Why Cash is the King?

In the pandemic, there has been a push in the digital payments. UPI transactions have reached an all time high. People are speculating it as major push to digitization. People may get habituated to digital payments in the long run. Per a recent study by Harvard Business Review, India has the most potential for growth in the digital economy.

However, cash is the king and it will always remain one at least in India for the next couple of decades. The reason for that is simple. The failure of the banking institution, where the hard earned money of the people is eroded. Secondly, there is network issues at times when one cannot do the digital transactions. Digital to become mainstream in India will take time. Thirdly, the transaction charges, the shop keeper need to pay. The cost is around 2% per transaction. 2% may sound small. But when you pay ₹ 2,000 as charges for the payment of ₹ 1,00,000. It takes a huge plunge on your profit.

Obviously there is benefits of moving towards cashless economy. First being the tracking of every transactions so as to decrease corruption and black money. Secondly, the bank will have more cash so they can provide more loans, creating more development opportunities. Thirdly, there will be no duplicate notes anymore.

On the other side there is downside too, especially increase in cyber thefts. Secondly, people figure out new loopholes in the system. It’s like Tom and Jerry, where Jerry always wins. Thirdly, we consumer tend to spend more with plastic cards or digitally. It is not that easier to spend the same amount. Digital transactions may deplete your savings. In the long run making one poorer as 1000 bucks today can be worth of 1,00,000 bucks in a decade.

Lastly, all of your private digital transactions are recorded over GPay, PhonePe or any other payment apps you use. They can analyse and tell better about the purchasing taste. When, what and where you are likely to shop, showing the pop ups accordingly to boost their revenues. If you are happy and comfortable with it, then you don’t have to worry. There is not much income for the payment apps in UPI transactions, in the long run they will be monetizing this data to increase there revenue and income.