Advantages Of Cashless Payments

The government has created a rash of discounts and freebies on digital transactions to encourage the move toward a cashless economy.

FREMONT, CA: As the country nears a cashless environment after demonetization, the initial awe and confusion have given way to a flurry of concerns. Will the emphasis on online transactions give convenience and tangible benefits or add to stress and extra charges?

The government has created a rash of discounts and freebies on digital transactions to encourage the move toward a cashless economy. But will these be significant enough and, along with other advantages, counter the greater risk of identity theft once the currency notes are back in circulation? What are the benefits and drawbacks of financial digitization?

ADVANTAGES OF GOING CASHLESS

Convenience

The soothe of conducting financial transactions is possibly the biggest motivator to go digital. You will no longer need to carry a bunch of money, plastic cards, or even line up for ATM withdrawals. It’s also a safer and easier expenditure option when you are traveling. “The advantages are huge if you leave out the low-income group, which will face a large challenge,” says Kartik Jhaveri, Director, Transcend Consulting. “For the remaining country, it is constructive and basic.

It will be specifically useful in case of emergencies, say, in hospitals,” he says. Included Jayant Pai, Head, Marketing, PPFAS Mutual Fund: “You have the liberty to transact whenever and wherever you want. You don’t have to be physically present to conduct a transaction or be compelled to do so only during office times.”

Discounts

The latest 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. A series of cuts and freebies have followed this. For instance, a 0.75% discount on digital purchase of fuel means that the petrol price in Delhi at Rs 63.47 per liter can be brought down to Rs 62.99/l with digital payment. It’s the right time to increase your savings if you benefit from these.

Similarly, saving on rail tickets, highway tolls, or the purchase of insurance can help cut your costs. Add to these the cashback offers and discounts offered by mobile wallets like Paytm, in addition to the reward points and loyalty benefits on existing credit and store cards, and it could help enhance your cash flow marginally.

Tracking spends

“If each transactions are on record, it will be very simple for people to keep track of their spending. It will also support while filing income tax returns and, in case of a scrutiny, people will find it easy to explain their spends,” states Manoj Nagpal, CEO, Outlook Asia Capital. “In addition the tax, it will have a good influence on budgeting,” says Pai.

Budget discipline

The written record will allow you to keep tabs on your spending, resulting in better budgeting. “Different apps and tools will support people analyzing their spending patterns and throw up good insights over a couple of years,” states Jhaveri. Control expenses could also lead to higher investing.

If the equal amount of cash does not flow back into circulation and people remain to use mobile wallets and cards, it is also likely to bring down the latte factor. This means that the Rs 10 you spent on candy or chips or that regular cup of coffee office will likely take a hit since you will be short of loose change and smaller currency notes. There’s a minor chance of budgetary leaks and unaccounted-for spending sneaking into your budget at the end of the month.

Lower risk

“In that sense, the digital option offers narrow security,” says Pai. If stolen, blocking a credit card or mobile wallet remotely is easy, but getting your cashback is impossible. This is especially true while traveling, especially abroad, where the loss of cash can cause great inconvenience. Moreover, if the futuristic cards advance to use biometric ID (fingerprints, eye scans, etc.), it can be extremely hard to copy, making it a very safe choice.

Small gains

It may not resembles much of a gain, but being cashless makes it easy to ward off borrowers. Another bonus is that you can pay the exact amount without worrying about not having change or getting it back from shopkeepers.