Starting with a disclaimer - I live in one of the most urbanized cities in the world and do at least 95% of my transactions in electronic form. That includes online bank transactions, checks, credit cards (of my choice) and debit cards. Having said that, I also like to keep some cash in my wallet and house.
Why I use electronic forms of payment?
1. Convenience, of course.
2. There is no transaction fee or convenience fee paid to any provider service.
3. I'm very thick skinned when it comes to "special offers", "baits and teasers". Coming from economics, Tech and Digital marketing world with middle class Indian values, it’s tough to get to me with political or consumer campaign.
4. I know and have authority to allow, with whom my payment providers share my consumer data with. And ready to go at any length if I sense my personal consumer data is misused in any ways. The country I live in has strong consumer data protection laws as well.
5. I have never used more than 25% of my credit cards limit, so I’m disciplined with money.
6. All my electronic transactions are cash equivalent, no wallet bullsh*t pushing me to buy something with deep discount with barriers on cash conversion.
7. Paperless, so receipts are emailed, or in transactions history. Easy to manage and budget around.
Why I use cash sometime. - I buy local, always support local farmers, local family owned shops, restaurants, as much as possible, So.
1. To pay small denomination to my neighborhood small shop owner who will have no profit margin left if he must pay transaction cost on electronic payment. Say a small packet of banana chips or a scoop of frozen yogurt.
2. To pay a small denomination to a farmer who I sometimes visit for fresh produce, same issue for small denomination these small business owners can’t make sense of the transaction cost.
In all –
1) I know what I’m doing, I know and am diligent about my rights,
2) I live in a society (Developed Western) where laws are taken seriously and has hard earned institutional trust.
3) have understanding on digital security and can gauge the service.
4) Have a strong sense on sustainable consumerism, and can look beyond propaganda and campaigns into the real value to decide. And it all comes from a global and professional experience from the relevant fields.
Demonetization and the mirage of a Cashless India.
Michael Phelps, the most decorated Olympian of all times with a total of 28 medals and most gold medals any one has ever won, consumes 12,000 calories a day diet.
Michael Phelps is training hard since he was a child and has a body type and rigorous regime to justify this diet. This 12,000 calories diet is only a part of his massive efforts leading to wins in Olympics at this level.
So where is the problem?
Problem is when a sleazy marketing machinery running on a massive propaganda budget ties up with someone selling “cheap cheese filled deep fried Cheetos” (1000+ calories a pop) and connects winning medals for your country with having a 12,000-calorie diet, to sell it. While ignoring the fact that you already have diabetes, have had a largely carbs diet all your life, and no insurance or money to go all the way with medication.
It will kill you, but of course they will sell a few packets of “cheap cheese filled deep fried Cheetos”, along with a few tax subsidized diabetes pills, will make hospitalization money and sell TV shows when they carry you all the way to burn/bury, and do some friendly radio or TV shows.
The motivation of the TV and radio show will be so huge that there will be a line to buy these “cheap cheese filled deep fried Cheetos” all for the nations glory.
May be out of all these ashes of humanity, there will be a champion who will rise and take the nation to the path of glory, till then it would be the duty of everyone to be a martyr in the path to glory all eating “cheap cheese filled deep fried Cheetos”.
Wait I don’t understand, you said you are pretty much cashless? What’s wrong with Demonetization and Cashless economy in India?
Read the Michael Phelps, national glory and “cheap cheese filled deep fried Cheetos” example once more. And let’s break India’s example down into easily understandable pieces.
Points missed in Indian context.
- Biggest point is the free will and natural transition. Western economies are like Michael Phelps, they have built an institutional trust over the time. The trust is built on massive digital and compliance systems in place, be it Consumer Data Protection laws, Sovereign ratings, Banking laws, Swiftness of judicial systems, the “invisible hand of governance”. Cashless and electronics transactions are introduced in a free market, on no duress, consent basis. Everyone relates to one national identity be it SSN or similar since decades.
- None of the economies (western and successful) have done a shock therapy, demonetization process to force people to go cashless in a hurry and duress.
- Nowhere, even after a month of a massive economical exercise, no research or debate done in a formal environment, e.g. parliament.
- India even after decade of setting up mandatory transparency laws RTI Act 2005, is not able to provide a working digital infrastructure for it. Here is the research. Is there any hope to implement anything of moderate stability to sustain just digital transactions?
- Indian banks Non-Performing Assets are in the range of Rs. 6 Trillion as reported. Strong credit compliance have been a problem. And it has not affected the main street till now, due to the resilience built on cash with households and businesses. Remember a similar kind of credit crunch brought world economy down on its knees in 2008 with disastrous impacts. Everyone in the banking system in rich and developed economies created a single point of failures. It all happened despite much higher and advance compliance levels.
