Why cash is not good for the less well off, take India for example

Written by on January 31, 2017 in Guest Blog with 0 Comments

Down at the PayExpo Middle East and North Africa (MENA) in Dubai this year, I saw an excellent presentation from Uber India. One of the most interesting things I learned was that because most Indian Uber rides are paid for in cash, the Modi government’s radical experiment in currency reform hit them hard. As cash vanished from circulation, so there was a downturn in business.

That was bad news for the Uber drivers who need to drive to survive, but I’m still of the general opinion that the Indian push for a “less cash” (as opposed to cashless) economy makes sense, even for people who are poor, as many in India are. A couple of years ago, I wrote about the misguided view that cash is good for the less well-off. It is not.

People who live on the margin get screwed by cash.

From Cash hits the excluded | Consult Hyperion

This was a comment on a story about counterfeiting, and I concluded it by noting an interesting problem that I had not previously heard about, which was about sex workers being swindled through counterfeit cash:

In a country where counterfeits are widespread, it is obviously the marginalised groups trapped in the cash economy who are the big losers.

From Cash hits the excluded | Consult Hyperion

India’s experiment with demonetisation has accelerated the evolution of the retail payments environment not only for Uber but also for those marginalised people in the less-regulated parts of the Indian economy. As you will recall, with high-value banknotes, more than four-fifths the cash in circulation, vanishing into many different  parts of the Indian economy have been affected and, clearly, groups dependent on cash will have been hit hardest.

From the time the notes of the denominations of Rs 500 and Rs 1000 ceased to be legal tenders, the number of customers visiting the red-light area have dwindled to negligible numbers.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

The response of at least one group of such marginalised people will have gladdened the heart of Mr. Modi and other advocates of cash-free commerce (e.g., me). They moved quickly to adopt new technology.

Commercial Sex Workers offering services at Nagpur’s Redlight area Ganga Jamuna have started offering [sex] in exchange of payments made through Paytm.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

Yes, mobile payments. There is no reason why mobile payments cannot step in to the breach and take over from cash and, as I constantly opine, deliver something better to the poor, since it is the poor whose money is lost and stolen, it is the poor who cannot pay remotely for better deals and it is the poor who cannot be paid efficiently.

[sex workers said] we have also adapted to the changing times and have adopted the newer mode of payments for the services. They opined that this will also prevent the customers from getting their cash looted by unscrupulous elements who dwell in this disrepute lanes (Badnaam Gali) of Ganga Jamuna area.

From Commercial Sex Workers of Nagpur’s Ganga Jamuna Redlight area offer services for payments made through Paytms – Nagpur Today : Nagpur News

Note that last sentence. Getting rid of cash will make people safer. So not only will these marginalised people no longer have to worry about counterfeiting or the value of foreign currency, but their money will be stored more safely.

I was in Dubai to take part in a fun end-of-event discussion about the coming year for fintech, so I took the first three predictions from the Consult Hyperion “Live Five” for 2017 and shared these with the audience. Then I took the first three cakes, and shared them with me.

I hope I’ll be asked back next year and called to account!

This article was first published on Tomorrow’s Transactions.

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David Birch

About the Author

About the Author: Dave is Director of Consult Hyperion, the secure electronic transactions consultancy and is an internationally-recognised thought leader in digital identity and digital money. Named in Wired magazine’s global top 15 favourite sources of business information; rated one of the NextBank “Fintech Titans”; voted one of the European “Power 50” people in digital financial services and ranked Europe’s most influential commentator on emerging payments. .

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