Progress of Digitisation From Cash to Electronic: A Critical Essay

1. Background

1.1 The digital revolution is taking the world by storm and no other area has witnessed such metamorphosis as payment and settlement systems, resulting in a myriad of digital options for the common man. Consumers now have a range of options to choose from when selecting a payment method to complete a transaction. They make this selection based on the value they attribute to a payment method in a certain situation as each payment mode has its own use and purpose. In India, like in many parts of the world, cash is the well-established and widely used payment instrument. It is, however, reassuring that non-cash payments, especially those using electronic or digital modes are rapidly increasing.

2. Approach

2.1 Cash is all pervasive, easy to use and store and offers great convenience. The challenge in assessing the progress of a country from cash to digitisation arises from the fact that, given the anonymity of cash transactions, it is very difficult to establish the exact volume of transactions conducted in cash, and consequently the value of such transactions. Notwithstanding this, this paper studies the popularly used indicators over the world which denote the use of cash and which are considered as a proxy for cash payments.

2.2 This study also analyses the measures of cash, the enablers for payment systems and the measures of electronic payments over a timeframe of the last 5 years to ascertain the shift in India, if any, from cash to digital payments. Further, a comparison with the 26 member countries of the Committee on Payments and Market Infrastructures (CPMI) over the same five year period has also been attempted to evaluate India’s performance vis-à-vis other countries.

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