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Go Cashless: Challenges and Opportunities

  • Md. Latiful Islam
  • 24th May, 2022 05:30:10 PM
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Now rickshaw fare can be paid through mobile payments. Trust Axiata Pay, shortly named as tap, introduced the service at Dhanmondi area with 300 rickshaws as a pilot project. I am not going to evaluate the end result but one thing we understand that it is possible to pay cashless even at this stage. So, it may work at kitchen market and everywhere. What we can think logically is possible to frame out technologically these days. Many of us have heard the name ‘Amazon Go’, the world’s most advanced shopping technology. Customers never have to wait in line. This is a checkout-free shopping experience developed as like as the technologies used in self-driving cars: computer vision, sensor fusion, machine learning and deep learning algorithm. Customers check in the store just tapping app in the smart phone and scan with the QR code presented. The in store technology automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When customers are done shopping, just leave the store and payment is automatically completed from the customers’ wallet. There are similar stores in London with the brand name ‘Amazon Fresh’. You may find many videos of the total process of ‘Amazon Go’ in Youtube.

Cashless payments or transactions are completed without using cash. The mode of cashless payments are included via credit/debit cards, cheques, Demand Drafts, Electronic Funds Transfer, RTGS, mobile wallets, internet banking or any other digital form of alternate channels. But in this advanced digital era, we usually mean digital payments as cashless that get effects real-time or near real-time. The COVID-19 pandemic taught us to adopt many technological changes to meet daily requirements. During lockdown period, people could not go out to withdraw cash and ordered their living items like groceries, medicine, clothing etc online. People also made all sort transactions of funds transfer, utility bills payments, salary payments of staffs, business transactions and many things through digital channels. Recently, we notice that there is a separate line at toll plaza to pass the vehicle without any queue of paying toll. The payment is made automatically through contactless system using preloaded wallet. This technology can be implemented at the super shops, restaurant, coffee shops and many more places. When payments will be so simple, then people will proactively switch to cashless, avoiding carrying of paper notes.

Let us see an imaginary story of Mr. Abdul Haque who has been doing business of agro-based machineries in Kushtia. Few years back, he used to come to Nawabpur Road, Dhaka at least twice a month to procure his items from wholesalers. He carried cash amount and demand draft with him to settle the payments. It was very risky and time consuming for him, and in the total supply chain process there were some additional cost. Now, he orders his items from wholesalers’ webpages and makes payment digitally either through fund transfer/EFT/RTGS from online banking or through mobile wallet based on the arrangement with the respective seller. Think how the digital payments make the total supply chain in the business easy, hassle-free and cost effective. Nowadays, people are giving even Zakat and Sadaqah through mobile wallet, sending gift items from online shop to their loving persons’ doorstep sitting anywhere in the world. So, technologically going cashless is quite possible; it is all about change of people’s mindset.

Before going to discuss opportunities of cashless society, let us discuss the challenges. We are highly depended on cash for most of the payments. The top reason behind is the lack of digital infrastructure and poor internet connectivity to operate cashless payments. Other than a few urban areas, there is no sufficient facility of digital payment systems. Still a big portion of people do not have any banking account or mobile wallet. There is huge knowledge gap among the banking account holders about the cashless services and they feel comfort in dealing with paper notes. Small shopkeepers do not use POS machine due to the high cost of swipe machine and the commission on transactions amount charged by the payment operators. Many people in the rural area maintain mobile banking account but they use it only for receiving money and do cash-out for ultimate payments with paper notes. Cash is received everywhere, but digital payments are not. So, people always carry sufficient cash despite having digital wallets with them. Sometimes, we hear fraudulent activities in mobile wallets where the fraudsters take PIN from the original wallet holders making fake calls referring the call centres. Another big challenge in digital payments is cyber security issues that results in online frauds, leakage of confidential information, malware and virus attacks to damage the systems. All these are the great concern to run digital payment systems.

