand, or at a set time, with
the payee named on the contract document. When no payee was mentioned,
the bearer of the note was the payee. This allowed such bank notes to be exchanged
quickly, and viewed as cash. But now they also had to be protected since once stolen,
the bearer could use them.

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Banknotes were originally issued by commercial banks, who were legally required to
redeem the notes for legal tender (usually gold or silver coin) when presented to the
chief cashier of the originating bank. These commercial banknotes only traded at face
value in the market served by the issuing bank. Commercial banknotes have primarily
been replaced by national banknotes issued by central banks. This is the "cash" and
"currency" we use today, also called "fiat" currency. The value of the currency was
determined by the policies of the central bank, who could print more notes, anchor the
value of the currency to a metallic standard (e.g.: gold standard), or target the price of
money, i.e. interest rates as a function of macroeconomic conditions.

In parallel to the developments above, it became important to account for the

growing set of financial transactions to manage the trading business. With the
availability of paper, printing and easier writing, a double-entry accounting system
was developed with two accounting entries are required to record each financial
transaction. These ledger entries may occur in asset, liability, equity, expense, or
revenue accounts. Today we manipulate these in excel spreadsheets.

• Inter-Bank Automated Clearing & Settlement Networks

With the advent of bank accounts, and practice of payments against those
accounts, and the growth of computers and networks (including telephonic / fax
networks), new networks started emerging for inter-bank automated clearing and
settlements. The Automated Clearing House (ACH in USA), Clearing House
Interbank Payments System (CHIPS), Society for WW Interbank Financial
Telecommunication (SWIFT), National Electronic Fund Transfer (NEFT in India),

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RTGS (Real-time Gross Settlement), IMPS (Immediate Payment System), and credit
card networks (Visa, Mastercard) are examples of such networks for different
purposes. Some are for large payments (e.g.: Fedwire, RTGS), some are settled in
batches (e.g.: ACH, NEFT, etc), some immediately (IMPS, RTGS etc), some owned
by banks (CHIPS, SWIFT).

• Credit Card Networks

VISA and Mastercard are two inter-bank networks established 1958 and 1966
respectively. Credit cards are payment cards issued to users (cardholders).
The issuing bank creates a revolving account and a line of credit to the cardholder
from which cardholder can borrow money for payments or cash advances. A charge
card is similar, but requires the balance to be repaid in full each month. A debit card
charges the transactions to bank accounts. Since merchants are charged for each
transaction, payments now became a revenue generating operation for banks (from a
costed service that they needed to support to ensure they keep customers happy), and
a way to drive personal loans (via revolving credit). Seeing the success of such cards,
airlines, retailers, casinos and hotels started issuing loyalty cards and new forms of
"currency" such as Airline miles, hotel stay points etc emerged as a form of customer
engagement and innovative discounting. Co-branding of airlines and cards also
emerged. (JAL, Visa).

From a technological perspective, managing security of payments, real time

electronic verification, fraud detection, and credit scoring of cardholders became
important functions. A point of sale (POS) terminal with communications to the
merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or
chip on the card with the EMV - Euro pay, Mastercard, Visa standard. EMV cards are
either physically inserted (or "dipped") into a reader and contactless (near field
communications - NFC) that can be read over a short distance using radio-frequency
ID (RFID) technology. Visa and MasterCard have also developed standards for using

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EMV cards in devices to support card not present transactions over the telephone and
Internet. MasterCard has the Chip Authentication Program (CAP) for secure e-
commerce.

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1.2 TRANSFORMING INDIA INTO CASHLESS ECONOMY:

• Post Demonetization, the Centre is making a big push for online and card –
based transactions in the country to achieve its target of becoming a largely
cashless economy.
• Rapid growth of e- payment start-up in the country.
• Launch of Unified Payments Interface (UPI) to facilitate cashless transactions.

Why Is Moving Towards A Cashless Economy Important?

To put it in a straight forward manner – cashless economies tend to be less corrupt,
and have lesser black money. Let’s examine these reasons in detail.

1. Cash is costly:
A significant amount of time and effort is expended in shepherding them
through the system and finally into the consumer’s hands. RBI has spent Rs.32.1
billion just for printing the currencies that are in circulation. Add to it the costs of
setting up and maintaining ATMs. Also, paper currency has a shelf life after which it
is renewed. It is said that the direct cost of running a cash-based economy is close to
0.25% of India’s GDP.

2. Cash drives a shadow economy:

Cash transactions provide anonymity like no other mode of payment. They’re
difficult to track. This leads to many evils, like – tax evasion, black money etc.
In 2007, currency in circulation was almost equal to bank deposits. But in the last
three years, currency with Indians was more than the bank deposits by 50%. As per
government data, the size of black money in India is Rs.15-16 lakh crores. This is the
unaccounted money and was being used to finance a shadow economy, almost
running a parallel government that finances all illegal transactions. Most of it is used

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for financing terrorist activities, illicit funding for elections, purchasing political
decisions, betting, trafficking, and for hijacking democracy.

3. Future rewards: Financial inclusion + Increased tax revenues:

A cashless or a digital economy will require all the residents to have a bank account.
This will lead to higher financial inclusion rates and will also help build a bridge
between Bharat and India. Also, since digital transactions can be easily tracked, the
incidences of tax evasion will reduce drastically and in the long term will help the
common people in terms of better implementation of government policies.

1.2.1 Advantages of a Cashless Economy:

• Tackling Black Money: The main advantage of a cashless society is that a

record of all economic transactions through electronic means makes it almost
impossible to sustain black economies or underground markets that often prove
damaging to national economies. It is also much more risky to conduct criminal
transactions. An economy that is largely cash-based facilitates a rampant
underground market which abets criminal activities such as drug trafficking,
human trafficking, terrorism, extortion etc. Cashless transactions make it
difficult to launder money for such nefarious activities.

• Convenience: The ease of conducting financial transactions is probably the

biggest motivator to go digital. You will no longer need to carry wads of cash,
plastic cards, or even queue up for ATM withdrawals. It is also a safer and easier
spending option when you are travelling.

• Lower Risk: If stolen, it is easy to block a credit card or mobile wallet

remotely, but it is impossible to get your cash back. In that sense, the digital
option offers limited security. This is especially true while travelling,
especially abroad, where loss of cash can cause great inconvenience. Besides,
if the futuristic cards evolve to use biometric ID (finger prints, eye scan, etc),
it can be extremely difficult to copy, making it a very safe option.

• Small Gains: It may not seem like much of an advantage, but being cashless
makes it easy to ward off borrowers. Another plus is that you can pay the
exact amount without worrying about not having change or getting it back
from shopkeepers.

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 • Increase Tax base: It is difficult to avoid the proper payment of due taxes in a
cashless society; such violations are likely to be greatly reduced. Increased tax
base would result in greater revenue for the state and greater amount available
to fund the welfare programmes.

• Tracking spends: If all transactions are on record, it will be very easy for
people to keep track of their spending. It will also help while filing income tax
returns and, in case of a scrutiny, people will find it easy to explain their
spends.
• Continuous growth is a factor: The digital payment industry will get a
continuous growth in coming years too and mediums of paying will go
downwards. Most important saving time and money for both the customer and
the customer and the seller. It's been years that the ATMs were introduced but
till date its an updated channel for taking out money. Just the payment
channels keep adding with the old one and the series goes like this. The
government keeps taking new initiatives to improve the digital infrastructure.
• Others:
✓ Circulation of Fake Currency notes can be curbed.
✓ A cashless economy will help reduce corruption.
✓ Digital transactions bring in better transparency, scalability and accountability.
✓ Digital transactions are convenient and improve market efficiency
✓ Transaction costs will come down in the long run
✓ It would bring down the logistics & cost involved in printing, managing and
moving money around.
✓ Cashless economy will reduce the production of paper currency and coins. This
will save a lot of production cost in turn.
✓ A lot of data transfer happens due to the cashless transaction. This data will help
the government plan for future expenses such as housing, energy management,
etc from the pattern of the data transmission.

Go Digital, Get Discount

• Service tax: Waiver of service tax of 15% on digital transactions up to 2000.

• Fuel: 0.75%discount on digital purchase of fuel through credit/debit cards, e-
wallets or mobile wallets.

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• Rail tickets: 0.5%discount on monthly and seasonal suburban railway tickets
from 1 January 2017. Online rail ticket buyers get up to 10 lakh free accident
insurance too.
• Rail catering: 5% discount on digital payments for railway catering,
accommodation, etc
• Highway toil: 10% discount on NH toil payment via RFID or fast –tags in
2016-2017.
• Insurance: 10%discount by government general insurers on premium paid
online via their portals. 8% discount on new LIC policies bought online via its
site. POS Rs 100a months is the maximum rent hat PSU banks can charge for
PoS Terminals.
• Rupay: Kisan credit card holders to get RuPay Kisan cards.

1.2.2 Drawbacks of Digital Transactions:

• Losing phone: Since you will be dependent on your phone for all your
transactions on the move, losing it can prove to be a double whammy. It can
not only make you susceptible to identity theft, but you could also be rendered
helpless in the absence of physical cash or any other payment option. This can
be especially problematic if you are travelling abroad or in smaller towns or
villages with lack of banking infrastructure or other payment options. Another
drawback is that you need to keep your phone constantly charged. If the phone
dies on you, you will be stranded, particularly if you are in the middle of an
important purchase or dealing with an emergency.

• Acceptance infrastructure and digital inclusion: Lack of adequate

infrastructure is a major hurdle in setting up a cashless economy. Inefficient
banking systems, poor digital infrastructure, poor internet connectivity, lack of
robust digital payment interface and poor penetration of PoS terminals are some
of the issues that need to be overcome. Increasing smartphone penetration,
boosting internet connectivity and building a secure, seamless payments
infrastructure is a prerequisite to transition into a cashless economy.

• Financial Inclusion – For a cashless economy to take off the primary

precondition that should exist is that, there should be universal financial

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 inclusion. Every individual must have access to banking facilities and should
hold a bank account with debit/credit card and online banking facilities.

• Digital and Financial Literacy – Ensuring financial and digital inclusion alone
is not sufficient to transition to a cashless economy. The citizens should also be
made aware of the financial and digital instruments available and how to
transact using them.

• Cyber Security – Digital infrastructure is highly vulnerable to cyber-attacks,

cyber frauds, phishing and identity theft. Off late cyber-attacks have become
more sophisticated and organised and poses a clear and present danger. Hence
establishing secure and resilient payment interfaces is a prerequisite for going
cashless. This includes enhanced defences against attacks, data protection,
addressing privacy concerns, robust surveillance to pre-empt attacks and
institutionalised cyber security architecture.

• Changing habits and attitude – Indian economy functions primarily on cash

due to lack of penetration of e-payment modes, digital illiteracy of e-payment
and cashless transaction methods and thirdly habit of handling cash as a
convenience. In this scenario, the ideal thing to do is to make people adopt e-
payments in an incremental fashion and spread awareness to initiate behavioural
change in habits and attitude.

• Urban – Rural Divide – While urban centres mostly enjoy high speed internet
connectivity, semi urban and rural areas are deprived of a stable net connection.
Therefore, even though India has more than 200 million smartphones, it is still
some time away for rural India to seamlessly transact through mobile phones.
Even with regard to presence of ATM’s, PoS terminals and bank branches there
exists a significant urban-rural divide and bridging this gap is a must to enable
a cashless economy.

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 1.2.3 Is India Ready for a cashless economy?

India’s reliance on cash

• Indian economy is primarily to be driven by the use of cash and less than 5% of
all payments happen electronically. This is largely due to the lack of access to
the formal banking system for a large part of the population and as well as cash
being the only means available for many. Large and small transactions continue
to be carried out via cash. Even those who can use electronic payments, use
cash.

• Indians traditionally prefer to spend and save in cash and a vast majority of the
more-than 1.2 billion population doesn’t even have a bank account.

• Indian economy is primarily driven by the informal sector and it relies heavily
on cash-based transactions.

• A report by Google India and Boston Consulting Group showed that IN 2015
around 75% of transactions in India were cash-based while in developed
countries like USA, Japan, France, Germany etc. it was just around 20-25%.

• RBI estimates for July 2016 show that banks had issued around 697.2 million
debit cards and 25.9 million credit cards to customers after deducting withdrawn
or cancelled cards. However, cards on their own cannot turn the economy into
a cashless one. It is Important to note that the number of cards in operation is
not equal to the number of individuals holding those cards. It basically means
that many customers hold multiple accounts and cards.

• The difficulty in going digital is exemplified by the data on debit card usage —
over 85% (in volume) and 94% (in value) of all debit card usage is at ATMs for
the purpose of withdrawing cash. The principal purpose for cards in an Indian
context is thus a means to withdraw cash. The exponential growth in debit cards
(over 600 million) is a direct consequence of the financial inclusion drive that
led to the opening of over 170 million bank accounts. Though the move put
plastic money into the hands of millions, effectively it has only shifted cash
withdrawals from banks to ATMs, which was not quite the intent.

