Demonetization of the bigger
denomination currencies announced by the Modi government on 8-Nov-2016, is a big first step
towards eradicating corruption and parallel economy that was plaguing the
country for decades. However, this must be followed by other measures
including an infrastructure for cashless society.
For a cashless society, firstly, the banking penetration
must increase to 100%. That is every earning adult must have access to bank.
Alternatively, the mobile penetration can be used to promote E-wallets. Wages
can be paid as E-wallet credits and expenses can be made from the E-wallet.
While the mobile penetration is phenomenal, it is still not 100%.
The question
arises on how to be inclusive of those who are unconnected and no access to banks? We
cannot afford to ignore this section, however small they may be.
Building a cashless society:
An infrastructure
for E-Cash using which paper currency can be completely
eliminated. Such a system can be supported even in areas that are have no access to banks and are unconnected by telecommunication or cell phone infrastructure . The system also records all transactions.
The concept of an E-Cash that I am proposing here, is
an amalgamation of the concept of a credit/debit card and the electronic wallet.
A transaction can be between two E-Cash cards or between an E-Cash card and
a bank account. It looks like a credit card with an electronic chip, the name
and optionally the photograph of the holder. It functions like an electronic wallet
– not necessarily attached to a bank account, but money can be added (transfer
in) or paid through (transfer out) using an E-Cash card.
One acquires an E-Cash card,
either from a bank or from a sales counter. Initially, money must be
transferred from an account to the E-Cash or for those without an account,
sales counter can load the amount against the cash paid. The latter is only for
transition from a cash based system to a cashless system. That is, cash thus
received shall be deposited into the account never to come out as cash.
Amount in a E-Cash do not attract
any interest. It is the small amount that an individual sets aside for his/ her
daily needs. The E-Cash can be directly used at a POS. The transaction can be
between two E-Cash cards without an intervening bank (similar to a E-wallet transfer).
The POS machines to have 2 card slots – one for credit and other for debit. This
is advantageous because the shop owner need not take each transaction though to
the bank. Instead he can do an end-of-day transfer from his E-cash to the bank.
Bio-metric security is required for all debit transactions (pay outs) from the E-Cash. In addition to its use at POS, E-Cash
can also be used at ATMs to transact between two parties who do not have a POS terminal.
In a cashless society, ATMs are not for dispensing cash but for transferring cash
from account to an E-Cash or from one E-Cash to another E-Cash. For example, if
A has to pay B a sum of Rs. X, they can go to an ATM or any POS terminal, put A’s
card in debit slot, B’s card in credit slot and carry out the transaction with
A’s bio-metric. For every transaction using the E-Cash, the POS or ATM shall
print a transaction advise, similar to the credit/debit card charge slip. The
last transaction advise would show the balance on the E-Cash. The transactions
are tracked just like any payment banking system.
To understand the advantages of an
E-Cash, let us look at some of the problems with the credit/debit card
and with
E-wallet. Credit/ Debit cards are attached to a bank account. Hence the
facility
is difficult for rural people without access to banking facility.
E-wallet, on
the other hand, is a mobile app and needs communication infrastructure,
hence again difficult in interior areas that are ill connected. The
solution is the E-Cash. The POS terminal in case of an E-Cash
need not be connected when it is required to do transaction between two
E-Cash
cards. This is possible because the bio-metric information of the E-Cash
holder is cached within the E-Cash
card itself. However, for transferring the amount between an E-Cash and
an
account, one would need to go to a connected POS terminal or an ATM.
Since there is no cash to be
dispensed in ATM, these occupy much less space. Another advantage is
even if
the card is lost – no one else can misuse the same due to the bio-metric
requirement. However, original owner also cannot recover the cash. It
is like a
lost wallet, except that the utility for the receiver is none, so
chances
are, it is returned to the original owner. Thirdly, cash thefts are
eliminated,
since E-Cash is theft proof.
The E-Cash can be linked to “Aadhaar”
for tracking purposes. While one can have multiple E-Cash cards, it is really
not necessary. Dependent E-Cash cards can be procured and attached to the
parent Aadhaar, but with the bio-metric information of the dependent.
Online use of the E-Cash is
possible with a PIN, but that is not the intent of the E-Cash. It is intended
to provide the utility that cash provides today, without having use the cash
physically and having a complete trace of transactions recorded in the card
itself.
In summary:
-
A credit/debit card – it must be attached to a
bank account
-
E-wallet needs a communication infrastructure
-
E-Cash looks similar to a credit/ debit card and
can work without a bank account or a communication infrastructure.
-
Foreign travelers can procure E-Cash at airport
terminals in ATMs that dispense E-Cash against a forex credit/debit card or at
a bank against forex cash.