There are some intentional issues as well. In some cases, people avoid digital payments not to keep records of financial transactions. The reasons behind such attitudes are to evade high tax on the actual income, hide earnings through illegal channels, dodge VAT on the transactions amount etc. Many small shops, even in the large shopping centre, encourage cash transactions in selling products though they have digital payment arrangement, because for digital payment they have to give 1.5%-2.5% commission and it takes 3-4 days to get final settlement. Every day, a huge amount of dealing is happening of illegal items trading, bribery and some criminal activities. In these cases, people always try to avoid digital payments to escape further tracking of the dealings. However, there are challenges in every positive change besides big opportunities are there. Let see the opportunities of going cashless economy.

Carrying cash is hassle and very risky of having pickpocketing. A few years back, we frequently heard occurrence of pickpocketing in the cattle market and public gatherings, burgling cash using anaesthetic substances and hijacking. Many people lost their hard earned money and their lives. These risks are getting reduced due to the increase of digital payment channels. There is a huge cost involved in printing cash currencies and facilitating its’ operations. As per the reports with reference to the Bangladesh Banks’ survey data in 2019 done by US consultancy firm McKinsey & Company, accumulative cash handling cost in Bangladesh is more than Tk. 9000 crore per year due to its heavy dependency on cash. The figure includes printing cost of money, cash transactions cost by the Banks, transportation, insurance etc. This cost can be reduced by increasing digital payments. Cashless transaction is safe, secure, convenient and may be done from anywhere in the world. You need not to go outside for making payments of anything that save your time and cost. Life becomes easier with the improvement of digital payment channels. You can pay your utility bills and scheduled payments automatically without any tension; just set an instruction. Many shops and channel partners offer lucrative discounts, reward points, cashback and prizes, if you use digital payments. Cashless payment is not just the smart way of transactions but also brings transparency since digital payments keep records of every transaction, it is possible to track all the expenses, payments and produce proof record in future for disputed cases.

There is huge circulation of forged cash notes in the market but in cashless payments, there is no risk of fraudulence. Convenient payment of cashless transactions makes faster and easier the supply chain management process in business. The government may get huge benefits in collecting revenue from taxes, VATs, tolls and other collections. There is no scope of hiding figures in these items as records are kept in the computer system. Other financial crimes, illegal trading and money laundering may be controlled through improving digital payment channels. If financial transactions and digital payments data of different sources are integrated under big data platform, there will be a better visibility in the financial information system for the government, individuals and business enterprises.

Let us see the comparative statistics of February 2022 and February 2021 from the data published by Bangladesh Bank. Total number of branches of different Banks is 10,941; all these are fully online. The total number of POS in Feb’22 was 95,037 (22.15% increase compared to Feb’21); number of debit, credit and prepaid cards was 29,237,748 (19.19% increase); number of cards transactions in the month Feb’22 was 29,422,794 (15.15 increase); number of EFT transactions was 38,57,546 (28.58% increase); number of RTGS transaction was 5,43,730 (69.89% increase) and number of internet banking transactions was 44,96,931 (97.20% increase). The total number of mobile banking account till February’22 was 116,137,804 (13.45% increase compared to Feb’21); total number of mobile banking transactions, including cash-in & cash-out, salary payments, utility bills payments, talk-time purchase, P2P payments, purchasing etc was 317,919,659 (13.68% increase) for Tk. 68,162.80 crore (23.81% increase). The statistic clearly tells that use of digital payments in Bangladesh is growing.

Due to innovation in the technologies, world is changing every day. Being the major component in the financial ecosystems, digital payments also is going smart and getting popular day by day. It is very tough to go fully cashless immediately but can be used at optimum level. For that to happen, challenges to be identified and be mitigated to take the advantages of cashless economy. It requires running massive awareness and learning sessions with the end users to take it at the door step of every one. It is not a dream that cash notes will be the museum items like previous metal coins in the future.

The writer is the Chairman, FinPro Consultants Limited

Source: Sun Editorial