From Paper to E-money
News on 17th December 2009, UK: Cheques to be phased out by 2018.
Personal experience on 8th November 2009, India: Cheques from cheque book of well known private sector bank ‘payable at par’ only in the city where cheque book was issued.
In the UK, use of cheques is declining by 10% every year. In Sweden and the Netherlands, cheques are now virtually extinct. In India, we have a long way to go before we can seriously consider being in the league of paper-less transaction countries. Although giving us company are the US and France where successive administrators have seriously resisted the phasing-out of cheques even as cheque usage continues to decline.
Coming back to India and the plethora of cash transactions that occur every day my first reaction was to sigh again. Then I decided to give it deeper thought. Even 5 years ago no one would have thought that a country with worrying UN and World Bank-type ‘Basic Facilities Depravation Statistics’ would emerge as the fastest growing mobile phone market of the world.
Mobile phones were for long seen as an item of luxury. But in India the ‘luxury’ phase was quite short and the word ‘necessity’ describes it better now. Statistics pertaining to the Indian mobile phone industry's growth and coverage are mind-boggling and I need another post to do full justice to that. To an onlooker, it would seem that owning a mobile phone is almost like owning a toothbrush. In fact, I am pretty certain that there would be folk here who do not own a toothbrush but have one or even two mobile phones! (Dental Hygienists: we have traditional Indian ways of keeping teeth clean like using the neem tree twigs with superior anti-bacterial properties).
But the mobile phone is just one tool, one success story. Back on the subject of being paper-less, I decided to make a list of all the cash transactions I undertake in Mumbai on a daily/ weekly/ monthly basis:
So, if I were to think rationally I would say we have a good few years (decades?) to go before going seriously electronic in day to day life. But then again, there is nothing rational about India!
There is a good chance that we’ll skip a couple of technology levels, leave behind the cheques and all that plastic and jump straight from paper money to a single all-purpose card or electronic transactions. Considering that they are now making the world’s cheapest computer in India (planning to cover each village) and the Telecoms Ministry has plans for widespread internet coverage in ever nook and corner, this is not a far-fetched idea.
There is something else to consider: India’s vast underground parallel economy. They have much to lose from the surveillance of their business and non-business cash transactions. They will continue to promote, use and sustain cash-based systems. Yet going electronic may be the one way to clean up the system? Apparently a big reason for India to come out glowing through the global recession was the presence of this parallel economy. When a credit crisis was emerging in the ‘white’ Indian economy, there were still huge reserves of cash available privately. As market sentiment improved, the underground investors came back to do what they do best- getting the capital circulating and of course multiplying their principal in the process.
And what about the millions of people living on the margins? They eke out their living on a daily basis by providing small services to all other segments of society. The banana-man cannot go electronic. But here’s a thought- he can go mobile! Yes the banana-man may lack many things but he does have a mobile phone. It could well be a 3rd user hand-me-down with little or no credit, perhaps the call- receiving facility only, but if payment through mobile becomes possible (and they are doing this already with people who have bank accounts) then what’s to stop me from picking up my half a dozen kelas, punching some numbers on my phone, confirming receipt via SMSes on both sides, popping the kelas in an eco-friendly bag (ahem!) and walking away happily.
Personal experience on 8th November 2009, India: Cheques from cheque book of well known private sector bank ‘payable at par’ only in the city where cheque book was issued.
In the UK, use of cheques is declining by 10% every year. In Sweden and the Netherlands, cheques are now virtually extinct. In India, we have a long way to go before we can seriously consider being in the league of paper-less transaction countries. Although giving us company are the US and France where successive administrators have seriously resisted the phasing-out of cheques even as cheque usage continues to decline.
Coming back to India and the plethora of cash transactions that occur every day my first reaction was to sigh again. Then I decided to give it deeper thought. Even 5 years ago no one would have thought that a country with worrying UN and World Bank-type ‘Basic Facilities Depravation Statistics’ would emerge as the fastest growing mobile phone market of the world.
Mobile phones were for long seen as an item of luxury. But in India the ‘luxury’ phase was quite short and the word ‘necessity’ describes it better now. Statistics pertaining to the Indian mobile phone industry's growth and coverage are mind-boggling and I need another post to do full justice to that. To an onlooker, it would seem that owning a mobile phone is almost like owning a toothbrush. In fact, I am pretty certain that there would be folk here who do not own a toothbrush but have one or even two mobile phones! (Dental Hygienists: we have traditional Indian ways of keeping teeth clean like using the neem tree twigs with superior anti-bacterial properties).
But the mobile phone is just one tool, one success story. Back on the subject of being paper-less, I decided to make a list of all the cash transactions I undertake in Mumbai on a daily/ weekly/ monthly basis:
- House cleaner (bai)
- Garbage-picking man (kachrawallah)
- Window-cleaner (usually bai, but the neighbours use another cleaner)
- Newspaper-wallah
- Apartment Block’s TV Cable operator
- Fruit-sellers: there are two, the banana-man and all-other- fruit-man
- Veggie-selling husband and wife team
- Mobile phone top up at local shop
- Small kiosk selling yogurt/dairy products
- Taxi driver
- Autorickshaw driver
- Car Driver.s salary (i.e. Chauffeur. Don’t have one right now, but had one for a while in Delhi)
- Cooking-gas LPG cylinder delivery man (Piped gas supply now coming up, available in limited areas so far)
- Office Food delivered by the pantry guys: separate bill for breakfast and lunch as they operate from different floors
- Nearest grocery shop (Patel Store) - popular with bollywood stars, expats and general locals. No cards, only cash! [My colleague says that Bollywood stars have too much unaccountable cash, they probably prefer this option]
- Nearest chemist – have not seen anyone use card. Probably a limit above which they accept card (plus transaction fee on card is often a norm)
- Tips (in all restaurants, hotels, some hairdressers).
- Toll Charge (not enough trips to justify electronic tag and other operational issues)
- Parking Fee
- Small retail shops- when shopping in street bazaars or in small shops selling household items
So, if I were to think rationally I would say we have a good few years (decades?) to go before going seriously electronic in day to day life. But then again, there is nothing rational about India!
There is a good chance that we’ll skip a couple of technology levels, leave behind the cheques and all that plastic and jump straight from paper money to a single all-purpose card or electronic transactions. Considering that they are now making the world’s cheapest computer in India (planning to cover each village) and the Telecoms Ministry has plans for widespread internet coverage in ever nook and corner, this is not a far-fetched idea.
There is something else to consider: India’s vast underground parallel economy. They have much to lose from the surveillance of their business and non-business cash transactions. They will continue to promote, use and sustain cash-based systems. Yet going electronic may be the one way to clean up the system? Apparently a big reason for India to come out glowing through the global recession was the presence of this parallel economy. When a credit crisis was emerging in the ‘white’ Indian economy, there were still huge reserves of cash available privately. As market sentiment improved, the underground investors came back to do what they do best- getting the capital circulating and of course multiplying their principal in the process.
And what about the millions of people living on the margins? They eke out their living on a daily basis by providing small services to all other segments of society. The banana-man cannot go electronic. But here’s a thought- he can go mobile! Yes the banana-man may lack many things but he does have a mobile phone. It could well be a 3rd user hand-me-down with little or no credit, perhaps the call- receiving facility only, but if payment through mobile becomes possible (and they are doing this already with people who have bank accounts) then what’s to stop me from picking up my half a dozen kelas, punching some numbers on my phone, confirming receipt via SMSes on both sides, popping the kelas in an eco-friendly bag (ahem!) and walking away happily.
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