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In Favour: -

• Long before demonetizing 500- & 1000-rupee notes, Indian government is

trying to increase cashless transactions through Direct Benefit Transfer
Scheme, Jan Dhan accounts etc.
• From the moment higher denomination notes are demonetized,
cashless transactions have increased at a rapid rate.
• Though India has a huge proportion of digital illiteracy, using debit card does
not require much digital literacy.
• Many state governments are working hard to spread the awareness of digital
transactions.
• Indian Government rolled out incentives for going digital in financial
transactions. It introduced daily and weekly lucky draws to encourage digital
transactions.

Against:

• Till the moment 500- & 1000-rupee notes are demonetized, cash transactions
constituted 85% among all the financial transactions in India.
• Even after the demonetization move, cash transactions are still the king.
• India has a huge population of digital illiterates. It’ll take a lot of time to
transform everyone into digital literates.
• No country is a fully cashless economy yet. India is still a developing country,
and needs a lot time to transform itself into cashless economy.
• Though no. of accounts have increased drastically after the demonetization
move, once the scarcity of new notes is reduced, there is no guarantee that
everyone will use that bank accounts.
• With the recent hack of 32 lakh Rupay & Visa debit cards, there is a doubt
in cyber security of Indian Banking. Before going for completely cashless
economy, India needs to strengthen its cyber security first.

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 1.2.4 SWOT Analysis of cashless transaction

➢ Strengths of India going cashless:

A planned strategy: The government of India followed a detail criterion by first SIT
on black money, then Jan Dhan Yojana which was followed by tracking on foreign
accounts and money hoarders. Then, the income declaration scheme and finally,
demonetization.

Financial inclusion: The government of India is focusing on reaching all the corner
and to every citizen. Many bank accounts were created throughout the country as an
initiative taken up by government.
Steps taken by Government:
• Launch of BHIM app for smartphone users based on UPI
• Launch of Aadhar merchant pay.
• Direct benefit transfer.

➢ Weakness faced by India :

• Cash is the dominating means of payment in the Indian economy.
• There is 24 x 7 electricity in India.
• E- illiteracy is also a major weakness
• Smartphone market is still untapped.
• Lack of technological infrastructure.
• Sluggish economy.

➢ Opportunities available with India after going cashless:

• Curbing blank money -Going cashless will bring an end to the parallel
economy running by black money.
• Tax collection – With digitization, tax collection will be made easy.
• Reduced real estate – Going cashless will ensure only payment in white
money.
• End of corruption – Going cashless will ensure a proper check on bank
accounts, which will reduce the system of bribery.

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➢ Threat with going cashless:
• Threat of cyber – crimes.
• Threat of loss of database.
• Threat of data encryption.
• Cash is considered the most convenient and fastest means of payment.
• It is very difficult to gain trust and faith among Indians, as there are constant
ups and downs in the economy.

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 1.3 DIGITAL PAYMENT METHOD:

The Government of India has been taking several measures to promote and encourage
digital payments in the country. As part of the ‘Digital India’ campaign, the government
aims to create a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’.
There are various types and modes of digital payments.

Types of Digital Payment Methods in India

1. Banking cards
2. USSD
3. Aadhaar Enabled Payment System (AEPS)
4. UPI
5. Mobile Wallets
6. Bank pre-paid cards
7. Point of Sale (PoS)
8. Internet Banking
9. Mobile Banking
10. Bharat Interface for Money (BHIM) app

1. Banking cards: Cards are among the most widely used payment methods and
come with various features and benefits such as security of payments, convenience,
etc. The main advantage of debit/credit or prepaid banking cards is that they can be
used to make other types of digital payments. For example, customers can store card
information in digital payment apps or mobile wallets to make a cashless payment.
Some of the most reputed and well-known card payment systems are Visa, Rupay and
MasterCard, among others. Banking cards can be used for online purchases, in digital
payment apps, PoS machines, online transactions, etc.

How to get Banking cards?

• Apply with your respective bank and provide Know Your Customer (KYC) details
• The card will get activated within a week and you will be allotted a 4-digit pin,
which can be used for all transactions

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 Payment method through plastic money

a) Debit card

✓ Debit card process

Swipe your card and enter your PIN (as one option).

If you use your debit card at the supermarket checkout, for instance, the card reader
will usually ask whether you want to pay by “debit” or “credit” after you swipe
your card. If you select “debit,” you will have to enter your PIN number to complete
the transaction.

✓ Online payment through debit card

If you're paying for something online, you can use your Debit Card. Here is a step-by-
step guide to help you complete your payments online.

a) Once you are at the payment checkout, you need to choose “Pay Using Debit/ Credit
Card. Once you select on the option, you need to specify the type of card, i.e., Debit
Card and whether it is a Visa or Mastercard.

b) Then, type the 16-digit Debit Card number which is on the front side of your Debit

Card. You will also have to enter the expiration date of the card.

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c) Once you’ve entered the Debit Card details, you may be asked for a CCD, CVV, or
similar security code. In most cases, it is a three or four- digit code that helps prove that
you are authorised to use the card. This code is mostly found on the back of the cards.

d) Once you are through the payment portal, you will be asked to enter a unique transaction

code or an OTP (one-time password) that is sent to the mobile number linked to your
Debit Cards. Once you enter the number, your transaction is verified, and you receive
a notification.

e) To use a Debit Card online, you will need to know the correct billing address which is
linked to the card being used.

b) Credit card
✓ Credit card payment process

STEP 1- Login to the New Mobile Banking App. ...

STEP2-Enter Customer ID/Password details or Login via Quick Access Pin.
STEP 3 -Go to Pay Section >> Cards.
STEP4 -Choose your registered card.
STEP5 -Select "Pay" option.
STEP6 -Select the type of amount (Minimum/Total/Other)
STEP 7Click confirm to complete payment.

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 ✓ Online payment method of credit card
• The shipping address allows the merchant to calculate your shipping price and
update your purchase total. Make sure you enter the address to where you want
the order shipped, even if it’s different from the billing address where you
receive your credit card statements. You will also usually be given options and
pricing for various shipping types.

• There will sometimes be an option to choose the type of credit card you’re using,
e.g. Visa, Mastercard, Discover, American Express, or a store credit card. If
your credit card processor isn’t listed in the box, the merchant doesn’t accept
that type of credit card. You’ll have to use another type of credit. You’ll
encounter this more often with American Express and Discover than Visa or
Mastercard.1 2
• Look at the credit card to verify that you’ve entered your name correctly. Then,
enter your credit card information: the credit card number, expiration date, and
security code. For Visa, Mastercard, and Discover, the three-digit security code
will be printed on the back of the card after the credit card number. The four-
digit security code for American Express credit cards is printed on the front-
right of the card, directly above the credit card number.3 If you’re using a store
credit card that’s not co-branded with a major credit card company, you will not
be asked for a security code
• This is the address at which you receive your credit card statements. Note that
this address may be different from the shipping address, for example, if your
statements go to the post office but you’d like your order shipped to your
home or to someone as a gift. The billing address must be entered correctly for
your credit card transaction to go through. Check your credit card statement if
you're not sure of the exact billing address.
• Once you have entered everything and selected the button to proceed, you will
usually be taken to a verification screen where you can review everything you
have entered. Once you've ensured that everything is accurate, select the
button to complete your order.

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 Documents required when you are applying for a plastic money card

Documents required when you are applying for a debit card

The documents required for a debit card are similar to the documents for opening an
account. Typically, you don’t have to submit additional documents for a debit card.
As debit card is linked to a bank account, the bank already has the necessary
information. The objective behind obtaining these documents is to perform a thorough
check on the customer. As per the present guidelines of RBI, KYC is a must. If the
banks fail to do so, they are liable to pay penalties.

Some banks may require documents for verification. Here is a list of documents
required for a debit card:

• Proof of identity: Any of the following: Passport, Driving license, Voter’s ID

card

• Proof of address: Any of the following: Passport, Driving license, Voter’s ID

card

• PAN card

• 2 latest passport size photographs

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 • Form 16 (only if PAN card is not available)

Documents required when you are applying for a credit card

• Identity proof (Any one of the below)

• Aadhaar card
• PAN card
• Driving license
• Voter ID card
• Passport
• Address proof (Any one of the below)

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 • Electricity bill
• Ration card
• Passport
• Driving licence
• Telephone bill
• Last two month's bank statement
• Voter ID
• Income proof (Any one of the below)

• Latest payslip
• Form 16
• Income tax (IT) return

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 • Age proof (Any one of the below)

• Tenth standard school certificate

• Birth certificate
• Passport
• Voter ID card
• Other documents

• PAN card photocopy

• Form 60

2. USSD(Unstructured Supplementary Service Data ): Another type of digital

payment method, *99#, can be used to carry out mobile transactions without
downloading any app. These types of payments can also be made with no mobile data
facility. This facility is backed by the USSD along with the National Payments
Corporation of India (NPCI). The main aim of this type of digital payment service is
to create an environment of inclusion among the underserved sections of society and
integrate them into mainstream banking. This service can be used to initiate fund
transfers, get a look at bank statements and make balance queries. Another advantage
of this type of payment system is that it is also available in Hindi.

How to Use *99#?

• This service can be used by dialling *99#, after which the customer can interact
with an interactive voice menu through their mobile screen.
• To use the service the mobile number of the customer should be the same as the one
linked to the bank account
• The next step is to register for USSD, MMID (Mobile Number Identifier) and
MPIN

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 3. AEPS (Aadhaar Enabled Payment System): Expanded as Aadhaar Enabled
Payment System, AEPS, can be used for all banking transactions such as balance
enquiry, cash withdrawal, cash deposit, payment transactions, Aadhaar to Aadhaar
fund transfers, etc. All transactions are carried out through a banking correspondent
based on Aadhaar verification. There is no need to physically visit a branch, provide
debit or credit cards, or even make a signature on a document. This service can only
be availed if your Aadhaar number is registered with the bank where you hold an
account. This is another initiative taken by the NPCI to promote digital payments in
the country.

How to use AEPS?

• It is very simple to use AEPs, all you need to do is to provide the accurate Aadhaar
number and the payment will be successfully made to the concerned merchant.

4. UPI (Unified Payment Interface): UPI is a type of interoperable payment system

through which any customer holding any bank account can send and receive money
through a UPI-based app. The service allows a user to link more than one bank
account on a UPI app on their smartphone to seamlessly initiate fund transfers and
make collect requests on a 24/7 basis and on all 365 days a year. The main advantage

26
 of UPI is that it enables users to transfer money without a bank account or IFSC code.
All you need is a Virtual Payment Address (VPA). There are many UPI apps in the
market and it is available on both Android and iOS platforms. To use the service, one
should have a valid bank account and a registered mobile number, which is linked to
the same bank account. There are no transaction charges for using UPI. Through this,
a customer can send and receive money and make balance enquiries.

How to use UPI?

• Download the app on Android or iOS platform

• Register for the service by providing bank account details
• Create a VPA, get an MPIN

5. Mobile Wallets: A mobile wallet is a type of virtual wallet service that can be used
by downloading an app. The digital or wallet stores bank account or debit/credit card
information or bank account information in an encoded format to allow secure
payments. One can also add money to a mobile wallet and use the same to make
payments and purchase goods and services. This eliminated the need to use
credit/debit cards or remember the CVV or 4-digit pin. Many banks in the country
have launched e-wallet services and apart from banks, there are also many private
players. Some of the mobile wallet apps in the market are Paytm, Free charge, etc.
The various services offered by mobile wallets include sending and receiving money,
making payments to merchants, online purchases, etc. Some mobile wallets may
charge a certain transaction fee for the services offered.

How to use a mobile wallet?

• Download the app

• Register for the service by following instructions and providing all details
• Load money

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 6. Bank pre-paid cards: A prepaid card is a type of payment instrument on to which
you load money to make purchases. The type of card may not be linked to the bank
account of the customer. However, a debit card issued by the bank is linked with the
bank account of the customer.

How to Use a Prepaid Card?

• Apply for the card

• Get pin
• Load money from your bank account/debit card

7. PoS terminals (Point of sale): Traditionally, PoS terminals referred to those that
were installed at all stores where purchases were made by customers using
credit/debit cards. It is usually a hand held device that reads banking cards. However,
with digitization the scope of PoS is expanding and this service is also available on
mobile platforms and through internet browsers. There are different types of PoS
terminals such as Physical PoS, Mobile PoS and Virtual PoS. Physical PoS terminals
are the ones that are kept at shops and stores. On the other hand, mobile PoS terminals
work through a tablet or smartphone. This is advantageous for small time business
owners as they do not have to invest in expensive electronic registers. Virtual PoS
systems use web-based applications to process payments.

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8. Internet Banking: Internet banking refers to the process of carrying out banking
transactions online. These may include many services such as transferring funds,
opening a new fixed or recurring deposit, closing an account, etc. Internet banking is
also referred to as e-banking or virtual banking. Internet banking is usually used to
make online fund transfers via NEFT, RTGS or IMPS. Banks offer customers all
types of banking services through their website and a customer can log into his/her
account by using a username and password. Unlike visiting a physical bank, there are
to time restrictions for internet banking services and they can be availed at any time
and on all 365 days in a year. There is a wide scope for internet banking services.

9. Mobile Banking: Mobile banking is referred to the process of carrying out

financial transactions/banking transactions through a smartphone. The scope of
mobile banking is only expanding with the introduction of many mobile wallets,
digital payment apps and other services like the UPI. Many banks have their own apps
and customers can download the same to carry out banking transactions at the click of
a button. Mobile banking is a wide term used for the extensive range or umbrella of

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 services that can be availed under this.

