IMPACT OF CASHLESS PAYMENT ON WORLD ECONOMY

INCLUSIVE:-

The 21st century is the age of information and communication technology. Every discipline observes innovations, whether it is the discipline of science, medicine, agriculture, or others. The Finance discipline has also witnessed technological advancements in recent decades and creating benefits for governments, institutions, and people, especially those from the middle or lower middle class, as access to digital financial products becomes easy. It helps penetrate financial services to other non-finance sectors more significantly while more individuals get access to essential services and due to the introduction of digital finance, access to secure and fast banking is possible for middle or lower-middle-class people in developing countries. Hence, they will likely conveniently move to and perform digital transactions instead of cash transactions. Firstly, it focused on the group of G7 countries due to their economic and technological importance, which earlier studies lacked to focus. Secondly, it applied the latest research methodology of the ARDL (Panel) for precise short-run and long-run results. In the long run, all three variables, card & e-money, cheque payment and credit transfer, were found to be significant. However, in the short-run, credit transfer has an insignificant relationship with real GDP. The findings are of great importance for policymakers, institutions and governments of G7 countries to bring more technological innovation to the financial sector. The purpose of the study was achieved. However, there were some limitations confronted during the research process. Many modes of cashless payments are currently being practiced in the markets, including direct debits, mobile wallet banking and others. the impact of cashless payment and digital finance on reducing poverty and money laundering also needs attention to explore more benefits of the cashless society.
The Indian government has been pushing for a cashless economy for some time because they believe that it will be user-friendly, rapid, and transparent in addition to yielding more revenue for the government and improving budgeting. In 2006, the government took a significant step toward a cashless economy when it introduced the Unified Payments Interface (UPI), an interoperable payment system that allows users to make online cash transactions from their bank accounts in a matter of seconds. Many factors have led to UPI’s rise in popularity, including the government’s official policy of demonetization, the lockdown induced by the COVID-19 pandemic, and the extent of mobile phone penetration and internet access within India. This article argues that UPI has increased financial inclusion in India and can be a model for the transition to a cashless economy in other developing countries. In 2015, the Indian government announced its Digital India program aimed at “transforming India into a digitally empowered society.”1 One of the key vision areas of the initiative was to provide mobile phones and bank accounts to citizens to enable them to participate in the digital financial space and hence enable financial transactions to be electronic and cashless.2 The long-term objectives of making the switch to a cashless economy included transparency, accountability, and market efficiency on the one hand, and curbing nefarious activities such as money laundering and terrorist-financing on the other. The government also considered user convenience, accurate expenditure tracking, budgetary discipline, and payment authentication as additional benefits of such a switch. In the same year, India joined the United Nations’ Better Than Cash Alliance, which was described as “an extension of the Indian Government’s commitment to reduce cash in its economy.”3 These steps are part of a technology innovation project known as the “India Stack” (hereafter “the Stack”) undertaken by the Government of India.
Cashless payment systems present enormous benefits the ease of transactions via various modes of payment can increase revenue, improve operational efficiency, and lower operating costs to businesses and the economy. Cashless payments are also seen as more hygienic for food vendors [3]. Cashless modes for small payments, such as Near Field Communication (NFC) technology, are found to be able to reduce queueing and the need to carry cash for high-volume and low-value transactions [4,5]. In a recent study, Kilay, Simamora and Putra [6] show that the supply chain performance of micro, small, and medium enterprises in Indonesia is directly correlated with the use of e-payment services. Mohamad and Kassim’s [7] study postulated that the adoption of e-payment services by micro-entrepreneurs (which make up more than 70% of the SME sector) could enhance their financial inclusion, as they tend to be seen as an unprofitable community. Despite these benefits, businesses’ take-up of cashless payment systems has been slow. A study by Srouji [8] shows that cash and cheques still dominate payment settlements. In addition, they found that the firms’ perception of banks’ handling of electronic payment transactions was less satisfactory. Meanwhile, another study found that the use of debit cards accounted for only 4 per cent of retail transactions, while credit cards comprised nearly 22 per cent [9]. As only 29 per cent of Malaysians own credit cards [10] there is still a huge potential for the use of cashless payment systems. One of the ways to increase the adoption of cashless payment systems within the retail industry is through point-of-sale (POS) terminals. Their employment within small businesses can transform the retail experience in the country. Unfortunately, very little is known about the factors that can influence the adoption of cashless payment systems among businesses in Malaysia.
The noticeable impact that variations in the monetary system and the national income have on cashless transactions in the Spanish economy. These results are in line with the vicissitudes experienced by this economy in recent decades, which are closely linked to the European economic, regulatory and monetary framework. In order to study the role played by the monetary aggregates in the transactions based on cashless instruments, we apply the cointegration methodology when focusing on the long-run. We evidence long-run relationships that integrate the real sector, the monetary system and the value of cashless transactions. Moreover, we prove the relevant (and direct) impact of changes in the monetary system and the national income on the value of cashless transactions. These results are consistent with those obtained in the correlation study. Short-run relationships are also studied. We evidence short-run relationships between the value of cashless transactions and M1, GDP and per capita GDP in both directions; we also demonstrate a relationship going from transactions to economic growth. In addition, short-run relationships for CLT10, GDP, per capita GDP and economic growth are also found; according to the estimated ECMs, the most important short-run relationships for the value of cashless transactions are those related to the real sector of the economy; and for the monetary variables, the relevance is focused on the more liquid ones. Thus, our results point to the role of economic growth and income distribution in expanding cashless transactions. There do not seem to be any contradictions with the results obtained in those empirical studies centered on transactions in ATMs and POS and their relation with money demand
The COVID-19 pandemic intervened at a time when the global payments sector was in the midst of significant transformation. Banks, FinTechs and card associations were rolling out increasingly integrated, swift and contactless payment methods, leading to a reduction in the use of cash in all major economies. The world’s top central banks were already preparing for a cashless or less- cash future and collaborating on proposals to issue central bank digital currencies, while studying the opportunities and challenges emanating from privately managed crypto currencies. Even as the repercussions of the pandemic continue to be felt, it is clear that its consequences for the declining use of cash and the digitalization of payments have led to differentiated responses by agents and institutions across the world, bringing to the forefront more disparities than convergence in the evolution of payment systems. A few broad conclusions can be drawn. The first is that the road to a near cashless eco-system, as exemplified by Canada and Sweden, is more than a question of payment innovations and transaction costs, and requires a distinct set of socio-economic, institutional and technological pre-requisites that are not easily replicated. The second, and closely related to the first, is that faced with the declining use of cash, central banks in the major economies are unconvinced that private-led initiatives and innovations are able to guarantee a universally accessible, safe and inclusive payment system.
