Information Technology in Making the Journey of Cash to Cashless Easier Dr. Sarita Sharma 1, Ms. Manavi Setia 2 1 Department of Computer Science DAV Institute of Management, Faridabad sarita_kaushik24@rediffmail.com,phone:9810922059 2 Department of Computer Science DAV Institute of Management, Faridabad manavisetia94@gmail.com, phone: 8882224861 ================================================================= ABSTRACT In the demonetisation process, the Government of India initiated a step towards cashless India by initiating programs like Digital India. It is universally agreed that being cashless is safe and efficient. This paper highlights the role of Information technology in making the journey of cash to cashless easier. The paper discusses the various methods of Information Technology that helped the end users at the time of currency crises when 86 percent of the circulating currency was all of a sudden rendered invalid. Also, the benefits of being cashless are discussed in this paper. ================================================================= INTRODUCTION November 8, 2016 at 20:00 Indian Standard Time, Prime Minister Narendra Modi announced the demonetisation of Rs.500 and Rs.1000 currency bills of Mahatma Gandhi Series. In the announcement, Mr. Modi announced that old Rs. 500 and Rs. 1000 notes would be invalid past midnight and announced that the issuance of new Rs. 500 and Rs. 2000 notes of Mahatma Gandhi new series in exchange for the old notes. The currency bills that were cancelled amounted to a whopping 86 percent of the cash in circulation. This meant that the 86 percent of the currency which was in circulation at that point of time in the form of currency bills of Rs. 500 and Rs. 1000 were rendered invalid and were not to be accepted for any kind of transactions. This was not the first time India was facing such a thing. The Indian government had
demonetised bank notes on two prior occasions - once in 1946 and then again in 1978 - and in both cases, the goal was to combat tax evasion by black money held outside the formal economic system.[1] As soon as the announcement was made, there was a situation of utter chaos, a lot of chinese whisper started floating around without any authentic source. Initially one announcement was made about the banks and the ATMs, that was the banks will be functional a day after the announcement and ATMs will start working after two days. The idea behind this action was to fight terrorism funded by counterfeit notes. While the supply of all denominations had increased by 40 percent between 2011 and 2016, the Rs.500 and Rs.1000 banknotes increased by 76 percent and 109 percent respectively, owing to forgery. They say that the forged cash was used to fund terrorist activities against India and that the demonetisation had a counter-terrorism purpose.[2] The Reserve Bank of India stipulated a window of fifty days until 30 December 2016 to deposit the demonetised currency as credits in bank accounts. The currency bills could also be exchanged over the counter of bank branches up to a limit that varied of the days :[3] Initially the limit was fixed at Rs.2,000 per person The limit was increased to Rs. 4,500 per person from 14 to 17 November 2016. The limit was reduced to Rs. 2,000 from 18 November 2016. All exchange of banknotes were abruptly stopped from 25 November, 2016. Some Facts and Figures [5] Up to 97% of the demonetised bank notes have been deposited into banks which have received a tot
l of 14.97 trillion as of December 30 out of the 15.4 trillion that was demonetised. This is against the government's initial estimate that 3 trillion would not return to the banking system. Of the 15.4 trillion demonetised in the form of 500 and 1000 bank notes of the Mahatma Gandhi Series, 9.2 trillion in the form of 500 and 2000 bank notes of the Mahatma Gandhi New Series has been recirculated as of 10 January 2017, two months after the demonetisation. A lot of alternatives to make the transactions were suggested by the Government of India and the financial experts : To use lower denominations which were still valid for any kind of transactions. To use account transfers to make payments. To use plastic money. Also we have, E-wallets that allow an individual to make payments to anyone using the application. OBJECTIVE The objective of this paper is to understand the role of Information Technology in the journey to move from cash to cashless after the announcement of demonetisation of the currency bills of 500 and 1000 which were at that time the 86 percent of the circulating currency.