10. Bharat Interface for Money (BHIM) app: The BHIM app allows users to make
payments using the UPI application. This also works in collaboration with UPI and
transactions can be carried out using a VPA. One can link his/her bank account with
the BHIM interface easily. It is also possible to link multiple bank accounts. The
BHIM app can be used by anyone who has a mobile number, debit card and a valid
bank account. Money can be sent to different bank accounts, virtual addresses or to an
Aadhaar number. There are also many banks that have collaborated with the NPCI
and BHIM to allow customers to use this interface.

How to Use BHIM App?

• Download and install the BHIM app

• Choose a language Register for the service by providing mobile number linked to
bank account
• Add bank-related information and set up a UPI PIN by following the given
instructions

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 1.3.1 Why digital payment industries are important?

Digital payments have developed as an important tool for encouraging financial

formation. Because it reduces the cost of rendering financial services to common
people. Also, improves the security and availability of using savings, payments, and
insurance methods. That is it reduces the system of theft and robbery everything is
Finite Element Analysis (FEA) in your mobile. It's you who needs to take off all the
information related to digital payments. Don't share your any detail with other people
like getting phone calls from banks. They ask for the details of the digital payment
way never share any OTPs with them. Even now for opening a bank account one can
easily apply online. The person will visit you home and complete the KYC process,
you can open a bank account. For example, Kotak Mahindra Bank has started a new
system of an online debit card

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1.4 IMPACT ON CASHLESS ECONOMY BY DEMONETISATION AND
LEGAL PROTECTION ON THE CASHLESS TRANSACTIONS

8th November, 2016 was the day when the journey of India’s National Currency
Note of Rs.500 and Rs.1000 had come to an end, where Rs.500 note survived till 29
years (1997-2016) and Rs.1000 for the same till 16 years (2000-2016). This day
became very harsh for the Indians to realize that the pockets with the multiple
banknotes will no more be worthy enough from the day onwards, it will become
worthless piece of paper in couple of hours. A live unscheduled NEWS flashed got
viral over the televisions’ media by our Honourable Prime Minister Mr Narendra
Modi who made the announcement regarding demonetization of all 500Rs. and
1000Rs. banknote in a battle against the corruption. This prominent step taken by our
Prime Minister was to bring the change in our developing country by dematerializing
the corruption, track all the fake currency, layoff the supply line money, arms and
immunizations for terror funding, to bring tax evasion to halt, to unearth and curb the
black money, also to curb illegal and unethical business activities such as, the black
marketing, food adulteration. More importantly, transformation of Indian economy
into cashless economy which is driving the growth of country towards digitization i.e.
Digital India.

What is demonetisation?

Demonetization is the act of stripping a currency unit of its status as legal

tender. It occurs whenever there is a change of national currency, the current form or
forms of money is pulled from circulation and retired, often to be replaced with new
notes or coins. Sometimes, a country completely replaces the old currency wit new
currency.

On November 8,2016, the Prime Minister Narendra Modi announced the

demonetization of the currency notes of Rs. 500 and Rs 1000. Further, the
government gave people a period of around 2 months to deposit all currency notes of
the said demonetization with any bank.

In India, this is not the first instance of demonetization. In India, Currency were
demonetized on three occasions. In 1946, the Reserve Bank of India had demonetized

32
Rs. 1000 and Rs. 10000 currency notes which were then under circulation. In 1954,
the Government introduced new currency notes of Rs. 1000, Rs. 5000 and Rs. 1000.
Further these notes were demonetized in 1978 when the Morarji Desai Government
decided to curb illegal transactions and anti-social activities. Finally, in 2016, the
Prime Minister Narendra Modi announced the demonetization of the currency notes
of Rs. 500 and Rs 1000.

1.4.1 Impact of Cashless Transaction

➢ Business Process:

The impacts of Cashless Transaction on the Business sector are as following:

• Businesses are legally strong.

• Proper audit. Not hidden excess liability.
• Increase use of e-payment.
• Wallet hold business gets an advantage

➢ Education Process:

The impact of Cashless Transaction on the education sector is likely to be minimal.

Some of the foreseeable fallouts of demonetization on the Indian education sector are
as following:

• The decision of the central government to withdraw high-value bank notes to

curb unaccounted cash will hurt education institutions that accept donations or
capitation fees for admissions.
• Accepting and accounting donations will become difficult because of the
demonetization drive. Education sector was not immune to the Indian theory
of 'you can buy everything with money'. This move of demonetization will
definitely curb this mentality of many in the country.
• Nursery admissions, private education institutions and professional higher
education including medical and engineering are the segments which accept
donations widely. For the first time, these segments are going to feel the
impact in a big way.

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 • Private educational institutions take huge of amount of donations in Cash
which is 40% to 50% more than the fees of the course. We expect that
demonetization will impact the recipient.
• Admissions in private educational institutions and medical college admissions
comes tagged along with donations without a glitch. The donation in medical
colleges is usually more than 100% of the fees. Demonetization will impact
both admissions and also the receipt.
• MBBS seats in some colleges go for Rs40 lakh to Rs60 lakh, while MD seats
have a range of Rs 2 crore price tag on it. Similarly, engineering and
management stream seats have a price tag between Rs 2 lakh to Rs 10 lakh
each. This move can change the course of expensive education which can be
made more affordable devoid of the capitation fee.

➢ Economic Growth:

The impact of Cashless Transaction on Economic Growth in India is as following:

• According to the Bank, India's growth in the first half of FY 2017 was
underpinned by robust private and public consumption, which offset slowing
fixed investment, subdued industrial activity and lethargic exports.
• The medium-term may be liquidity expansion in the banking system, helping
to lower lending rates and lift economic activity," the World Bank noted.

➢ Impact of Information Technology in cashless economy:

The impact of Information Technology on in cashless economy in India is as

following:

• Because of information technology the cost of bank will reduce that will result
in lower service charges for customers.
• Making Transaction is very easy by using information technology.
• New IT Technology like biometric are help to do secure and transparent
transaction.

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 1.4.2 LEGAL ASPECTS GOVERNING CASH-LESS TRANSACTIONS:

There are two directions where the law plays very important role in making the
boundation for the crime to take place in cash-less transactions, i.e regarding the
privacy and the other is the assurance of data of the users. As of now, there is no such
law specifically deals with these two issues. The question arises, if there is no such
law regarding the cash-less transactions, then why the liquid-money transaction user
will trust in the cash-less transaction scheme of the government. Rather there are laws
that governs the online activities of the user, i.e. Information Technology Act, 2008
(Cyber law), under Section 43A of the Act the security and privacy of the online data
is protected, and for any kind of malicious activity, tempering or misuse of data is
covered under Section 65 of the said Act. Also, if there any kind of unauthorized
transaction takes place without user’s knowledge then the user is limited liable under
customer protection-guidelines of RBI.

On July 6, 2017, the RBI issued a notification, Customer protection – limited liability
of customers in unauthorized electronic banking transactions. The good news is that
the onus is on the banks to prove that a fraud has taken place, but customers should
inform the bank as soon as possible to avoid being penalized.

Also there are cyber-cells which are engaged by the police when the FIR is done and
there is the need of tracking of cyber-footprints the court grants the permission under
its jurisdiction, than the investigation is done accordingly which is one of the legal
solution but in many cities the influence and working mechanism is not that equipped
enough for the investigation process. Also, there is the myth that it is very lengthy and
the slow process. Therefore, very few people try to opt for this option. But more or
less it is the effective process nowadays.

Although there is no such specific law for these types of issues but the above
discussed handful of security assurances by our government are helpful in getting
relief and remedies, therefore we can have fearless online transactions on our daily
usage by keeping complete precautionary measures in mind.

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 1.4.3 CURRENT POSITION OF CASHLESS INDIA:

• The cash centric informal sectors like agriculture, real estate, etc., have been
affected by demonetization. However, the experts say that it's a short-term
scenario and this move will give positive long-term consequences.
• To bring the economy on track again, government is promoting cashless
economy because scrapping of cash needs an alternative to cash.
• India's black money has been estimated by the World Bank in 2010 to be
worth about one fifth of the GDP. In a country where 90% transactions are
carried out on cash basis it was a revolutionary move to transform from cash
to cashless transactions.
• India's black money has been estimated by the World Bank in 2010 to be
worth about one fifth of the GDP. In a country where 90% transactions are
carried out on cash basis it was a revolutionary move to transform from cash
to cashless transactions.
• Under this scheme, 250 million bank accounts have been opened in two years.
As per RBI reports bank branches increased by 5% per year but ATMs, debit
cards and card swiping machines have doubled in four years and online
transactions have grown 20 times in six years to 2016.
• All these data shows a gradual shift towards cashless economy.
Demonetization has speed up this transition.

1.4.4 FUTURE PROSPECTS OF CASHLESS PAYMENTS IN INDIA:

Smooth, simple and secure payment processes will help to bring about
behavioural changes and faster adoption of digital payments and banking among un-
banked segments. When new players enter the market, each with a slightly different
take on the market and with differing business models, the increased competition will
help the environment and offer more options for consumers to choose from. A larger
pie with more players is definitely good for the changing dynamics of the payments
industry, which is still nascent in India.

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 Indian consumption is still dominated by cash, with cards contributing only 5
per cent of the personal consumption expenditure. In developed countries, 30-50 per
cent of spends happen through cards. So there is huge growth opportunity.

The rapid growth of smartphones, Internet penetration and e-commerce is

complementing these; card payment volumes have been growing in excess of 25 per
cent y-o-y. We expect this trend to continue, aided by the continued increase in debit
card activation and usage; debit card transactions have been growing at 31 per cent
each year.

Intense competition and strategic collaboration among existing and new market
participants like the payments and small banks and wallets will help scale up
acceptance and foster more creativity, innovation and consumer choice. According to
him, the future holds exciting times for the payments industry in India, as all
stakeholders and regulatory authorities come together to achieve a “less-cash
dependent” and eventually “cashless” society.

The credit card industry in India sees greater acceptance among consumers this
year. According to Worldline India Card Payment Report 2014-15, the credit card
base grew at 9.8 per cent in the past year. Worldline India is a leader in the payment
and transactions services in the country. Alternative methods like mobile wallets and
prepaid cash cards accounted for 3 per cent of digital transactions. This industry has
been growing steadily over the past few years. Card transactions, both by debit and
credit cards, are on an upward trajectory. There are interesting dynamics at play in the
Indian payments industry.

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1.5 FRAUD THROUGH CASHLESS TRANSACTION

1.5.1 Payment fraud: What is it and how it can be avoided?

Payment fraud is any type of false or illegal transaction completed by a cybercriminal.

The perpetrator deprives the victim of funds, personal property, interest or sensitive
information via the Internet.

Payment fraud is characterized in three ways:

• Fraudulent or unauthorized transactions

• Lost or stolen merchandise
• False requests for a refund, return or bounced checks

Ecommerce businesses rely on electronic transactions to charge customers for

products and services. The increased volume of electronic transactions has also
resulted in an increase in fraudulent activities.

What types of fraud are there?

There are multiple methods of payment fraud:

• Phishing: Any emails or websites that require personal or private information

such as credit card, bank account or login credentials are prone to phishing. If
the source is trusted, such as a partner with a bank, the website is trustworthy.
However, if the source is unfamiliar, it could indicate an attempt at stealing
information.

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 • Identity theft: Identity theft exists outside of the digital realm as well, but it's a
common type of fraud online. A cybercriminal who steals personal
information and uses it under false pretense is engaging in identity theft.
Hackers penetrate firewalls through old security systems or by hijacking login
credentials via public Wi-Fi.
• Pagejacking: Hackers can reroute traffic from your ecommerce site by
hijacking part of it and directing visitors to a different website. The unwanted
site may contain potentially malicious material that hackers use to infiltrate a
network security system. Ecommerce business owners must be aware of any
suspicious online activity in this capacity.
• Advanced fee and wire transfer scams: Hackers target credit card users and
ecommerce store owners by asking for money in advance in return for a credit
card or money at a later date.
• Merchant identity fraud: This method involves criminals setting up a merchant
account on behalf of a seemingly legitimate business and charging stolen
credit cards. The hackers then vanish before the cardholders discover the
fraudulent payments and reverse the transactions. When this happens, the
payment facilitator is liable for the loss and any additional fees associated
with credit card chargebacks.

How does fraud happen?

Fraudsters have become savvy at illegally obtaining information online. Hackers often
pose as a legitimate representative and contact credit card owners asking for sensitive
information, then use the following means of interaction to steal personal data:

• Email
• Texting malware to smartphones
• Instant messaging
• Rerouting traffic to fraudulent websites
• Phone calls
• Online auctions

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Cyberthieves also work in teams to penetrate network security systems by looking for
glitches or patches that haven't been updated in a while. These gaps give hackers
access around a firewall and make it easy to illegally obtain sensitive information.

How can ecommerce businesses mitigate fraud?

While it's challenging to entirely eliminate the threat of fraud for ecommerce stores,
you can help protect against it by continually updating your network security systems.
Firewalls and antivirus software are designed to act as a shield against hackers'
attempts to penetrate a secure network. Constantly updating software helps ensure that
your sensitive business information is safe.