Mobile wallets are a special form of mobile payment, that has garnered much attention in the markets which use the internet to process money transactions and payments for products and services. Moreover, m-wallets are designed to offer customers substantial benefits that will improve the customer’s quality of life. These m-wallets have benefits in terms of time, effort, security, economy, and convenience. Despite these benefits, usage intentions and adoption of m-wallets in most emerging markets have been low, and they have not received widespread acceptance which involves uncertainty and risks due to the vulnerable nature of mobile networks. businesses can promote m-wallets by educating customers on how to establish an m-wallet, set a password, delete it, protect it, and how m-wallets may save time and money. To utilize the service and ensure that there are no gaps in it, it is essential to benefit from the experiences of developed countries regarding payment channels and electronic financial transactions. Organizations that offer m-wallets and other electronic services need to enhance their capacity to manage the technology they have in order to improve service efficiency, cut costs, build relationships with customers, and discover more about their wants and desires. Particular attention should be given to the m-wallet’s weak dimensions of ease of use, usefulness, cost, and security.
Cashless economy is an economic system in which there is little or very low cash flow in a society and all financial transactions are done through electronic media. India had been preparing itself for going cashless since a long time. Reserve of India as well as Government of India was enlightening a number of steps to make India a cash free economy from time to time. Some of them include Electronic Clearing service (ECS), Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT), National electronic clearing service and many more. Citizens of India especially in urban areas are already equipped with a number of electronic transaction modes and the demonetization drive of the Govt., when on 8th November 2016 it announced that the currency notes of Rs. 500 and Rs. 1000 are no longer legal tender accelerated the push to go from cash to cashless economy. It has boosted many other means of transacting financial transactions. This movement has shown remarkable result and more and more people are switching to digital modes of conducting financial transactions especially in urban areas. But in India where a majority of population is living in the rural areas, where there exists low literacy rate, less coverage of formal banking system, poor financial infrastructure, less trading and marketing activities etc., it has become quite difficult to implement the idea of cashless economy. This research paper aims to study the awareness level, acceptability, usage rate, and perception of rural population of Assam on cashless economy with special reference to selected villages of Chaiduar Development Block of Biswanath District. It also highlights the conceptual framework on cashless economy and the various Govt. initiatives undertaken for creating cashless economy in India. Moreover, it also seeks to highlight the challenges and opportunities that exist in making a cashless rural economy in India.
Germany is a large open economy in which a great many economic transactions are conducted with non-resident counterparties every day. These transactions are recorded in the balance of payments (b.o.p.). The bulk of them involve cross-border payment flows that are settled through the banking system and see liquidity being transferred from one country to another. Within the banking system, commercial banks and the central bank perform different, mutually supportive tasks. Viewed individually, transactions recorded in the b.o.p. can be traced back to specific decisions by the counterparties involved and come about for all kinds of reasons. Analysed as an aggregate, it is possible to identify domestic and external factors and conduct a systematic investigation into the main determinants of the direction and composition of net liquidity flows. One major source of impetus for payment flows into and out of Germany since the turn of the millennium has been domestic and external economic activity. Another key factor was confidence or uncertainty in financial markets. And monetary policy, too, has left a lasting impression on the German banking system’s cross-border liquidity flows that varied largely according to whether monetary policy in the euro area was generally tighter or looser than in other major currency areas. The past two decades have also seen a change in how commercial and central banks settle cross-border capital flows and in the way they interact within the banking system. Those changes were reflected by the extent to which cross- border payments on aggregate were transacted primarily in the form of commercial banks’ book money or as central bank money. The monetary policy measures in particular not only left their mark on the German banking system’s other investment as a whole, but brought about a structural change as well in the resulting liquidity flows of the commercial banking system and the Bundesbank. That holds true for the current phase of monetary policy tightening as well. It would be welcome if this phase also saw structural excess liquidity being scaled back to a point where the private interbank market can regain importance in the field of European payment transactions, thus enabling commercial banks to focus more strongly on their traditional task once again.
To analyse whether each cultural dimension has a regulatory effect on behavioural intention for mobile payment, attitudes of Chinese and Korean consumers toward mobile payment businesses, as well as their respective national cultural dimensions were observed. The study found that in the mobile payment adoption model for Chinese consumers, perceived ease of use and perceived usefulness significantly impact behavioural intention, and perceived ease of use significantly impacts perceived usefulness. However, in the Korean model, the influence of perceived ease of use on behavioural intention is not significant, and the rest are the same as those in the Chinese model. The SPSS hierarchical regression method was then used to analyse power distance, individualism versus collectivism, uncertainty avoidance, and masculinity versus femininity through a regression test and adjustment analysis of the two paths of China and Korea models. The study concluded that uncertainty avoidance has a negative adjustment effect on the relationship between perceived ease of use and behavioural intention for mobile payment. Furthermore, the Between-group chi-square difference test was applied to the structural equation models , the results showed that the negative regulatory effect of uncertainty avoidance was roughly the same in both China and Korea, and no significant difference was observed. Firstly, the research sample is limited. Although both China and Korea have samples of various occupations and academic qualifications, and the comparison between national cultures.
The impact of COVID-19 was measured by the difference in MPS demand and supply before and after the epidemic. The pandemic played a role in encouraging consumers to adopt mobile payments as a health-protective behaviour. Consumers have started to search more for information about mobile payment as they think it is safer, since it requires less contact and physical approach by others. Businesses’ response to these market dynamics was quick, since mobile payment systems were available before the pandemic. However, respondents and consumers had issues using mobile payment systems, according to the open-ended questions. They viewed it as a complicated method of payment, not supported by all shops, which made people hesitate to use it. Many said they did not consider mobile payment special until the current circumstances emerged, and people needed to change their lifestyles and perceptions. Although MPS existed with less use before the pandemic, businesses were pushed to develop campaigns to increase consumer awareness of using it and its potential benefits. Other stakeholders, such as banks and internet service providers, were also active. The study has practical implications because mobile payments have become integral to consumer life owing to the pandemic. The industry in the UAE should thus maintain the momentum towards fulfilling the growing needs and demands of this new normal. Further, among its players, the industry should collaborate in formulating operational and marketing strategies to maintain the appetite for the trust that has been induced in mobile payment services among consumers. Moreover, the study has social implications, with mobile payments offering more accessible and faster payments, and access to a broader range of products and services, complementing the pervasiveness of e-commerce in the UAE. The research has its limitations. Firstly, the pandemic itself was the most significant constraint that had to be quantified to reveal the impact on mobile payment systems. Secondly, our survey was distributed to only 125 retailers (purposeful sampling) due to lockdowns and standard operating procedures issued by the government, which might have decreased the degree of representativeness of the study sample. Thirdly, our study focused on the supply of and demand for mobile payment systems from the merchant perspective. Future studies could identify the constituents of demand and supply and consider the impact of the pandemic on each of these factors. Further studies could also measure consumers’ perspectives, with moderating and control factors, to test their influence.

