Sunday 17 October 2021

News Analysed, Opinions Expressed

Cashless is not Painless (or Less-Cash is not Less-Pain)


Cashless transactions don’t come free. And the person who pays, ultimately, directly or indirectly, is the consumer – you and me, says ASHWIN TOMBAT

WHEN Union Defence Minister Manohar Parrikar made what he thought was a headline-grabbing announcement that Goa would be the first state in the country to go “cashless”, did he think things through?

We don’t know, but an overzealous Commercial Taxes Department ordered all commercial establishments in the state to set up Point-of-Sale (PoS) machines. This great Tughlak-ian firman has now met its logical end with the Goa government assuring the state’s Human Rights Commission that it has no intention of forcing cashlessness on Goans.

Cashless purchases are a good thing, says the government, and it wants to ‘encourage’ Goans to adopt digital payment methods, which are better than cash.

Are they really?

The very fact that the country with the highest use of ‘plastic’, as credit and debit cards are known – the United States of America – is a more than 50 per cent cash economy, should tell us that Mr Parrikar’s new and revised goal, that 50 per cent of Goa’s transactions should be ‘cashless’, is about as realistic as his original ‘cashless’ dream.

There is a very good reason for this; cashless transactions don’t come free. I should know. I run an Adventure Sports company, and we get 80 per cent of our bookings online, all paid by cards or netbanking. We’re already a virtually cashless company. That is why we know exactly how much these so-called ‘cashless’ transactions cost.

Whether it is by debit card (1 to 2 per cent), credit card (2 to 3 per cent), netbanking (0.0005 per cent), or digital wallet (no interest for the buyer, and 1 per cent to take money out of the wallet for the seller), there is a commission involved. Ultimately, it is the consumer who will pay this commission.

In addition, a PoS machine costs a shopkeeper Rs3,000 to Rs6,000 to buy. Banks have a minimum target of sales for these machines (usually around Rs50,000 per month). Those who achieve lower sales volumes have to pay higher commissions. All these costs need to be recovered.

From whom? From us…!

Today, the government may announce incentives, waive commissions and make cashless seem completely painless. But it isn’t. Neither is less-cash going to be less-pain. Within months, if not weeks, the incentives and waivers will have vanished. The commissions will be back. And we will be paying them.

For example, petrol pump owners are accepting credit and debit cards nowadays, because the Oil Marketing Companies are paying for the commission. When they stop, sooner or later, the pump owners will have no choice but to charge the commission to us, because their margin on the petrol and diesel they sell is less than the 1 per cent to 3 per cent commission they will have to pay the card companies for each transaction.

Yes, it all costs. And the person who pays, ultimately, directly or indirectly, is the consumer – you and me.

I am not even going into the issue of security here. We all know how ATMs are hacked, cards duplicated and money is robbed. We know how hackers can steal data from even the biggest and most powerful IT companies in the world. As we use our cards and e-wallets more and more, will they not become more susceptible to theft?

And is there any real convenience that we get from this apart from not having to carry around large amounts of cash?

Only you can answer that question.

Disclaimer: Views expressed above are the author's own.

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Ashwin Tombat

Ashwin Tombat has been the Editor of Gomantak Times and Herald. Worked as an Associate Editor of national magazine Gentleman in Mumbai, before shifting to Goa. Loves sailing, also participates in Marathons. Has worked as an activist in students's union and trade unions in Maharashtra. Also an artist of Street Theatre during student days.


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