There are a number of other ways to protect your business against fraudulent
payments:

• Maintain awareness of the latest fraud trends

• Partner with a verified payment processor
• Encrypt transactions and emails containing confidential information
• Ensure that tokens and login credentials are regularly changed
• Establish a policy regarding access to confidential information
• Constantly run security checks with antivirus software
• Require customers to log in to an individual account prior to making a
purchase

Payment fraud can hurt both you and your customers. By aggressively protecting your
ecommerce store against fraud, you can improve your reputation and your bottom line

1.5.2 Types of fraud

While the internet has connected us to more information than ever, today’s digital age
has made it easier for scammers to perpetrate their fraudulent activity. From faux
social media postings to password phishing for financial accounts, scammers have
found countless ways to get their hands-on other peoples’ money. They use any
means to contact victims telephone, snail mail, email, and the Internet. They gain your
trust and when they have you hooked, they ask you for money; then they take it and
run. The scenarios they use to lure you in change, constantly. But you can protect

40
yourself and your friends and family by arming yourself with knowledge of the most
common types of fraud

1) Fraud through USSD:

Mobile payments have become more popular and are used to perform transactions that
carry sensitive information that should only be visible to the person performing that
particular transaction. One of the well-known services to perform such transactions is
called Unstructured Supplementary Service Data (USSD) and due to the sensitive and
important details it performs it has become very attractive target for fraudsters. The
problem is that critical threats such as fraudulent transactions, request/response
manipulations, weak encryption, and insecure message communications are directly
triggering revenue loss for mobile payment service providers, customers and financial
institutions. In this paper, we seek to design and implement a model of fraud detection
in mobile transaction via USSD. We use Bayesian Network model to define the type
of transactions given the customers behaviour and EM algorithm to learn the
parameters in the model using observed data from transactions via USSD services
across the network. The proposed system has been designed.

2) Fraud through mobile wallets:

A mobile wallet works like an electronic prepaid card and can be used to pay for
things ranging from grocery to rail tickets without the need to swipe the debit/credit
card. All you have to do is to key in the username and password for logging in. The
app can be loaded with money either through debit/credit card or net banking.
The flip side is that these wallets mostly rely on the phone's locking system for
security and don't ask for any PIN or password while the payment is being made. So,
if your phone is stolen, anyone can transfer money using the wallet by merely
unlocking the screen.
There is also a fear that your phone might fall into wrong hands, who might use it to
make fraudulent transactions. Hence, users should create a personal password (under
security and settings feature) for making mobile wallet transactions.

41
 3) Fraud through Banking Card:

Types of fraud

• Fraud in the Application

In this all the information of the card holder is obtained and the fraudsters can actually
pose to be the applicant himself. The original card holder’s residential address is
replaced by the fraudster’s temporary address. It also happens that the fraudsters
sometimes also talk to the applicant and gets all the information from him posing to
be the issuing authority or the person from the bank issuing the credit cards. They also
get signatures on the card by saying print is not clear or any other such excuses. The
card holder also cannot deny this type of fraud because this signature is on the card
and the application thus, the card holder in this fraud cannot deny any thing since he
himself has signed the charge slips.

• Sold charge sheets fraud

If many charge sheets are submitted in a very short duration for the same card holder,
it could be more often a case of fraud. The reverse is also true. When there are no
charge sheets issued for a long duration too it could be that the fraudster is trying to
use the card at critical places. But this is more difficult to trace. It is known as sold
paper fraud since the paper, i.e. the charge slip is sold to other merchants for a fixed
price. The buyer merchant is then free to fill in any amount before submitting the
charge slips to his acquirer.

• Forgery

When the original card is stolen or lost and in case it comes to the possession of the
forger/ fraudster, then they give it a new entity by altering it suitably. It is reem
bossed with a new name, an account number, a convenient expiry date, etc. The

42
original signatures are changed sometimes but often the original signatures are
allowed to remain and the defrauder practices to imitate them and acquires the skill to
write the signatures on the sale draft and in other credit card transactions with
passable resemblance.22 It takes a long time to detect altered card forgery. Only when
there are some abnormal statements does the account holder even realize that there is
a forgery of the card. It takes so long to deduct that even when such cases are
deducted, it become useless because most damage is already done.

• Duplicate Card

Now with additional help from technology in the way of photo- mechanical process,
the fraudsters can actually duplicate the original card which will have almost replica
to the original card. They use almost the same material as their original and even the
encoding of the magnet. In fact the work is being professionally done by some
gangs.23 White Plastics, are imitations of credit cards in general aspect. The forger
does not make any serious effort for exact replications of dimensions, sizes or shapes
42 of letters, graphics, etc. The counterfeit credit cards are poor imitations of the
genuine cards and even a layman can distinguish one from the other, if the two are
presented to him. The manufacture of the white plastics does not follow the pattern of
the manufacture of the normal genuine cards. In white plastic fraud, it is not difficult
to identify that of a fake card because the embossed figures of the card bin number are
bound to be crooked and will not follow the same font or pattern as the original card.

• Terminal Takeover Fraud

In this fraud, the fraudster does not collude with the merchant, instead he poses as the
acquirer’s employee and proceeds to examine the working of the terminal. He will
find a fault in the machine and replace it with another machine. This machine is
capable of performing the same functions as that of the bank’s terminal and in
addition also has the facility to store the credit card information obtained through the
magnetic stripe. After a few days, the fraudster returns the machine claiming that it
has been repaired. He replaces his own machine with the original machine and
disappears along with all the confidential credit card data.

• Shave and Paste

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Any number of alpha or numeric characters are sliced from the card other characters
are attached to the card surface utilizing fast drying epoxy-type glues. This is done to
put an entirely new but valid account number as to change the name, so that the
fraudster can use the card as if it is his own.

• Identity Theft

One of the boom fraud types is identity theft. The simple fact, however, is that
identity theft existed long before the internet. What the internet has done is to
facilitate both the ease with which other people’s information can be obtained and
then used. Identity theft is a blissfully concept; the fraudster illegally acquires and 43
uses an innocent person’s personal details, credit as account information to obtain
money, credit goods, services and anything else of value. All such spending or goods
ultimately end up being recorded on the innocent victim’s credit record. There have
been numerous way of acquiring the required personal information to commit identity
theft including stealing a wallet or a purse, going through trash and picking out
financial statements or credit card slips or taking mails directly.

• Lost/stolen card

A card holder can genuinely lose his card when he forgets to collect it from the ATM
machine or the cashier after signing for the goods or loses his wallet with his card in it
and in many other ways. When a fraudster comes across such lost cards, either he
himself uses the card or sells the card to a gang which specialises in credit card related
crimes. This gang has recruits persons at various levels. Those who have to show their
face in the shops by going there physically are called ‘runners’. These runners try out
the cards at various establishments for the small amounts in order to ascertain whether
the card has already been put on ‘hot list.’ If the card is found to be ‘clean’, the card is
immediately used for high value purchase-by forging the signature. There are
instances of course, when the cardholder reports his card as lost and then himself goes
on shopping. This can be done because once the cardholder reports his card as lost,
his maximum liability is limited to Rs. 1000/-. When the cardholder is billed for the
items purchased after the date of the card being reported as lost, the cardholder
refuses to pay claiming that he had reported the card as lost and is therefore not liable

44
to pay the charges. Stolen cards can be stolen in mail or in person from the wallet /
purse or from the house.

As technology develops, so do the types of frauds. The latest fraud

happening abroad is skimming. In simple terms catching the Customer verification
value (CVV) data. CVV is an algorithm (a code) which is very difficult to break
through. The fraudster therefore does not bother to do so. He simply colludes with a
merchant or merchants.

He then provides the merchant with a terminal similar to the one provided to the
merchant by the bank. This type of scheme usually occurs in businesses where the
patron’s credit card is taken out of sight while the transaction is processed.

Debit card is one of the most important forms of plastic money. People all over the
world especially in India widely use it for withdrawal of cash through ATMs and as a
payment instrument for purchase of goods/services. There are various factors
exclusively attracting customers to prefer debit cards, such as it has the advantages of
immediate cash, it is useful for small purchase, it helps to avoid credit and pay
immediately, it helps to control high spending and also enjoy a few privileges and
exclusive offers. People residing in rural area have given prime importance to debit
cards because it serves the advantages of immediate cash; followed by other reasons
in the order of preference were it avoids credit and pays immediately, it is useful for
small purchase. In semi-urban areas, there is a different pattern of preference. Among
them, users of debit card alone are concerned their first reason to prefer debit card was
that it avoids credit and pay immediately, second and third reasons respectively were
it serves the advantages of immediate cash, and it is useful for small purchases. In
urban areas there was no difference between the users of debit cards alone and users
of both debit and credit cards with regard to the preference. Whether the card used in
debit or credit, the usability and technicality is increasing and so is the number and
types of frauds in plastic money. Each case of the fraud seems to use a new technique
and sometimes the history of each type of misuse and fraud is so different. The legal
aspects of these frauds also play a vital role in curbing or limiting the frauds using
plastic money. The next chapter gives a brief over view of the legalities of this credit

45
and debit cards in some important countries. If legalities and the punishments are
strengthened then may be the frauds using the plastic money will be decreased.

4) Fraud through Online Banking:

Several banks have recently started offering digital accounts to their customers. These
can be opened through an app on the smart phone without visiting the branch. With
these, you can transact round the clock, apart from doing online shopping.
Considering the new services that are being rolled out almost every other day, experts
say users need to follow safety measures strictly.

"These new channels come with risks such as device falling into wrong hands and
unsafe sharing of passwords in public domain. Also, compromises happen when
banking/payment apps are connected to social security accounts," says Dhungat of
Galaxy Office Automation. He says users need to follow basic safe practices such as
"using complex and unique passwords for different accounts, changing them
frequently, and using secure apps, preferably enabled with two-factor authentication."

While there have been new threats with the recent expansion of digital services,
phishing remains the oldest and the most used technique. It is used to get sensitive
information such as personal details, bank account number and password by sending
fake e-mails. It works like this. The targeted individual receives an email which looks
like an official communication from the bank with a link to a look-alike of the bank's
portal. Once you key in the details asked for on the fake site, the data, including your
password and PIN, is passed on to the fraudster. Therefore, before making any
payment, make sure that it is not a fake website.

Card cloning in another widely-used method to defraud people. Under this, the data of
the original card, including the ones with the magnetic strip, is imprinted on another,
making it a fully functional card.

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 1.5.3. Types of Cyber Fraud

1. Social Engineering:

A hacker may dig through your social media accounts to get your personal
information, including names of, say, your pet or school, or your mother’s maiden
name, to crack your online banking password.

2. Phishing:

Fraudsters try to extract sensitive information such as personal details, banks account
number and password by sending fake e-mails. Once you key in the details asked for
on the fake site, the data, including the password and Pin, are passed on to the
fraudster.

3. Malware:

It is designed to copy and transfer data from an infected device. A malware can be
downloaded from a fake e-mail attachment or any other unsecured website.

4. Money Mule;

Once the targeted individual’s data are available, fraud rings or organized criminals
typically transfer money from the target account to an intermediary, or money mule,
account to receive the illegal money.

5. SIM Cloning:

This has mushroomed after OTP became mandatory for banking and card
transactions. The fraudster gets hold of your account details and identify proof to get a
duplicate SIM after getting the original SIM deactivated.

6. Vishing:

Scamsters dial an individual posing as a bank representative and weave a web of

deceit to extract card details.

7. ATM Skimming:

47
For obtaining the PIN, the fraudster places a camera a which focuses on the keypad or
uses a fake keypad. Sophisticated thieves have been found to use thermal imaging to
pick heat signatures left behind after the user enters the PIN.

8. Card Cloning:

When you leave your card unattended in the hands of a stranger, the stranger just has
to swipe the card for the skimming device to capture all the data; the fraudster or his
associate just needs to note down the CCV number manually.

1.5.4. HOW TO STAY SAFE?

Here are some precautions you should take to secure your online transactions.

➢ Set strong passwords as a safeguard against password attacks.

➢ Ensure your phone is unlocked through biometrics, PINS or patterns.
➢ Install good anti- malware app or antivirus software.
➢ Keep a unique password for payment applications.
➢ Never open any link on WhatsApp or emails without checking is authenticity.
➢ To protect your phone from hackers, it is always better to install updates of
software as soon as they are made available.
➢ You should not download apps that do not look trust worthy and be careful
about what to download on the phone.
➢ Apple reviews apps that are available on its store but the same cannot he said
about others.
➢ Using an open Wi-Fi may not be a good idea.
➢ You should monitor accounts actively and check for unusual activity.
➢ You should never link payment wallets to debit/credit cards or bank accounts.
➢ Keep a track of all the messages and notifications that you receive from your
bank or wallet providers to make sure that you are aware of all transactions.