INFORMATION TECHNOLOGY Information literally means a message or a collection of message whose meaning can be interpreted. Information can be recorded or transmitted. It can be recorded as signs, or conveyed as signals by waves. Information is any kind of event that affects the state of a dynamic system. The concept has numerous other meanings in different contexts. But, the meaning which is valid in all the contexts is Information is processed data. Information technology (IT) is the use of computers and software to manage information. The term is commonly used as a synonym for computers and computer networks, but it also includes other information distribution technologies such as television and telephones. Several industries are associated with information technology, including computer hardware, software, electronics, semiconductors, internet, telecom equipment, and e- commerce. SHIFT FROM CASH TO CASHLESS One of the options available to public was to use lower denominations which indeed were only 14 percent in circulation and thus, were unable to fulfil the demands of all the transactions. Secondly, the use of paper cheques was a slow process which might take 2-3 days when the drawee has account in different bank. Also, it does not guarantee that the payment will be honoured. The other options available to ensure that demonetisation was smooth and seamless for the end users are : Electronic Purses/Wallets: E-wallets that store card numbers and cash. This is a virtual wallet that can store credit card, debit card and other information. A lot such applications such as PAYTM, Airtel Money, are being used by users after the demonetisation. Electronic Funds Transfer at Point of Sale (EFT/POS): EFT/POS is an online system that involves the use of plastic cards in terminal on merchants premises and enables customers to transfer funds instantaneously from their bank accounts to merchant accounts when making purchases.
Credit Cards: This is a plastic card for payment for the goods or items delivered. Debit Cards: These were a form of value-transfer, where the cardholder after keying of a PIN, uses a terminal and network to authorize the transfer of value from their account to that of a merchant. Smart Cards: A smart card is a plastic card with a computer chip inserted into it and that store and transacts data between users. Mobile: A mobile payment is an electronic payment made through a mobile device (e.g., a cell phone or a PDA). This uses a mobile device to initiate and confirm electronic payment. Personal Computer Banking (Home Banking): This term is used for a variety of related methods whereby a payer uses an electronic device in the home or workplace to initiate payment to a payee. Online/Internet Payments: This is the means by which customers transact business with a bank through the use of the Internet network. Customers can access their bank accounts and make transfers through a website provided by the bank and complying with some rigorous security checks. The methods discussed above were fast and were indeed easier than to carry lower denominations or the use of paper cheques. This is where Information Technology has proven as boom. BENEFITS OF BEING CASHLESS Below listed are the benefits of being cashless according to[4]: Convenience : The ease of conducting financial transactions is probably the biggest motivator to go digital. One will no longer have to carry wads of cash, or even queue up for ATM withdrawals. It s also a safer and easier spending option when one is travelling. The benefits are enormous if one leave out the low-income group, which will face a huge challenge, says Kartik Jhaveri, Director, Transcend Consulting. For the rest of the country, it is constructive and simple. Discounts : The recent waiver of service tax on card transactions up to Rs 2,000 is one of the incentives provided by the government to promote digital transactions. This has been followed by a series of cuts and freebies. It s a good time to increase your
savings if you take advantage of these. For instance, 0.75% discount on digital purchase of fuel means that the petrol price in Delhi at Rs 63.47 per litre can be brought down to Rs 62.99 per litre with digital payment. Similarly, saving on rail tickets, highway toll, or purchase of insurance can help cut your costs. Add to these the cashback offers and discounts offered by mobile wallets like Paytm, as well as the reward points and loyalty benefits on existing credit and store cards, and it could help improve your cash flow marginally. Tracking Expenditure : If all the transactions are on record, it will be easy for an individual to keep track of the expenses one is making and to analyse them. Also, it will provide an ease in filing income tax returns. Budget Discipline : The written record will help end users keep tabs on your spending and this will result in better budgeting. Cashless tools will help people analyse their spending patterns and throw up good insights in the coming years. Controlled spending could also result in higher investing. If the same amount of cash does not flow back into circulation and people continue to use mobile wallets and cards, it is also likely to bring down the latte factor. Lower Risk : The digital option offers limited security, that is, if stolen, it is easy to block a credit card or mobile wallet remotely, but it s impossible to get your cash back. This is especially true while travelling, especially abroad, where loss of cash can cause great inconvenience. Vanishing the change issues : A positive point of using a cashless medium to make transactions is that one can pay exact amount without worrying about the change issues. FUTURE SCOPE The futuristic cards can be evolved to use biometric ID (fingerprints, eye scan, etc), it can be extremely difficult to copy, making it a very safe option. This will also result in the decline of theft activities. CONCLUSION From all of the points discussed above the conclusion is clear that being cashless is undoubtedly a better option in every aspect whether it is security or convenience. Also, Information Technology has played a vital role in making the journey of cash to cashless easier.
[3]https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=38520 REFERENCES [1]http://blogs.economictimes.indiatimes.com/onmyplate/the-cycles-of-demonetisation-alooks-back-at-two-similar-experiments-in-1946-and-1978/ [2]http://www.news18.com/news/india/why-were-the-notes-scrapped-rbi-chief-andeconomic-affairs-secretary-explain-1309756.html [4]http://economictimes.indiatimes.com/wealth/spend/going-cashless-is-it-good-foryou/articleshow/55908649.cms [5]https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation