‭ HAPTER:3‬

C
‭LITERATURE‬
‭REVIEW‬
‭The‬‭authors‬‭calculate‬‭private‬‭and‬‭social‬‭costs‬‭for‬‭nine‬‭separate‬‭payments‬‭instruments.‬‭They‬‭find‬‭that,‬
‭from‬ ‭a‬ ‭social‬ ‭cost‬ ‭perspective,‬ ‭cash‬ ‭is‬ ‭the‬ ‭cheapest‬ ‭payment‬ ‭instrument,‬ ‭followed‬ ‭by‬ ‭various‬
‭electronic‬ ‭payment‬ ‭methods.‬ ‭From‬ ‭a‬ ‭private‬ ‭perspective,‬ ‭cash‬ ‭and‬ ‭checks‬ ‭emerge‬ ‭as‬ ‭the‬ ‭cheapest‬
‭payment methods.‬

‭Humphrey‬‭and‬‭Berger‬‭argue‬‭that‬‭because‬‭payers‬‭using‬‭credit‬‭cards‬‭and‬‭checks‬‭benefit‬‭from‬‭float,‬‭they‬
‭tend‬ ‭to‬ ‭"overuse"‬ ‭this‬ ‭payment‬ ‭methods-a‬ ‭market‬ ‭failure‬ ‭that‬ ‭could‬ ‭be‬ ‭overcome‬ ‭with‬ ‭government‬
‭intervention.3‬ ‭Humphrey‬ ‭and‬ ‭Berger's‬ ‭analysis‬ ‭focuses‬ ‭exclusively‬ ‭on‬ ‭costs.‬ ‭Although‬ ‭they‬
‭acknowledge‬ ‭that‬ ‭"convenience‬ ‭and‬ ‭acceptability"‬ ‭may‬ ‭play‬‭a‬‭role‬‭in‬‭payment‬‭instrument‬‭choice,‬‭in‬
‭their calculations they omit the benefits that accrue from using different payment systems.‬

‭Wells‬ ‭(1996)‬ ‭extends‬ ‭the‬ ‭Humphrey-Berger‬ ‭study.‬ ‭She‬ ‭argues‬ ‭that‬ ‭Humphrey‬ ‭and‬ ‭Berger‬
‭underestimate‬ ‭the‬ ‭social‬ ‭cost‬ ‭of‬ ‭checks.‬ ‭She‬ ‭also‬ ‭observes‬ ‭that‬‭check‬‭use‬‭did‬‭not‬‭fall‬‭between‬‭1987‬
‭and‬ ‭1993,‬ ‭even‬ ‭though‬ ‭the‬ ‭value‬ ‭of‬ ‭float‬ ‭fell,‬ ‭calling‬ ‭into‬ ‭question‬ ‭the‬ ‭overuse‬ ‭hypothesis.‬ ‭Like‬
‭Humphrey‬‭and‬‭Berger,‬‭Wells‬‭focuses‬‭on‬‭costs‬‭and‬‭acknowledges‬‭that‬‭benefits‬‭matter‬‭-‬‭particularly‬‭in‬
‭her‬ ‭discussion‬ ‭of‬ ‭why‬ ‭checks‬ ‭are‬ ‭used‬ ‭more‬ ‭frequently‬ ‭than‬ ‭less‬ ‭costly‬ ‭alternatives‬ ‭-‬ ‭but‬ ‭does‬ ‭not‬
‭attempt‬‭to‬‭measure‬‭any‬‭of‬‭these‬‭benefits...‬‭Humphrey‬‭et‬‭al.‬‭(1996)‬‭analysed‬‭patterns‬‭in‬‭the‬‭use‬‭of‬‭cash‬
‭and‬‭other‬‭paper‬‭and‬‭electronic‬‭payment‬‭instruments‬‭in‬‭14‬‭developed‬‭countries,‬‭including‬‭the‬‭U.S,‬‭for‬
‭1987-‬‭1993.‬‭They‬‭find‬‭that‬‭the‬‭calculated‬‭prices‬‭of‬‭payment‬‭instruments‬‭fail‬‭to‬‭explain‬‭differences‬‭in‬
‭instrument‬ ‭use‬ ‭that‬ ‭"institutional‬ ‭variables”‬ ‭in‬ ‭particular‬‭the‬‭violent‬‭crime‬‭rate-‬‭explain‬‭a‬‭non-trivial‬
‭portion‬‭of‬‭the‬‭observed‬‭differences‬‭in‬‭usage‬‭across‬‭countries.‬‭Crime‬‭could‬‭be‬‭interpreted‬‭instead‬‭as‬‭an‬
‭indirect cost.‬