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 CHAPTER 2 : RESEARCH METHODOLOGY

2.1 OBJECTIVES

a. The main objectives of the study is to examine that the importance of the
cashless policies in the economy of a country.
b. To find out the current position of India in terms of cashless transaction.
c. To find out various challenges and opportunities associated with the
implementation of the cashless policies in India.
d. To find out the solution to be adopted against challenges associated with the
implementation of the cashless policies in India.
e. To study the consumer awareness on cashless transaction.
f. To assess the customer trust and confidence in cashless transaction.
g. To study benefit of cashless economy.
h. To analyse future trends of cashless transaction.
i. To understand the factors influencing the customer moving towards cashless
economy.
j. To illustrate the steps taken by government to fulfil the dream of digital India.
k. To study the socio-economic impact of cashless economy on the society.

2.2. SCOPE OF THE STUDY

Work on the cashless economy is scarce, so scope of study is more researchers further
needs to understand the mechanism of cashless policies affecting cashless payments
and their effect on the India economy.

The expansion of telecom and smart phones would provide a digital shift to the
economy in near future. The private sector the driver of this change. Government is
also mulling to provide incentives for electronic payments for example waiver of tax
when electronic settlements are used.

The private sector has to come forward to drive the change. Apart from this
government should also give incentives for electronic transactions.

49
2.3 Limitation of study

Due to constraints of time and resources, the study is likely to suffer from certain
limitation. Some of these are mentioned here under so that the finding of the study
may be understood in a proper perspective.

1) Some of the respondents of the survey were unwilling to share information.

2) The tool used for analysis has its own limitation.
3) The research was carried out in a short period of one month. Therefore, the
sample size and other parameters were selected accordingly so as to finish the
work within the given time frame.
4) Data analysis and interpretation is done base on the information provided by
the respondent and the reliability of the data may not be hundred percent
accurate.

2.4 Sample size

Samples of 68 are selected by applying the logic of collecting small percentage of the
total population who has knowledge about the subject.

2.5 Data collection

Data is collected through primary as well as secondary source. Primary data was
collected by the survey. Questionnaire is prepared in English consisting of close
ended question.

The secondary data was collected from official records, published reports of similar
projects and journals.

50
 CHAPTER 3: LITERATURE REVIEW

1. Pathania, 2016 in his article mentions some of the benefits of cashless

transactions to nations like increased GDP by using cards and reduced social cost,
increased in financial inclusion due to acceptance of e-payments, reduces the
shadow economy, reduced in cash payment enables e-commerce growth and
facilitated trusted transactions online. He says that at 1.7% of GDP, India incurs a
much higher cost of cash compared with most developed economies.
2. Lauby, Mar 23, 2011 Every changing digital world had a huge impact on Human
resource. It had created an impact on their jobs and their workplaces. He mentions
five challenges that the human resource has to in the present as well as in the future.
The five challenges are- (i) figuring out when processes should be automated,
versus when a human face or voice is the best route, (ii) better communicators in
order to effectively leverage the digital space, (iii) simplifying the data and provide
a clear picture of their current workforce as the data are scattered among multiple
systems and acquired in varied formats, (iv) fear from the legal department of using
social media and (v) HR has to evaluate what function can be automated and
provide desired level of services.
3. Hunt, 2014 Talked about the critical role to be played in ensuring the efficient and
effective transition and transformation from Industrial Era models and processes to
their Digital Era upgrades. He further said the social and digital technologies are
transferring talent management. In addition to transforming talent management,
social and digital technologies are changing the nature of work itself which have
extensive human capital management implications, ranging from human capital
strategy, organizational structure, and staffing - to job design, training and
development, performance management, and compensation.
4. Team, 2016 paper clarifies the impact of Demonetization on the availability of
credit, spending, level of activity and government finances. The impact of the shock
in the medium term is a function of how much of the currency will be replaced at
the end of the replacement process and the extent to which currency in circulation
is extinguished.
5. Sharma, 2017 Conducted a survey to understand the potential for cashless
economy in India, through an extensive household survey of Jodhpur city. It was
estimated the extent to which households made non cash expenditure. It was also

51
 identified the bottlenecks which prevented households to make non cash payments
like Security, internet connection, loss of card, hackers’ activity, lack of technology
are worries of customers towards switching to cashless economy.
6. Kumari D. N., Impact of Cashless Economy on Common Man in India), The paper
meets an attempt to know the awareness about smartphone and the use of
Smartphone in rural India. The low literacy rates in rural India, along with the lack
of infrastructure like internet access and Power make things extremely difficult for
people to adopt e-transaction route. (Kumari & Khanna, Cashless Payment: A
Behavioural Change to Economic Growth, 2017), The study examines the effect of
adopting cashless payment on economic growth and development of the developing
countries. The paper discovered that the adoption of the cashless economy policy
can enhance the growth of financial stability in the country. It appears that much
has already been done in making the people aware of the cashless economy and that
a sizeable proportion of the people are actually awaiting the introduction of the
cashless economy. Cashless economy initiative will be of significant benefits to
developing economy; hence the cashless system will be helpful in the fight against
corruption and money laundering. One most significant contribution of the cashless
economy is that it is expected to reduce the risk associated with carrying cash.
7. R., 2016 in his paper what is the relationship between cashless economy and
knowledge economy. Cashless economy is the basic way to eradicate black money,
but it also used to create awareness about the knowledge economy among the
common people. It improves the way of thinking and use of their intellectual capital
rights in a proper way. Cashless economy is the basic way to eradicate black money,
but it also used to create awareness about the knowledge economy among the
common people.
8. Kumari D. , 2016 her paper spread the light on the basic concept of cashless
transaction its security issues. She says that insufficient infrastructure is also a major
barricade for cashless transaction. Illiteracy is one of the major issues in the path of
cashless transaction, as per UNESCO report. Hacking is one of the issues for
cashless transaction as per the Economic time is the major challenges in cashless
transaction.
9. Gupta, 2017 The main of the paper was to find out scheme, achievements and
challenges of Haryana government for the cashless transaction. She says that in
order to promote cashless transactions in India Central Government has also

52
 launched Lucky Grahak Yojana and Digi Dhan Vyapar Yojana in which monetary
benefits will be provided to citizens using cashless means for transactions. The
Haryana government has decided to observe a ‘cashless week’ from January 20 to
January 27 to promote digital payment in the state. The government has also
decided to engage college students and staff (both teaching and non-teaching) to
promote the mission.
10. Garg & Panchal, 2017 her paper led light on the views of people on cashless
economy in India. Responses from respondents shows that cashless economy will
help in curbing black money, counterfeit’s fake currency, fighting against terrorism,
reduce cash related robbery, helps in improving economic growth of our country.
Major challenges that can hinder the implementation of the policy are cyber fraud,
High illiteracy rate, attitude of people, lack of transparency & efficiency in digital
payment system. The study shows that the introduction of cashless economy in
India can be seen as a step-in right direction. It helps in growth and development of
economy in India.
11. Mr. Pradeep H. Tawade (2017), “Future and scope of cashless economy in India.”
This paper helps in assessing the future trends and the impact of going cashless in
the Indian economic scenario. After the study was conducted it was seen that the
Government of India should consider many more steps in digitalizing India. And
payment methods should be made more secure and risk-free. Dhanda and Arora
(2017), Genesis of cashless society: A study on growing acceptability towards
plastic money. This paper is aimed towards studying the factors responsible for the
rapid increase in acceptability of plastic card in the recent years. After the study was
conducted it was seen that use of plastic cards is a matter of great pride among
teenagers and is considered safe and free from any frauds.
12. Dr. Rashmi Gujrati (2017), India’s march towards faceless, paperless, cashless
economy. The paper is aimed towards creating a sense of awareness about cashless
economy, its benefits, challenges and the steps taken by government toward
cashless economy. After the research conducted it was seen that cashless economy
comes with various benefits but brings in a lot more challenges with it.
13. Dr. Asha Sharma (2017), Potential for cashless economy in India. The study was
conducted to find the scope of India becoming a cashless economy, challenges and
opportunities related to cashless economy. The study shows that there is a
significant scope of Cashless India as we can abolish various problems, we face

53
 today but we must be prepared for the challenges and problems which cashless
economy will bring.
14. Dominic, Saranya, and Rajani (2018), A study on transformation in behaviour of
individual towards cashless economy. The study is aimed towards studying the
behavioural changes in individual towards cashless economy. After the study
conducted it was seen that many individuals have already moved or are moving
towards a cashless nation but there is still a long way for India to become cashless.
15. Mr. Bharat Khurana (2015), Dream of cashless India: Benefits and challenges.
The paper studies the benefits and challenges India might face if it becomes a
cashless nation. It also helps in assessing the meaning of digital India and steps
taken by government towards achieving the dream of cashless India. After the study
no matter how much the government had done for fulfilling the dream of digital
India but there is still a lot more that can be done to achieve that dream.
16. Metri and Jindappa (2017), Impact of cashless economy on common man in
India. The study focusses on effect of going cashless on a common man living in
India and the challenges related to going cashless. The study shows that India can
never turn into a fully cashless economy as cash has been the dominating factor and
always will be. Going cashless will only be feasible for a very small section of the
society but not the whole nation.
17. Kumari and Khanna (2017), Cashless payment: a behavioural change to an
economic growth. The paper aims to study how a behavioural change led to an
economic growth in the Indian economic scenario. After the study conducted it was
seen that various factors were responsible for such a change as people were finding
various benefits and opportunities by adopting such a change.
18. Felix, Rebecca and Igbinoba (2015), Appraisal of the impact of e-banking and
cashless society in the Nigerian economy. The paper was aimed towards
understanding the impact of e-banking and cashless society on the people of
Nigeria. But after the study was conducted it was seen that most of Nigerian citizens
were not at all aware of such concepts and those who were aware were not fully
using such facilities and there was no infrastructure development before
implementing such changes.
19. Kousalya and Shankar (2018), Cashless economy/transaction. The paper was
focussed towards understanding the impact of cashless economy and its importance
in India. After the research conducted it was seen that the introduction of cashless

54
 economy in India will bring about a positive impact on the financial sector and will
help in modernisation of the payment system in India.
20. Kokila and Usha Devi (2017), A study on consumer behaviour on cashless
transaction in U.T. of Puducherry. The paper was focussed towards understanding
the awareness and trust among the customers about cashless transactions. It was
seen that people were aware about the cashless transaction but were still in doubt
with implementing the same in daily routine.
21. Thomas and Krishnamurthy (2017), Cashless rural economy- a dream or reality.
The study is focussed towards understanding the impact of demonetisation on rural
India and to keep a check on the government initiatives to make rural market a
cashless economy. The studies show that the government of India should initiate
various schemes to make the dream of cashless economy a reality.
22. Shrikala K.K. (2017), Cashless Transaction: Opportunities and Challenges with
special reference to Kodagu district of Karnataka. The paper is aimed to find the
opportunities available in the rural part of India and the challenges which may be
faced while moving towards a cashless economy. It was seen that there are many
opportunities and every opportunity come with its own challenges, but they can be
avoided with proper implementation.
23. Shendge, Shelar and Kapase (2017), Impact and importance of Cashless
Transaction in India. The paper focuses on impact and importance of cashless
transactions in India. The study shows that if India becomes a cashless economy
there will be both positive and negative impact, but negative impacts can be
overlooked if the gain from positive impact is considered.
24. Garg and Panchal (2017), Study on Introduction of cashless economy in India
2016: Benefits & challenges. The study focusses on finding benefits and challenges
related to cashless economy in India. The study shows that there are various benefits
related to cashless economy and various challenges related to the cashless economy.
25. Akinola (2012), Cashless Society, Problems and Prospects, Data Mining Research
Potentials. The is focused on understanding the cashless society and the problems
related to the same in Nigeria. The study shows that cashless society will face a lot
of challenges and criticism by the citizens of Nigeria.
26. Bindra and Bindiya (2017), Going Cashless: stepping towards Digital India. The
study is focussed to find out benefits, challenges and the growth prospects in India
on the path of moving towards digital India. The study shows that digital India will

55
 bring a huge growth in the GDP of India and will also have other benefits are the
society and the economy as well.
27. Thilagavathy and Santhi (2017), Impact and importance of Cashless Transaction in
India. The paper focuses on impact and importance of cashless transactions in India.
The study shows that if India becomes a cashless economy there will be both
positive and negative impact, but negative impacts can be overlooked if the gain
from positive impact is considered
28. Sharad Malhotra (2017), Impact of Cashless Society for the Economic Growth in
India. The paper focuses on impact and importance of cashless transactions in India.
The study shows that if India becomes a cashless economy there will be both
positive and negative impact, but negative impacts can be overlooked if the gain
from positive impact is considered. There would be lower costs and keep a check
on financial crimes and TAX frauds.
29. IDRC Project Report (2000) The project was implemented on pilot basis in a
group of 6 villages in Pondicherry. The objective is to develop an ICT infrastructure
to create a communication base among the village members. The purpose is to
create a community-based atmosphere to share the information related to various
aspects. The use of internet also became handy during the project period. The initial
phase was problematic as the concept was new. It was difficult to made them
understood the importance of ICT system. The sharing of knowledge and other
information helped the system immensely. Slowly, the villagers were able to
understand the need and importance. Down the line the villagers were started using
the services to increase the productive activities. A sense of ownership was also
seen. The project was able to bring a positive outcome and betterment for the
stakeholders
30. . Malecki (2003) The author discussed the shortcomings of digital movement in
rural America. The growing usage of digital technology is the need of the hour but
most part of rural America is still not equipped with the same. The major reason for
this kind of backwardness is related to shortages of human capital. Due to better
income generating opportunities, a wider segment of the working population base
has shifted their base from rural areas to urban areas. The end result is downward
growth of economic activity. The shortcomings may be addressed with the help of
more immigration and return migration policy. If the reasons for leaving one’s own
space are addressed properly then it can be seen that lack of income generating

