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The death of cash

If you were to ask me as to which is the single most important invention or discovery of all times, I will name two. The first is the Internet. The Internet has really, truly, totally and dramatically changed the way we conduct both our personal and our business lives. It has killed both time and distance, and brought knowledge to our drawing rooms.  

The second is Money. The most important face of money is Cash. Barter was clumsy; cash has been revolutionary. Between the Internet, which is at the bleeding edge of technology, and cash, which is at the leading edge of business, we are going to see some dramatic changes in the years ahead. Let’s discuss the most significant of them all.

 

‘CASH” heading towards its expiry date

Every invention, every discovery, every innovation, howsoever dramatic, they might have been, has a sell-by date. And I believe that CASH is fast heading towards its expiry date.

Imagine a situation where you walk into a dhabha, on the national highway. You have your grab and then you pay, not by cash but by your mobile. Or you step into a chai shop, have bun and a cup of hot tea, and you pay, not by cash but by your mobile. Or you walk the pavements of Kochi, pick up a crumpled shirt and then you pay, not by cash but by your mobile. Or you pay your monthly rentals or the blessed EMI not by cheque, but by your mobile. Or you walk out of a retail mall, your trolley full of products and you don’t have to wait in a queue in the counter to pay, because there is no counter. And that, as you exit the gate, the goods in your trolley are automatically billed and money is drawn out of your bank account. Wonderful?

Let me tell you how exciting all this would be. The cops will be thrilled. They don’t have to bust anymore cash crimes. People like you and me would be happy. We don’t have to carry cash or card anymore. Your home accounting would be simplified. Society would find it great. It won’t have to fell trees to make paper and to print currency that would have to be stored and transported. Next, the government would be overjoyed. They would know every penny that we spent. It would be getting closest to being the Big Brother, of which George Orwell wrote in his famous book, 1984.

The first step towards all this is to make both the Rs 500 note and the Rs 1000 note illegal tender.

 

The M-Pesa revolution...

Well, I am not shooting in the dark. In distant Africa, a website called safari.com launched the revolutionary M-Pesa that completely transformed the lives of the native Africans as Africa sidestepped development banking to leapfrog directly into mobile banking.

M-Pesa enables people to transfer cash to others using a menu on the phone, making it quick, safe and easy. This is particularly useful in a country where many workers in cities send money back home to their families in villages, which is a case with India too. It can be used to pay salaries, bills, taxi fares, shopping and grocery bills, utility bills. Businessmen are using it to receive payments from customers. M-Pesa had more than 17 million users, which was equal to close to 2/3 of adult population. The country’s GDP constitutes 25 per cent from M-Pesa.

Kenya, like India, also has an under-penetrated banking sector in the rural areas. The M-Pesa initiative has enabled people in rural areas to stop depending on banks that are miles away from their homes and no Internet facility. This scenario is similar to India’s, which means Vodafone’s initiative could take steam once it gets popular among the rural masses by making it widely available by BSNL, MTNL and other service providers in rural areas.  

Remember, at 74 per cent, India’s mobile penetration percentage is high. Now the government is pushing people to open bank accounts. The next step is to work proactively with technology companies to see how basic handsets too can do some of the functions of a smartphone. That would facilitate transfer of money through and with mobiles.

From there to being totally cashless is just a small leap of faith. Vodafone has launched M-Pesa in India.

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