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CONCLUSION:-

A cashless society is one in which most or all transactions are conducted electronically, with little or no use of physical cash. This trend is already underway in many countries around the world, and it is likely to continue in the years to come. There are a number of potential benefits to a cashless society. For one, it could help to reduce crime. A cashless society could also make it easier for people to manage their finances. Cash is often used in criminal activities, such as drug dealing and tax evasion. A cashless society would make it more difficult for criminals to operate, as they would have to find other ways to exchange value. Another potential benefit of a cashless society is that it could make it easier to track economic activity. All electronic transactions are recorded, which could help governments to better understand how the economy is performing. This information could then be used to make better economic policy decisions. With all of their transactions being recorded electronically, people would be able to see exactly where their money is going. This could help them to budget more effectively and avoid overspending. However, there are also some potential drawbacks to a cashless society. One concern is that it could lead to a loss of privacy. When all of our transactions are recorded electronically, it leaves a trail of data that could be used to track our spending habits. This could be a concern for people who value their privacy. Another concern is that a cashless society could make it more difficult for people who are not well-banked to participate in the economy. Banks, FinTechs, and government organizations need to work together to ensure the switch to a cashless society is as smooth and gradual as it needs to be, and that no sections of society are left out in the cold and financially vulnerable as a result. Digital transactions are easily tracked and recorded, which raises questions about data security. However, with the change being considered all but inevitable, it becomes crucial for all organizations involved in the economy to work together responsibly and make sure no person is left behind and the vulnerabilities in a cashless system cannot be exploited by those with nefarious intentions.

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