56
 opportunity may be the main reason for shifting the base. If this issue is addressed
properly and adequate income generating opportunities are created, then return
migration may be possible. The digital movement may help to create these types of
job opportunities which the younger generations are looking for. The system may
also become helpful for those who are living other places as they need a system to
remittance financial resources. The inflow of financial resources through this
process will ultimately help to bring economic growth of the economy of that
particular region.
31. Yang etal (2005) The authors developed a case study approach through this paper
to see the operational efficiency of small community banks. Community banking is
a system which serves a specific geographical area. The business opportunity is
limited for this type of banking system. The members of the banks are mostly the
representative of that village where the bank is located. Due to slow operations and
profitability part, they are able to sustain because of local understanding and needs.
But due to expansion of business activities, various other players are also started
entering into their business territory. This makes them thinking of creating better
value added and customer friendly services. E – Banking is a system which helps
to create this kind of opportunities for them. As the market becomes more
competitive the urge to provide these kinds of services become more important.
32. Mukherjee (2011) The author discussed the role of Information and
Communication Technology to bring development in the rural sector. The rural
dominated economies are striving for the growth and development. The new age
technologies are helping the economy to achieve the desired result by providing
value added services at an affordable cost. The progress of the sector may become
more favourable due to changing nature of the consumer demand. The ICT is started
playing an important role in each and every segment of the society. It has a link
with the financial services, receiving government benefits and many more. The
nature of the requirement becomes more sophisticated as a result of which customer
preference also changes drastically. The changing requirement needs to be
addressed properly otherwise the facility may not become full proof down the line.
33. Ananth etal (2011) The paper attempts to focuses on the different aspects of the
application of science and technology in rural areas of Ethiopian economy. Poverty
is surely an important issue but there is a hope to improve the same if the existing
facilities are to be implemented properly. It is well known fact that the rural

57
 economy can’t grow on its own without the proper blend of science and technology.
The Ethiopian government is trying to develop that base with the help of which the
poverty alleviation programme may able to get momentum.
34. Sharma (2012) The author describes the need of internet banking in the rural areas.
The Indian economy is highly dominated by rural people. Approximately 6 lakhs
villages are there in the country with 70% of the population are still living in the
rural areas. Serving this huge population base is not an easy task due to diverse
nature of the rural economy and its livelihood. It is important to provide services
which traditional banking facilities may not be able to provide with the help of
existing banking system. So, there is a need to create alternative service exclusively
for the rural poor. Before that it is important to judge the specific service
requirement which the rural people are looking for. Services and facilities provided
at the non-rural areas may not be superimposed. Thus, the author has identified 17
factors which may create bottleneck for the banks to provide services to the poor.
Factors like adequate arrangement of ATMs, customer training facility, cost of
maintaining bank accounts, transportation etc. are some of the factors which may
create problem. Unless and until these facilities are not improved the banks may not
be able to provide the services required in the rural sector.
35. Akinola (2012) The paper examines the security and reliability part of cashless
society. It is a fact that cashless society has many advantages and it may lead to
reduce corruption, crimes on the one hand and on the other hand it will able to
increase the government revenue to a great extent. Government may force to
implement the cashless system by applying certain rules and regulations but it may
fail if the service receivers are not in a position to understand the potential benefits.
Most of the time customers perceive that there may be some amount of security
threats which will lead to loss of money. This is to some extent true as this kind of
unwanted event does happen. Second aspect is related to lack of awareness and lack
of understanding about the usage pattern of the services. It is obvious that the
cashless system is required but at the same time it should able to win the confidence
of the service receivers.
36. Chitla (2012) The author discussed the role of ICT in eradication of poverty and
rural development. Since, globalization the world market was opened up for
consumers of various segments. Today, people have choices and this has increased
the level of competition in the market. Today the focus is consumer satisfaction and

58
 development of product as per the need of the consumers. Considering this fact, it
becomes important to incorporate ICT led growth. The programme has a role to
improve social and economic well-being of the people living in rural areas. It has a
role to play in education, income generation, healthcare benefits etc. The
government is also able to improve the e – governance with the application of ICT.
This will surely improve smooth implementation of various social welfare schemes
like Direct Benefits Transfer (DBT), meant for the rural poor.
37. Anand etal (2012) The authors described the importance of e – learning
methodology to educate the rural consumers. Though, the article is not directly
linked to cashless economy but it has a direct link with consumer education. Unless
and until the people do not have adequate knowledge to deal with the technology
related issues it is difficult to implement the scheme. The formal education system
may not be available as the cost of developing and implementing the scheme is
difficult in most of the interior parts of rural India. On the other hand, traditional
education system may not be helpful to generate enough knowledge to avail and
understand the technology-based services. It is highly recommended to use the
online learning process to educate the people in a cost-effective manner.
38. Gupta etal (2013) The authors described the ICT based payment system in the
Indian banking sector. The application of technology is able to improve the payment
facility smoother and more transparent. It also helps to make process simpler and
more cost effective. Services like withdrawing money, opening bank accounts,
transferring money from one account to another also becomes possible with the help
of these facilities. Access to capital becomes easier. The timely availability of fund
helps the business groups to generate cash for business requirement in a hassle-free
manner. Not only have that banking services become more relevant from the view
point of reach and diversity. Poor people do not have the time to deposit and
withdraw money from the bank branches due to remote location of villages. Visiting
bank branches was a costly affair as it leads to loss of manpower and resource. The
travelling cost was also a matter of concern for these groups of people. But, use of
technology helped to reduce the problems faced by these groups.
39. Razak etal (2013) The authors discussed the role of IT to create a smart village in
Malaysia. Developing a smart village is not an easy task and involves lots of
activities. There is a need to develop an integrated approach which focuses on the
overall development of that village. Role of IT becomes very important for proper

59
 implementation of this kind of project. It has been observed that traditional
agricultural society may not able to keep in space with the existing business
environment so there is a need to upgrade the same. Technology based agricultural
productivity is the solution of the same. Farmers should be encouraged to involve
in these types of productive activities. Not only that the creation of smart village
also involves creation of subsequent other income generating activities in a
scientific way. Access to finance and access to training is the last important
dimension which should be implemented at the earliest, otherwise the entire system
will be failed to give meaningful result for the betterment of the rural poor.
40. Kumar etal (2013) The paper focuses on the concept of new generation banking
system. The Indian banking system has a rich history and over the time period it
grows in various aspects. Different forms of banking facilities are introduced for
the benefits of the target customers but these facilities may not be adequate to
provide the growing demand for better service, better products and better reach. It
has been noticed that most of the time the banking sector grows horizontally to tap
the huge customer base but most of the time the expansion happened in a non-plan
manner. As a result of the same, the sector is not able to provide the value-added
services. There is a growing demand for new age technologies which may be
adopted by the banks so as to provide the much-needed services. It will also able to
help reach a wider mass that are remained unbankable till date. The banks are
basically working as a financial backbone of the country and adequate supply of
finance is absolutely necessary so as to bridge the demand supply gap. Thus, it is
important to create that environment with the help of technology which may help
to provide various banking services including finance to the needy section of the
people.
41. Singh (2013) The author described the usage and importance of internet banking to
provide value added services to the rural poor. Accesses to banking services are
very important for the overall growth of any economy or people living in that
economy. Traditional banking services are not able to cater to the local needs as a
result of which most of the needy segment failed to avail the services as and when
the demand has arisen. But only adaptation of the technology will not work unless
and until the benefits of the facility is well understood by the service receivers.
Increasing customer awareness will not work unless and until the psychological
barrier of accessing new facility has been removed. Most of the service providers

60
 are facing difficulties in that segment. People are not well aware of the banking
services and facilities that they are suppose to get. Moreover, due to various rules
and regulations, most of the people try to avoid the conventional banking system
and rely heavily on the local money lenders. The new system may help to provide
better services but lack of knowledge of the facilities may dilute the entire process.
This is a serious issue which needs attention so that the psychological barriers may
be removed gradually.
42. Singh (2013) The author discussed the growing trend of internet usage in urban,
semi urban and rural areas. It is obvious that the Indian population is moving fast
towards adoption of internet linked services. Penetration of mobile phone has
improved significantly but internet usage is not that much impressive due to non
familiarity with the facilities. But it has the potential to grow. Provided adequate
arrangement is made for the same. Need wise there should be proper differentiation
strategy to provide services. The authors identified that factors like gender, age,
qualification, income and tenure of the account are playing an influential role to
determine the choice of e – banking facilities. These are the factors should be taken
into consideration to device strategy for e – banking
43. Nath (2014) The author discussed the implications of ICT in developed and
marginal economy of the world. In case of developed economy ICT is a demand
but for marginal economy ICT is the need. Due to lack of infrastructure support and
government intervention, ICT may not be implemented properly for the
development of the society. It is basically use for specific sections of the society.
But benefits should not be restricted to one segment only. The economic growth
should be viewed from each and every individual. Unless and until this objective is
not fulfilled the gap will remain as it is. So, there is a need to make necessary
changes in the policy implications so that the true benefits of ICT should be availed
by all the groups of people living within a territorial boundary of a country
44. . Ahamad etal. (2015) The paper described the present condition of rural economy
and its subsequent impact on rural employment opportunities. Indian economy is
basically agrarian economy and most of the people are engaged in agricultural
activities. But with changing economic environment the demand for new age
agricultural productive activities are in high demand. But slow implementation of
the process is hampering the growth in terms of production and employment
opportunities. This has also led to growing nature of rural to urban labour migration.

61
 This movement of workforce leads to shortages of manpower in the rural areas.
There is an urgent need to upgrade the facilities in the agricultural sector.
Application of IT should be considered more relevant as it may lead to create better
income generating opportunities. The growth in employment generation ultimately
leads to push other sectors as well. The overall impact should be seen from a long-
term perspective.
45. Vinayagamoorthy etal (2015) The authors studied the perception of rural
consumers towards internet banking services. It is noticed that most of the banks
trying to reduce the operational costs with the help of various value-added services
and innovative distribution networks. If we see the rural population distribution, it
is very much scattered. As a result of which providing services to these group of
customers increasingly become difficult. There is a trade-off exists which describes
the nature of the problem. On the one hand reach becomes difficult due to
infrastructural problems, on the other hand due to lack of banking facilities, they
become more dependent on local moneylenders. The higher cost of operations may
be reduced with the help of adequate development of technology led banking
services, viz. mobile banking services, internet banking services etc. The modern
banking approach also depends heavily on the technology aspect. But the problem
lies elsewhere. Even if the banks are able to develop modern facility, it may not be
useable for the rural consumers unless and until the consumers are well aware of
the facility and usage of the same over the time period. This gap should be removed
by providing adequate training to new customers. Otherwise technology may
become burden for them.
46. Bhatnagar (2015) The author describes the awareness and adoption of new age
banking facilities by the rural poor. It has been witnessed that after reforms of
financial sector, most of the banking services are widened their operations by
expanding the banking operations in unbanked areas. But even after the initial
momentum most of the banks are not able to retain the expansion of the services
due higher cost of serving the rural customers. Since, the earnings are less,
providing a basic banking service is a challenge. The traditional banking services
may not be able to provide the services are often become more complicated. As the
technology started playing an important role, the costs of delivering the services are
also reduced drastically. But the system is not full proof. Lack of awareness and
trust on the system are the major hindrance for the proper implementation of the

62
 system till date. As long as the consumers are not going to enjoy trust, it becomes
difficult for the service providers to adopt the technology-based services which is
the new mechanism for financial inclusion and other value-added services. Serving
rural areas in a cost-effective manner is surely an important and uphill task for the
service providers and this should be shorted out through proper implementation
mechanism.
47. Kak etal (2015) The authors tried to describe the role of ICT in developing socio
economic aspect of rural India. In a globalized environment the consumers are
supposed to get better service and facilities as compared to traditional product and
services. As the business opportunities increased the rural consumers also become
the target consumers. But due to wide application of technology-based products and
distribution network, it is becoming inevitable for them to learn and understand the
usage and benefits of the facility. Since the cost of delivery is not that much high,
it is becoming more acceptable for the producers also. As the global market is
growing the nature of the business and consumer expectation is also changing. This
changing environment should be taken into consideration and ICT should be
implemented in a phased manner.
48. Deshpande etal (2015) The authors describe the role of ICT in developing rural
villages. Economic growth of a country is entirely depending on the growth of urban
as well as rural areas. Higher concentration of growth in urban areas will not able
to achieve the target growth. As a result of which the country may move towards
backward directions. If we look at the Indian economy, a significant part of
population still leaving in rural areas but adequate measures have not been taken to
improve the socio-economic conditions of the rural people. Lots of improvement is
required in various areas. The new age technology adaptation may help to bring
much needed change. ICT is one such scale which aims to improve the agricultural
productivity, can attract people in allied sectors as well as non - farm sectors. There
is a potential to attract huge investment in these sectors if and only if the
technological improvement may be incorporated adequately.
49. Pavani (2016) The author discussed the effectiveness of financial inclusion
programme for the betterment of the rural poor. The basic objective of financial
inclusion programme is to provide banking services at an affordable cost. The slow
penetration of banking services is also creating barriers for the effective
implementation of desired services. The banking system should be strong enough