‭Unlike‬ ‭payment‬ ‭cards‬ ‭and‬ ‭cheques,‬ ‭which‬ ‭bear‬ ‭the‬ ‭owner's‬ ‭name‬ ‭and‬ ‭therefore‬ ‭require‬‭a‬‭degree‬‭of‬
‭sophistication to use without authorisation stolen cash is perfectly‬

‭transferable.‬ ‭The‬ ‭author‬ ‭finding‬ ‭confirms‬ ‭the‬ ‭importance‬ ‭of‬ ‭considering‬ ‭probabilistic‬ ‭costs‬ ‭like‬ ‭the‬
‭perceived‬‭risk‬‭of‬‭then‬‭The‬‭authors‬‭suggest‬‭that‬‭a‬‭country‬‭could‬‭save‬‭1‬‭percent‬‭of‬‭ins‬‭GDP‬‭annually‬‭by‬
‭shifting from a fully paper based to a fully electronic-based System. Costs are presented at‬
‭country‬‭specific‬‭instrument‬‭specific‬‭average‬‭transaction‬‭sizes,‬‭however,‬‭cross-instrument‬‭comparisons‬
‭difficult‬ ‭Some‬‭of‬‭the‬‭comparisons‬‭also‬‭omit‬‭certain‬‭parties‬‭to‬‭transactions,‬‭namely‬‭central‬‭banks‬‭and‬
‭consumers, most likely due to missing data. Finally, because de literature does not quantify benefits.‬

‭Why‬‭“Cashless”‬‭maybe‬‭the‬‭new‬‭normal?‬‭G‬‭Sampath,‬‭THE‬‭HINDU,‬‭December‬‭14TH2016,‬‭the‬‭article‬
‭is‬‭a‬‭slightly‬‭different‬‭take‬‭on‬‭cashless‬‭economy.‬‭The‬‭author‬‭covers‬‭the‬‭concept‬‭of‬‭a‬‭cashless‬‭economy,‬
‭first‬ ‭by‬ ‭tackling‬ ‭the‬ ‭outcomes‬ ‭of‬ ‭such‬ ‭an‬ ‭economy.‬ ‭The‬ ‭article‬ ‭covers‬ ‭the‬ ‭concept‬ ‭of‬ ‭a‬ ‭Cashless‬
‭Society‬ ‭with‬ ‭understanding‬ ‭the‬ ‭beneficiaries,‬ ‭and‬ ‭who‬ ‭will‬ ‭face‬ ‭difficulties,‬ ‭if‬ ‭implemented.‬
‭According‬‭to‬‭the‬‭author,‬‭one‬‭immediate‬‭outcome‬‭of‬‭a‬‭cashless‬‭India,‬‭would‬‭be‬‭a‬‭sharp‬‭rise‬‭in‬‭indirect‬
‭taxes‬ ‭compliance.‬ ‭Traders,‬ ‭Small‬ ‭Businesses,‬ ‭Shopkeepers‬ ‭and‬ ‭Consumers,‬ ‭use‬ ‭cash‬ ‭as‬ ‭means‬ ‭to‬
‭trade,‬‭so‬‭that‬‭they‬‭can‬‭avoid‬‭paying,‬‭service‬‭taxes,‬‭sales‬‭taxes,‬‭VAT‬‭and‬‭any‬‭number‬‭of‬‭indirect‬‭taxes‬
‭and‬ ‭fees.‬ ‭The‬ ‭author‬ ‭also‬ ‭suggests‬ ‭that,‬ ‭on‬ ‭enforcing‬ ‭a‬ ‭cashless‬ ‭payment‬ ‭system,‬ ‭86%‬‭of‬‭the‬‭paper‬
‭money‬ ‭will‬ ‭be‬ ‭sucked‬ ‭out,‬ ‭and‬ ‭will‬ ‭let‬ ‭people‬ ‭flounder‬ ‭for‬ ‭a‬ ‭period‬ ‭in‬ ‭a‬ ‭condition‬ ‭of‬ ‭acute‬ ‭money‬
‭scarcity, but that is perhaps the quickest means way to gather.‬
‭THE COUNTRIES THAT WOULD PROFIT MOST FROM A CASHLESS WORLD,‬
‭BHASKAR CHAKRAVORTI,‬