- Cashless electronic systems attract a tremendous targeted marketing opportunity to run massive consumerism campaigns to a few very sophisticated capitalists mostly global. These corporations have enough money to build affiliate networks to capture markets just using brute force money and way more sophisticated technology. This not only can destroy local Indian economies and small businesses. But will build sustainability catastrophe, samples of which are visible in India’s under strain water systems, yearly smog and deteriorating living conditions.
- India is a low-income society, cash systems at home, kisan vikas patras, Small Savings, which are not targeted by sleazy marketers, or other temptation to suck into their system and gobble all of it, have saved families till now. This whole system will be up for grabs to vested mostly foreign interests.
- As one drawback of primarily cashless, in banking system economy - The core of 2008 Credit crises started in USA was based on consumer data and targeted marketing based on that. The whole gambit of high yield bonds backed by very risky credits (loans, credit cards, home loans) sold to poorer families, was essentially an institutional fraud by banks and investors on wall street.
Poor families were lured into un-affordable loans to buy things out of their purchasing power with very complex payment terms starting with teaser rates (low rates as bates) or baits, going all the way to prohibitive rates and terms. These loans were sold and resold to other set of people luring them with higher interest’s rates, which were supposed to come from the first set of poor people.In the end, Banks and Brokers on wall street made big money, leaving everyone else broken financially, people invested in these loans lost their life savings, people with these loans lost their homes, trust, livelihood and a lot more.
Has India learnt from and has strong systems in place, where Indian citizens are not subject to a similar institutional fraud?
- My money under the control of Government is a huge scare on my freedom as well. Today I can deposit my own money in banks, but can’t take out what I want and is controlled. Yes, the sleazy marketer will say that it’s for nations good. But it’s such a dangerous precedence on what an institution can do.
Consider a situation where all the India’s money is under banking systems controlled by a dictatorial government (Only a hypothesis, no actual references intended).
1. The government which runs its operation from propaganda machinery controlled by them but not via debates in the parliament.
2. The government is controlled by a few big businesses who have the power to do anything by twisting and milking institutional dictates.
3. Won’t this kind of governance starve any opposition in a democratic system, by selectively targeting any funds?
4. Will this government keep every well-meaning citizen in a line waiting to just survive another day, while they syphon the hard-earned small savings in favor of these few mega corporations, running their form of white cashless operation?
United states has second amendment to protect citizens from such a state, are Indians that empowered?
The Second Amendment of the United States Constitution reads: "A well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed."
Weeding out black money, or increasing tax net has a lot many ways to do so. Many such ways are already under process, that includes higher scrutiny on real estate deals. KYC requirements in banking, Value added taxation systems, and taxation on transaction, digitization of related infra and improving oversight. And everything done in a transparent and not the most populist manner.
India’s biggest problem is not these small piggy banks of cash lying around with 99% of the population. The problem is institutional wastage of tax money, crony capitalism, massive unregulated funding to political parties, and obligation on these political parties to give a good return on investment, next to zero transparency in Government and increasingly public- private projects.
Demonetization and going Cashless has no impact on them, but will aid in creating a perfect world where sophisticated digital systems are owned by a few super rich, also running politics, funding increasingly expensive elections.
Before signing off
India’s biggest import is Crude oil, biggest export is refined petroleum and related products, so we are already world’s oil laundry, people connected to right system will find no difficulty in laundering their money using the same route. As a part of trivia – Petrol pumps and CNG stations were accepting old currency when this article was written.
So, if someone says cashless society will be the ultimate dream India should aim for. Ask him to build institutional trust first, not with Facebook marketing, but real parliamentary debates and processes.
And If your argument is parliament debates are too lengthy, and don’t work, and Judicial is too strained and overloaded, it’s an anarchy everywhere which needs these unregulated shocks and awes. Guess what this is the time to hoard cash!
Please don't forget to sign the appeal below, there is no official research or paper out from prime minister's office, Finance Ministry or Reserve Bank of India, on the events or tangible data points which led to such a massive decision, which has a potential to derail Indian economy. The way its done is unprecedented and leaves a lot of space of future conflicts and puts Indian democracy on an uncharted territory. Any signed appeal will help making a strong representation.
About the author
Rakesh Prasad has more than a decade in experience with financial technology and instruments. As a wall street industry insider from credit and securitisation markets at the time, has seen the 2008 Credit crises from close quarters. Lives in New York City and can comment on the socio-economic dynamics of the land with authority.
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Starting with a disclaimer - I live in one of the most urbanized cities in the world and do at least 95% of my transactions in electronic form. That includes online bank transactions, checks, credit cards (of my choice) and debit cards. Having said that, I also like to keep some cash in my wallet and house.
Why I use electronic forms of payment?
1. Convenience, of course.
2. There is no transaction fee or convenience fee paid to any provider service.
3. I'm very thick skinned when it comes to "special offers", "baits and teasers". Coming from economics, Tech and Digital marketing world with middle class Indian values, it’s tough to get to me with political or consumer campaign.
4. I know and have authority to allow, with whom my payment providers share my consumer data with. And ready to go at any length if I sense my personal consumer data is misused in any ways. The country I live in has strong consumer data protection laws as well.