63
 to serve each and every section of the society. There is a need to make changes in
the existing system so that the needy section should get the benefits as and when it
is required by them. It will also help to create rural business expansion which is a
must for the growth of the rural economy.
50. Dhanraj etal (2016) The authors attempted to describe the role of Regional Rural
banks (RRBs) in shaping the rural economy and rural credit structure. The RRBs
were established in the year 1975 to shape the rural economy by providing credit to
the needy segment. These segments were excluded by the formal banking systems
due to their inability to access to loan. The capital requirements were exclusively
meant for small and marginal farmers, rural small-scale producers, labourers. These
unbankable populations were able to improve the income generating activities with
the help of the capital that they received from RRBs. But very soon the bank
becomes sick due to poor repayment and mounting NPAs. The banks were not
planned properly and failed to understand the real need of the capital. Also, there
was no follow up for the loans provided to the needy segment. The traditional
production approach also led to huge loss for most of the small-time producers. This
is a kind of realization that only providing finance will not be adequate, the banks
should guide to make them understand the essential demand supply conditions as
well as market need. But neither the banks nor the implementing agencies are able
to see the gap and as a result of the same the outcome are below the expectation
level.
51. Midha (2016) The author discussed the issue of digitalization process and
effectiveness of digital India campaign. The programme is a good initiative but it
has certain barriers which need to be overcome. Digital India campaign aims to
create a cashless society which has its own advantages. Implementation phase is
surely problematic as the concept is new but over the time period this has to be seen
from the perspective of customers. It is high time to discuss the relevant issues with
the customers so that the existing barriers may be removed.
52. Newase etal (2016) The authors focus on the increasing importance of ICT among
rural village communities. It has a dual role to play. On the one hand it helps to
bring new innovative products or services which may improve the standard of living
of rural poor and on the other hand it also able to create better income generating
opportunities. The combined effect also helps the government to increase the
revenue. It’s a matter of fact that it may help the individuals to grow in all aspect.

64
 So, it is important to generate ICT infrastructure so that the process of serving
consumers with the help of various financial products.
53. Borhan Omar Ahmad Al-Dalaien (2017): Examined that cashless economy is an
economic system in which there is little or very low cash flow in a society and goods
and services are bought and paid through electronic media. There are many benefits
of cashless economy like faster transactions, increased sales, prompt settlement of
transactions, convenience and lower risk, transparency and accountability, and
reduced maintenance costs. Despite many benefits, there are several challenges
before cashless policy in India such as inadequate number of ATMs, digital
illiteracy, lack of internet facilities, few banks in villages, costly swipe machines
etc. The findings revealed that there are no significant benefits of cashless economy
to the general public.
54. Preeti Garg & Manvi Panchal (2017): Examined that many people actually
positive opinion about cashless transactions and usefulness of cashless economy as
it helps to fight against terrorism, corruption, money laundering but one major
problem in the working of cashless economy in India is cybercrimes and illegal
access to primary data. Therefore, it’s important to strengthen Internet Security
from protection against online frauds. Huge number of populations in India is still
below literacy rate living in rural areas. For smooth implementation of cash less
system in India, the following some measures are recommended Government have
to bring transparency and efficiency in e-payment system, strategies used by
government and Reserve Bank of India to motivate cashless transactions by
licensing payment banks, promoting mobile wallets and withdrawing service charge
on cards and digital payments. A financial literacy campaign should be conducted
by government continuously to make population aware about advantages of
electronic payments.
55. Sheetal Thomas & G. Krishnamurthi (2017): Examined that there is enormous
potential that rural economy in India can become a cashless economy. The rural
population is ready to learn it, with one person receiving benefit soon the rest of the
village will follow. Keeping the level consumption patterns and the recent trends
into mind the government can plan for implementation of basic support system like,
incentivizing the use of internet through free data and smart phones, distribution of
laptops to students taking higher education in nearby towns. Another way is by
creating awareness about digital transactions and financial literacy among rural

65
 people by partnering with different educational and NGO’s. It can make the cashless
rural economy a reality from dream.
56. Dr. Tushar Chaudhari (2017): Cashless transaction systems are not possible
without adequate internet facilities, so government must investigate in
infrastructure availing internet. Especially free wi-fi zones should be made
available at local market. All the major banks must have separate counter which
will be particularly used for assistance and guidance for cashless transaction system.
Extra charges on Cashless transaction must be stopped. It should be made
compulsory to all cooperative societies to make Cashless transaction specially
cheque or demand draft. Some advantages must be given to the people who are
using Cashless transaction. The vast advertisement campaign must be launched
which will not only develop Cashless transaction but also will provide valuable
assistance in using it.
57. Dr. Anthonima K. Robin (2018): This study focus on cashless transaction is
having a long-term impact on the lives of the people. As there are two sides of coin,
there are positive and negative impact of the scenario generated after
demonetization. With the increasing usage of cashless means people are tend to feel
save as they are free from carrying a wallet full of physical notes along with us,
which is not at all safe in a world full of anti-socials activities. People rather prefer
to use mobile as the most effective method of payment. Mobile have started serving
as an important instrument for all kinds of transactions such as bill payments, fees
payments, funds transfer, recharge, etc. In further to this, some other crimes such as
burglary, extortion, bank robbery, etc. are also declining. One of the most important
motives to implement and motive cashless transaction is to take control on the
illegal transactions and all activities related to terrorism.
58. Dr. Budheshwar Prasad SinghraulV (2018): The major findings of the study
show that India in terms of using digital payment methods is still very poor in
comparison to other developed countries in the world. As many countries are
already turned up with their electronic payment system, India is in its beginning
stage and all most of all population are mainly dependent on paper cash-based
transaction because of unavailability of proper internet connectivity, lack of
awareness and knowledge of financial transaction, charges on card payments and
un operational bank accounts.

66
CHAPTER 4: DATA ANALYSIS, INTERPRETATION & PRESENTATION

Age

o Below 21
o 21-30
o 31-40
o Above 40

Age No. of respondents Percentage

Below 21 42 61.8%
21-30 16 23.5%
31-40 2 2.9%
Above 40 8 11.8%
total 68 100%

Analysis & Interpretation

• There are 68 respondents from which 61.8% respondents are between below
21 age group i.e. 42 respondents are between below 21 age group. There are
23.5% respondents between 21-30 age group i.e. 16 respondents are between
21-30 age group.
• In the age group of 31-40 there are 2.9% respondents ie,.2 respondents. Lastly
there are 11.8% respondents that are above 40 age group i.e. 8 respondents.
• From the above study we conclude the age group of below 21 has the highest
respondents.

67
Gender

o Female
o Male
o Other

Gender No. of respondents Percentage

Male 21 30.9%
Female 47 69.1%
Total 68 100%

Analysis & Interpretation

• The above diagram shows that 30.9% of respondents are male i.e. there were
21 males out of 68 respondents.
• There are 69.1% female respondents out of 68 respondents.
• More respondents were female according to the survey.

68
Qualification

o Student
o Housewife
o Working employee
o Unemployed
o Others

Qualification No. of respondents Percentage

Student 54 79.4%
Housewife 7 10.3%
Working employee 7 10.3%
Total 68 100%

Analysis & Interpretation

• As per the survey, 79.4% respondents are students i.e. 54 respondents are
students out of 68 respondents.
• There are 10.3% housewife respondent i.e. 7 respondents.
• No. of 7 respondent are working employee which is 10.3%.
• More respondents are students according to the survey.

69
Questions & Responses

Q1. Do you make payments using your mobiles/ smartphone?

o Yes
o No
o Maybe

Particulars No. of respondents Percentage

Yes 43 63.2%
No 19 27.9%
May be 6 8.8%
Total 68 100%

Analysis & Interpretation

• The above pie chart shows thar 63.2% respondents are making payments by
using mobile/ smartphone which is 43 respondents out of 68 respondents.
• There are 19 respondents who don’t use mobile/ smartphone for making
payment i.e. 27.9% respondents.
• There are 6 respondents who sometimes use mobile/smartphone for making
payment i.e. 8.8% respondents.
• According to the survey, there are more respondents who use
mobile/smartphone for making payments.

70
Q2. What has been your most preferred mode of payment other than cash?

▪ Net banking
▪ Credit/debit card
▪ E-wallet/mobile app
▪ Cheque
▪ Other

Particulars No. of respondents Percentage

Net banking 18 26.5%
Credit/debit card 35 51.5%
E- wallet/mobile app 28 41.2%
Cheque 19 27.9%
Other 11 16.2%

Analysis & Interpretation

• According to the survey maximum of respondents are using credit/debit card

for making online payment.
• From the above graph, there are 26.5% respondents i.e. 18 respondents are
using net banking for making payment & 51.5% respondents i.e. 35
respondents are using credit/ debit card for making payment.
• There are 41.2% respondents i.e. 28 respondents are using E-wallet/ mobile
app for making payment & 27.9% respondents i.e. 19 respondents are using
cheque for making payment

71
Q3. Do you think that using your mobile or making cashless payments will
increase the chances of suffering theft or a fraud?

o Yes
o No
o Maybe

Particulars No. of respondents Percentage

Yes 19 27.9%
No 15 22.1%
Maybe 34 50%
Total 68 100%

Analysis & Interpretation

• According from the above diagram, 27.9% respondents i.e. 19 respondents

agree that using mobile or making cashless payments will increase the chances
of suffering theft or a fraud.
• But 22.1% respondents i.e.15 respondents don’t agree that using mobile or
making cashless payments will increase the chances of suffering theft or a
fraud. There are 50% respondents i.e.34 respondents who are not sure about
using mobile or making cashless payment will increase the chances of
suffering theft or a fraud.
• From the conclusion is that maximum respondents are not sure.

72
Q4. How often do you use cashless methods for payments while shopping for
clothes, products, etc.

o Always
o Occasionally
o Never

Particulars No. of respondents Percentage

Always 15 22.1%
Occasionally 43 63.2%
Never 10 14.7%
Total 68 100%

Analysis & Interpretation

• There are 22.1% respondents i.e. 15 respondents who always use cashless
method for payment while shopping for clothes, products, etc.
• 63.2% respondents i.e. 43 respondents who occasionally use cashless method
for payment while shopping for clothes, products, etc.
• There are 14.7% respondents i.e. 10 respondents who never use cashless
method for payment while shopping for clothes, products, etc.
• From the conclusion, majority of the respondents who occasionally use
cashless method.

73
Q5. For high value payment what is your preferred mode of payment?

▪ Net banking
▪ Debit/credit card
▪ Cash
▪ E-wallet
▪ Cheque
▪ Other

Particulars No. of respondents Percentage

Net banking 20 29.4%
Debit/Credit card 33 48.5%
Cash 22 32.4%
E-wallet 7 10.3%
Cheque 28 41.2%
Other 1 1.5%
Analysis & Interpretation

• According to the survey, maximum of respondents is using debit / credit card

for high value payment.
• From the above graph, there are 29.4% respondents i.e. 20 respondents are
using net banking for high value payment & 48.5% respondents i.e. 33
respondents are using debit / credit card for high value payment.
• There are 32.4% respondents i.e. 22 respondents are using cash for high value
payment & 10.3% respondents i.e. 7 respondents are using E-wallet for high
value payment.

74
 • There are 41.2% respondents i.e. 28 respondents are using cheque for high
value payment.

Q6. What do you think could be the barriers in cashless transaction?

▪ Lack of co-operation from merchants while shopping

▪ Lack of knowledge
▪ Lack of technical resources
▪ Security
▪ Overall cost
▪ Other

Particulars No. of Percentage

respondents
Lack of co-operation from 15 22.1%
merchants while shopping
Lack of knowledge 27 39.7%
Lack of technical resources 22 32.4%
Security 36 52.9%
Overall cost 4 5.9%
Other 6 8.8%

75
Analysis & Interpretation

• According to the survey maximum of respondents think that security could be

the barriers in cashless transaction.
• From the above graph, there are 22.1% respondent i.e. 15 respondents are
thinking that lack of co-operation from merchants while shopping could be the
barriers in cashless transaction & 39.7% respondent i.e. 27 respondents think
that lack of knowledge could be barrier in cashless transaction.
• There are 32.4% respondent i.e. 22 respondents think that lack of technical
resources could be the barrier in cashless transaction & 52.9% respondent i.e.
36 respondents think that security could be the barrier in cashless transaction.
• There are also 5.9% respondent i.e. 4 respondents think that overall costs
could be the barrier in cashless transaction & 8.8% respondent i.e. 6
respondents think that other problem could be the barriers in cashless
transaction.