‭RAVI‬ ‭SHANKAR‬ ‭CHATURVEDI,‬ ‭BENJAMIN‬ ‭MAZZOTTA‬ ‭FOR‬ ‭THE‬

‭HARVARD BUSINESS REPORT, MAY 31,‬

‭2016.‬

‭It’s‬ ‭been‬ ‭nearly‬ ‭300‬ ‭years‬ ‭since‬ ‭paper‬ ‭money‬ ‭became‬ ‭accepted‬ ‭as‬ ‭legal‬ ‭tender.‬ ‭While‬ ‭much‬ ‭has‬
‭changed‬‭about‬‭how‬‭we‬‭make,‬‭sell,‬‭and‬‭buy‬‭goods,‬‭cash‬‭has‬‭stuck‬‭around.‬‭It’s‬‭been‬‭only‬‭recently‬‭that‬
‭the road to a wider cashless society has started to really take shape. From apps such as PayPal,‬
‭Venmo, or Square Cash are signs that Cash is following the path of other “information goods,” such‬
‭as‬ ‭printed‬ ‭photographs,‬ ‭cassette‬ ‭tapes,‬ ‭and‬ ‭DVDs‬ ‭in‬ ‭being‬ ‭replaced‬ ‭by‬ ‭digital‬ ‭alternatives.‬ ‭Cash,‬
‭according‬‭to‬‭a‬‭recent‬‭MasterCard‬‭study,‬‭accounts‬‭for‬‭nearly‬‭85%‬‭of‬‭the‬‭global‬‭consumer‬‭transactions.‬
‭Cash‬ ‭has‬ ‭stubbornly‬ ‭resisted‬ ‭going‬ ‭the‬ ‭way‬ ‭of‬ ‭digital‬ ‭extinction.‬ ‭Paper‬ ‭currency‬ ‭is‬ ‭ubiquitous.‬ ‭It‬‭is‬
‭also‬‭untraceable‬‭and‬‭universally‬‭accepted.‬‭For‬‭many‬‭users,‬‭cash‬‭equates‬‭to‬‭a‬‭sense‬‭of‬‭security‬‭and‬‭for‬
‭many it is a sense of independence from government oversight. The rise of‬
‭cyber-crime‬‭and‬‭growing‬‭concerns‬‭about‬‭the‬‭ability‬‭of‬‭public‬‭agencies‬‭to‬‭look‬‭through‬‭digital‬‭records‬
‭will‬‭add‬‭to‬‭the‬‭unwillingness‬‭among‬‭many‬‭to‬‭let‬‭go‬‭of‬‭paper‬‭money.‬‭Countries‬‭that‬‭are‬‭highly‬‭digitally‬
‭evolved‬‭are‬‭best‬‭positioned‬‭to‬‭unlock‬‭value‬‭by‬‭focusing‬‭on‬‭migrating‬‭to‬‭digital‬‭alternatives‬‭from‬‭cash.‬
‭For‬‭those‬‭countries‬‭lagging‬‭in‬‭their‬‭digital‬‭evolution,‬‭the‬‭path‬‭to‬‭cashless‬‭nirvana‬‭is‬‭through‬‭investing‬
‭in digital inclusion first. This sequencing is crucial to success.‬