5. I have never used more than 25% of my credit cards limit, so I’m disciplined with money.
6. All my electronic transactions are cash equivalent, no wallet bullsh*t pushing me to buy something with deep discount with barriers on cash conversion.
7. Paperless, so receipts are emailed, or in transactions history. Easy to manage and budget around.
Why I use cash sometime. - I buy local, always support local farmers, local family owned shops, restaurants, as much as possible, So.
1. To pay small denomination to my neighborhood small shop owner who will have no profit margin left if he must pay transaction cost on electronic payment. Say a small packet of banana chips or a scoop of frozen yogurt.
2. To pay a small denomination to a farmer who I sometimes visit for fresh produce, same issue for small denomination these small business owners can’t make sense of the transaction cost.
In all –
1) I know what I’m doing, I know and am diligent about my rights,
2) I live in a society (Developed Western) where laws are taken seriously and has hard earned institutional trust.
3) have understanding on digital security and can gauge the service.
4) Have a strong sense on sustainable consumerism, and can look beyond propaganda and campaigns into the real value to decide. And it all comes from a global and professional experience from the relevant fields.
Demonetization and the mirage of a Cashless India.
Michael Phelps, the most decorated Olympian of all times with a total of 28 medals and most gold medals any one has ever won, consumes 12,000 calories a day diet.
Michael Phelps is training hard since he was a child and has a body type and rigorous regime to justify this diet. This 12,000 calories diet is only a part of his massive efforts leading to wins in Olympics at this level.
So where is the problem?
Problem is when a sleazy marketing machinery running on a massive propaganda budget ties up with someone selling “cheap cheese filled deep fried Cheetos” (1000+ calories a pop) and connects winning medals for your country with having a 12,000-calorie diet, to sell it. While ignoring the fact that you already have diabetes, have had a largely carbs diet all your life, and no insurance or money to go all the way with medication.
It will kill you, but of course they will sell a few packets of “cheap cheese filled deep fried Cheetos”, along with a few tax subsidized diabetes pills, will make hospitalization money and sell TV shows when they carry you all the way to burn/bury, and do some friendly radio or TV shows.
The motivation of the TV and radio show will be so huge that there will be a line to buy these “cheap cheese filled deep fried Cheetos” all for the nations glory.
May be out of all these ashes of humanity, there will be a champion who will rise and take the nation to the path of glory, till then it would be the duty of everyone to be a martyr in the path to glory all eating “cheap cheese filled deep fried Cheetos”.
Wait I don’t understand, you said you are pretty much cashless? What’s wrong with Demonetization and Cashless economy in India?
Read the Michael Phelps, national glory and “cheap cheese filled deep fried Cheetos” example once more. And let’s break India’s example down into easily understandable pieces.
Points missed in Indian context.
Has India learnt from and has strong systems in place, where Indian citizens are not subject to a similar institutional fraud?
Consider a situation where all the India’s money is under banking systems controlled by a dictatorial government (Only a hypothesis, no actual references intended).
1. The government which runs its operation from propaganda machinery controlled by them but not via debates in the parliament.
2. The government is controlled by a few big businesses who have the power to do anything by twisting and milking institutional dictates.
3. Won’t this kind of governance starve any opposition in a democratic system, by selectively targeting any funds?
4. Will this government keep every well-meaning citizen in a line waiting to just survive another day, while they syphon the hard-earned small savings in favor of these few mega corporations, running their form of white cashless operation?
United states has second amendment to protect citizens from such a state, are Indians that empowered?
Weeding out black money, or increasing tax net has a lot many ways to do so. Many such ways are already under process, that includes higher scrutiny on real estate deals. KYC requirements in banking, Value added taxation systems, and taxation on transaction, digitization of related infra and improving oversight. And everything done in a transparent and not the most populist manner.
India’s biggest problem is not these small piggy banks of cash lying around with 99% of the population. The problem is institutional wastage of tax money, crony capitalism, massive unregulated funding to political parties, and obligation on these political parties to give a good return on investment, next to zero transparency in Government and increasingly public- private projects.
Demonetization and going Cashless has no impact on them, but will aid in creating a perfect world where sophisticated digital systems are owned by a few super rich, also running politics, funding increasingly expensive elections.
Before signing off
India’s biggest import is Crude oil, biggest export is refined petroleum and related products, so we are already world’s oil laundry, people connected to right system will find no difficulty in laundering their money using the same route. As a part of trivia – Petrol pumps and CNG stations were accepting old currency when this article was written.
So, if someone says cashless society will be the ultimate dream India should aim for. Ask him to build institutional trust first, not with Facebook marketing, but real parliamentary debates and processes.
And If your argument is parliament debates are too lengthy, and don’t work, and Judicial is too strained and overloaded, it’s an anarchy everywhere which needs these unregulated shocks and awes. Guess what this is the time to hoard cash!
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