76
Q7. Choose your most/least reliable mode of cashless payments.

Net banking Credit/debit card E-wallet UPI

Most reliable o o o o
Least reliable o o o o

Particulars Most reliable Least reliable

Net banking 12 19
Credit / debit card 38 10
E-wallet/ mobile app 11 16
UPI 7 23
Total 68 68

Analysis & Interpretation

• There are 68 respondents out of which 12 respondents are most reliable on net
banking, 38 respondents are most reliable on credit/debit card, 11 respondents
are most reliable on E-wallet/ mobile app, 7 respondents are most reliable on
UPI.
• There are 68 respondents out of which 19 respondents are least reliable on net
banking, 10 respondents are least reliable on credit/debit card, 16 respondents

77
 are least reliable on E-wallet/ mobile app, 23 respondents are least reliable on
UPI.
• From the conclusion, respondents are most reliable on credit/ debit card &
least reliable on UPI

Q8. What do think can be done to improve cashless transaction in the system?

o Educating people on how to use the cashless methods

o Creating reliable technical resources
o Rewards & Incentives
o Other

Particulars No. of respondents Percentage

Educating people on 49 72.1%
how to use the cashless
methods
Creating reliable 8 11.8%
technical resources
Rewards & Incentives 11 16.2%
Total 68 100%

78
Analysis & Interpretation

• There are 72.1% respondent i.e. 49 respondents who think that people should
be educated on how to use cashless method to improve cashless transaction in
the system.
• There are 11.8% respondent i.e. 8 respondents who want that government
should create a reliable technical resource to improve cashless transaction in
the system.
• There are 16.2% respondent i.e. 11 respondents who think thar there should be
a rewards & incentives to improve cashless transaction in the system.
• From the conclusion, maximum respondents want people should be educated
on how to use cashless method to improve cashless transaction in the system.

79
Q9. Is a cashless system be proved beneficial for the development of the country?

o Yes
o No
o Maybe

Particulars No. of respondents Percentage

Yes 44 64.7%
No 23 33.8%
Maybe 1 1.5%
Total 68 100%

Analysis & Interpretation

• According to above diagram, there are 64.7% respondent i.e. 44 respondents

who will recommend that cashless system is proved beneficial for the
development of the country.
• But there are 33.8% respondent i.e. 23 respondent who will recommend that
cashless system will not be proved beneficial for the development of the
country.
• Also, there are 1.5% respondent, i.e. 1 respondent who may recommend that
cashless system may be proved beneficial for the development of the country.
• From the conclusion, maximum respondents are agreed that cashless system
will be proved beneficial for the development of the country.

80
Q10. If a complete cashless system was introduced would you be more likely to
accept this?

o Yes
o No

Particulars No. of respondents Percentage

Yes 50 73.5%
No 18 26.5%
Total 68 100%

Analysis & Interpretation

• According to above diagram, there are 73.5% respondent i.e. 50 respondent

who will accept the complete cashless system.
• There are 26.5% respondent i.e. 18 respondents who don’t want to accept
complete cashless system.
• From the conclusion, maximum respondent accepts the complete cashless
system.

81
 CHAPTER 5: CONCLUSION & SUGGESTIONS

Conclusion

➢ The study concludes that cashless transaction economy is one of the good and
strong decisions of government of India.
➢ Many people accept the concept of cashless transactions system.
➢ It helps to fight against major illegal or unethical activities in the economy like
terrorism, corruption, money laundries etc.
➢ But main problems are the working of cash less transaction in India is
cybercrime and illegal access of customer’s data.
➢ Therefore, it’s important to strengthen internet security from protection against
online mischievous.
➢ Customers and small retailers are faced the high degree of risk and problems
in the application of cash less transaction.
➢ The main reason is low literacy rate in rural area. Government should be
educated towards cash less transactions services.
➢ Government tries to promote customers mind towards the risk factors.
➢ Cashless transaction helps to develop the Indian economy is stronger.
➢ Hence, each and every one should access and use the digital based transaction.
➢ The Government to need more efforts financial literacy campaign time to time
to make population aware of benefits of electronic payments.

82
Suggestion

Findings and Suggestions

➢ The findings of the study show that India in terms of using digital payment
methods is still very poor in comparison to other developed countries in the
world.
➢ As many countries are already turned up with their electronic payment system,
India is in its initial stage and most of the population are dependent on cash-
based transaction because of unavailability of proper internet connectivity,
lack of awareness and knowledge of financial transaction, charges on card
payments and un operational bank accounts.
➢ India needs to come up with the new policies of digital transactions.
➢ It is recommended that government should promote their agencies and private
sector service providers to spread financial literacy at a great extend especially
in rural areas.
➢ Government should provide extra benefits on digital transaction payments and
offer extra incentives or interest rate on cash saving in bank accounts.
➢ At the same time reduction in charges of digital transaction or exemption
completely on digital banking should be offered for few initial years which
can be more helpful for speeding up the process of digitalisation of payments
in India.

83
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htps://byjus.com/free-ias-prep/cashless-economy/

https://economictimes.indiatimes.com/wealth/spend/going-cashless-is-it-good-for-
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https://www.bankbazaar.com/ifsc/digital-payment.html

https://yourstory.com/mystory/growth-of-digital-payment-industry-in-india

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HLESS_ECONOMY_IN_INDIA%E2%80%9D_1462.pdf

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84
 Appendix

Q1. Do you make payments using your mobiles/ smartphone?

o Yes
o No
o Maybe

Q2. What has been your most preferred mode of payment other than cash?

▪ Net banking
▪ Credit/debit card
▪ E-wallet/mobile app
▪ Cheque
▪ Other

Q3. Do you think that using your mobile or making cashless payments will
increase the chances of suffering theft or a fraud?

o Yes
o No
o Maybe

Q4. How often do you use cashless methods for payments while shopping for
clothes, products, etc.

o Always
o Occasionally
o Never

Q5. For high value payment what is your preferred mode of payment?

▪ Net banking
▪ Debit/credit card
▪ Cash
▪ E-wallet
▪ Cheque
▪ Other

85
Q6. What do you think could be the barriers in cashless transaction?

▪ Lack of co-operation from merchants while shopping

▪ Lack of knowledge
▪ Lack of technical resources
▪ Security
▪ Overall cost
▪ Other

Q7. Choose your most/least reliable mode of cashless payments.

Net banking Credit/debit card E-wallet UPI

Most reliable o o o o
Least reliable o o o o

Q8. What do think can be done to improve cashless transaction in the system?

o Educating people on how to use the cashless methods

o Creating reliable technical resources
o Rewards & Incentives
o Other

Q9. Is a cashless system be proved beneficial for the development of the country?

o Yes
o No
o Maybe

Q10. If a complete cashless system was introduced would you be more likely to
accept this?

o Yes
o No

86
 CASE STUDY

The Modi Government is Forcing a Cashless Economy on an Ill-Prepared Country

Forcing people to use digital payment methods will require the government to
increase the cost of using cash, which will be a greater burden for the poor.

In the aftermath of demonetisation, the government has taken up the task of

transforming India’s cash dependent economy to a cashless one. The government’s
push for a cashless economy is like blaming people’s dependence on cash for its own
failure to predict the impact of demonetisation. Social scientists have pointed out the
many impediments of transitioning to a cashless economy in the Indian context.
Though a cashless society may seem like a good idea, it is bad economics. Forcing
people to go cashless can potentially lower welfare by increasing the transaction cost
and result in higher inequalities.

To understand why it is a bad idea, one has to first understand the shift from a barter
system to use of money. The shift from barter to money for exchange was one of the
most important changes in terms of its economic implications. It allowed an increase
in economic activity to a level which was not possible with barter. The shift from a
cash economy to a cashless economy represents a similar shift in terms of lowering
the transaction cost on cashless transactions. Forcing a cashless economy means that
the government, through various regulations may increase the cost of using cash or
bar cash payments. These regulations may make cash payments costlier compared to
cashless payments. One can also think of it in terms of a tax on cash payments.

87
Money vs barter system

Despite the importance of money in modern economies, its use may not always be
beneficial. Barter may be preferred in instances where the transaction cost is lower
than what it might have been with money. The cost of exchanging commodities with
money is significant – it is costly to produce currency. The receiver must also be able
to detect fake currency and prevent fraud. And, if the real value of money is less than
what it represents – that is, fiat money – the issuer has to add security features that are
difficult to copy and can be used to detect fake notes. All of these requirements are
the cost of using money for exchange, instead of barter. This cost has existed in times
of gold and silver money. The cost of production then was mainly borne by issuer of
the currency and the cost of detecting fakes was borne by the receiver. The recipient
in those years had to be careful about the purity and weight of coins. In present times,
the issuer of the currency, by adding security features, bears the cost of production as
well as a substantial part of the cost of preventing fake currency. Given these costs, a
person uses money only if the cost of using it is lower than the cost of depending on
the barter system. In reality, both systems may exist simultaneously, since the cost of
using money may be lower in some transaction and the cost of barter in others.

In ancient times, people were mostly self-dependent and only a small number of
commodities were exchanged. Precious metals, which were used as money, were
scarce, adding to the cost of supplying currency. Using money, therefore, was
expensive, with its costs outweighing its benefits. As a result, barter was widely
prevalent among the common people, whereas money was mostly used in long
distance and high-volume trades.

The number and volume of commodities exchanged today has increased manifold,
whereas the cost of producing money has declined considerably. This has led to a
huge increase in the use of money for exchange of commodities, making barter almost
non-existent in all modern economies.

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Bad economics?

Presently, the cost of creating currency is borne by taxpayers. Along with the cost of
generating currency, there may be additional costs of transferring money which needs
to factor in aspects like the volume of currency involved, the uncertainty regarding
payment and the risk of theft. These costs are significant for large currency transfers.
Therefore, various banking and non-banking instruments are used to lower this cost,
which have developed over time in response to these costs. Cheques, demand drafts,
online banking, debit and credit cards, and e-wallets constitute such instruments.
These instruments are services provided by banking and non-banking institutions;
whose existence requires necessary infrastructure. For example, all of the above-
mentioned instruments require accessibility to a bank. In addition, some instruments,
such as online banking, debit and credit cards, and e-wallets, require access to
bank cards, internet and mobile phones. Providing these services calls for huge
investment in physical infrastructure, with skilled personnel required to handle these
transactions and maintain the system.

The cost of providing these services is borne by people who use these services. Many
people willingly pay for these services, as the benefits (in terms of lowering the cost)
of using these are higher than their cost. On the other hand, for people belonging to
economically weaker sections, these services have limited usage given their small
earnings and negligible savings. Even if they have a bank account, it is meant
primarily to deposit their savings. In addition, a lack of technological knowledge
makes cashless transactions appear riskier. Even people with necessary skills prefer
cash over digital payments in small transactions owing to the risk associated with it.
For this reason, most people use debit cards just to withdraw money from ATMs. As
per RBI data, 85% of the transactions using debit cards in August 2016 were at
ATMs.

The government’s decision to force people to go cashless is based on the assumption

that people can be educated about these technologies easily, which is far from reality.
The cost of shifting to cashless transactions is much higher for people from
economically weaker sections. They are dependent on others to avail basic banking
services like depositing money and making withdrawals, and can therefore be all the
more susceptible to fraud.
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Not viable

As per the 2011 Census, about 30% of the population over 15 years of age was
illiterate. After including people with primary or lower level education, the percentage
increases to 55%. It means that more than half of the Indian adult population was not
educated enough to shift to digital payments in 2011. The situation is not likely to be
very different in 2016. According to Intermedia’s Financial Inclusion Insights (2015),
a meagre 14% of the population (15 years and above) had high digital literacy and
another 26% had moderate digital literacy. These estimates suggest that 60% of the
Indian population is not prepared for shift to a cashless digital economy.

The supporters of this policy use the estimate on the cost of handling cash to justify a
cashless economy. For example, it has been pointed out that the RBI and commercial
banks spend about Rs 21,000 crore each year on currency operation. Another
estimates shows that citizens of Delhi spend about Rs 9.1 crore and 60 lakh hours in
collecting cash. However, no estimate is provided for the cost of additional internet
connection, mobile phones, debit or credit cards, loss due to fraud, cost of preventing
fraud and hours required to learn and stay updated about use of these technologies if
the cashless payment system is adopted. It does not mean that the use of digital
payment will not increase at all. The use of these instruments will increase over time
as a result of increase in literacy rate and income of the people. High literacy will
lower the cost of learning and possibility of fraud, whereas, the penetration of mobile
phones and internet will increase with income. In other words, a shift will happen
when its benefits are high enough to justify its cost.

Forcing people to use digital payment methods will require the government to
increase the cost of using cash, which will shift the demand curve of cashless mode of
payments upwards.

Normally, the upward shift of demand curve should mean higher consumer surplus.
However, it will not be so in the present situation, where the shift in demand curve is
the result of increased cost of using cash due to government policy. The final impact
of this move will depend on the shape of the supply curve. If the supply curve of
digital payment services is upward sloping, the higher price of these services will

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lower the consumer surplus of everyone. However, the loss of surplus will be higher
for the poor, as they are not ready to pay even the existing price.

On the other hand, if the supply curve is downward sloping, the price will come
down. Even in this situation, the consumer surplus of only those who were already
using these services will increase, whereas most of the poor who will go cashless
under compulsion will still be worse off. Since the cost of providing digital payment
services is likely to decline with their expansion, one can expect a declining long-run
supply curve. Given the declining supply curve, this situation will mean that the poor
will be subsidising the rich for a long time.

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