Cash – 22

It is the most common topic in conversation these days. No, I am not going to use that most commonly misused word! Yet….

This is about the simple psyche that commoners are going through (that includes myself). For simplicity sake let me call these people, in the context of India – the middle income group which perhaps constitute the median of the bell curve.

There is no denial that in the last decade or so the economy has seen tremendous growth, despite a depression in between. India had faced that situation quite boldly. People did have cash with them in India even in those difficult global situations. Slowly but surely the spending patterns had also seen interesting growth in the last many years. As people say the (erstwhile) Rs.500 note was symbolically equivalent to that of the Rs.50 of say 10 years ago.

Like many, I wouldn’t like to carry a lot of cash in my wallet every day. Just a few Rs 500 notes. The moment a 500 was broken for some change, you can be sure the rest of the change would vanish in no time. So the psyche was to keep the 500 note in full for as much time as possible.  And like most salaried employees, neither did I like to keep a large chunk of cash at home. The cash withdrawal patterns were mostly based on monthly essential requirements.

Have those changed in the last few weeks after the big announcement?

The first week – I didn’t want to stand in the big queues. So no new cash. I was moving around with the old Rs.500 note which had no value. But why did I carry them in my wallet, if no value? Just to give me a secure psychological feeling that I have something in my purse and not empty handed. The next week I got some new notes from the bank (the now famous pink Rs.2000). I had to obviously leave a large chunk of what I got, at home for emergency usage. I just kept one note of Rs.2000 in my wallet.

That was like a life saver. Started leading a frugal life. That 2000 buck stayed with me for a long time, as I did not want to spend it. Had lots of discussions and chats with my friends during that time. Most of them were almost on the same boat. People were debating that this situation could be bad for the economy at large. That people have started spending less. Overall spending less by people over a long term is apparently trickier than a lower inflation!

Come next week, I got some more new notes from the bank. I have now more than one 2000 note in my purse. Now that a few weeks have passed by, I am not as rigid as I was in the second week about giving the 2000 note to a vendor (albeit some hesitation).

Coming to think of it, the 24000 per week withdrawals are more than what I used to withdraw earlier in the whole month. Curiously I wanted to study the mind pattern and the behaviour in this situation. 

Have I started to withdraw cash in the month, more than I ever did? Have I started carrying more cash in my wallet now?

Is the new 2000 going to be another 100, if not 50? Will my spending actually increase now, without my realising?

It is a paradox! Cash 22 indeed!

Cash or Digital Cache

Every day we see many articles on the latest important subject in the lives of Indian people. What they call as De-Monetisation(whatever that means). Too many buzz words around it. Many people reacted as if they were stuck by the Amygdala hijack and started to panic. Some people say that what started as an initiative to curb black money, now the goal post has shifted to being a Cashless society. And there are many theories about how cash will be important, and how long will it take for the authorities to print the currencies. How deficient will it be for livelihood and therefore how we might be proceeding towards the doomsday?!

While the authorities are relentlessly promoting online transactions.

Well, point noted. And I am not here to debate whether the execution is appropriate or not. For the time being, let us accept the current situation and take a positive outlook. Agreed that the physical currency printing will have its lead times and the logistics around it. In my opinion, the authorities are not shifting the goal post to a cashless society. They are making people aware of going the digital way. And if not all, even if some people do adopt and change their transactional processes, to that extent the demand for physical currency would reduce, while the authorities get ready with the new currency notes. Another question – why Rs.2000? This is also strategic perhaps. They can do with a big value for less number of notes. Just for logistical reasons.

Having said that, how can the future be shaped? The naysayers and the doomsayers have been saying that middle class is largely affected and the poor in rural areas is affected big time. And there’s no recourse.

Let’s admit, this is the era of technology. Solar panels and LED lights have already started illuminating the villages largely. Mobile penetration and growth is phenomenal. Make the best use of the system. We have already seen a surge in digital wallets and online transactions increasing tremendously in the last 2-3 weeks. The current situation should pave way for a new age economy and India.

Can we have rural friendly digital transactions being evolved and developed? A new set of ecosystem could develop in the coming months. For example – can we have a very simplistic point of sale device which would accept payment based on finger print? One need not remember a security code. Your finger print could take care of that. The amount should get automatically get deducted from the corresponding Bank Account or credit card or any other medium. Keep it simple for the end user but supported with heavy backend to take care of all the security requirements linked with Aadhar, PAN or any other mandated gateways. Authentication could have a combination of picture of the end consumer, finger print and if required any other biometric including iris scanning. All done in a single cost effective POS device. The consumer will be agnostic of all the technology behind the transaction.

Now mobile companies have started getting Banking licenses. The mobile companies should not restrict themselves only to mobile wallets. They could offer path breaking banking experience for people. Especially rural people. Other banks could tie up with some mobile operators. With this combo, any person opening an account could be given a start up kit like cheque book, debit card etc. Also should give them a mobile phone with pre-loaded Banking App of the particular bank with the consumers credentials and biometric authentications. The App should be simple enough for the user for transaction purposes. Like a mobile game – the currency notes in their respective denominations could be visibly presented. Seeing is believing. If a person wants to transfer money to another person – they should choose the person’s name (with picture displayed) so it is easy for the rural person to pick the recipient. The account details of the receipient is all taken care automatically by the system (linked with Aadhar etc etc). And he shouldn’t be bothered whether it is an IMPS transaction or NEFT or RTGS. All to be taken care by the system. The transaction should be simple enough for the person to drag the digital currency note from his account and pasting it to the other person’s pictorial account and duly authenticated by finger print on the mobile phone. Bingo, the transaction is done!

Easier said than done. I am sure with the advent of technologies in banking, mobile communications, cost effective mobile devices, technologically advanced App developers, superior, simple and effective Multilingual User Interface, Risk mitigation systems, Security enhancement facilities including protection from data hacking, thefts etc and backed by social security & government support, the day is not far.

Afterall, we are a society with more number of mobile phones than toothbrushes!