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Are cashless cities the solution to financial inclusion in India?

Driving to go Digital: India’s First Cashless City is Breaking Down Barriers

By IGI Global Author Relations Team on May 29, 2017
CashlessCities Imagine going into a grocery store, getting your needed things and going to check out. You wait in a long line of people, cash in hand, and when you get to the register you are denied. Cash is now a thing of the past--this reality is not far off for many Indian cities. V. P. Singh Badnore, governor of Punjab, India, has put into motion the emergence of cashless cities.

Throughout Europe, the concept of cashless cities has caught on and vendors no longer accept cash or bank notes and instead citizens must use their phones, credit cards or other electronic enabled devices to make purchases. Chandigarh is slated to be the first city in India that will undergo this change and citizens will no longer be able to purchase goods or pay bills in cash. This radical change is occurring to help limit crime rates and integrate technology into the heart of India. It will not only create a greener, leaner system, but this model may be the answer to closing the financial gap between the classes.

According to The Wire, 57 Indian billionaires have the same amount of wealth as 70 percent of the country’s population and when it comes to banking and finance, those living under the poverty line are left out of the equation. Their economic status limits them from obtaining bank loans and collecting on other services banking institutions offer. Therefore, they are susceptible to moneylenders that can charge up to 120 percent on a loan, and are fastened into their financial class.

However, technology and this movement to a technologic infrastructure is now diminishing these limitations. Through the adoption of banking apps, e-wallet and biometric technology, everyone from remote villages to those in the inner city can now take part in financial activity. Cashless cities are just the first step in this technological wave and they are creating a society that will now use their cell phones to do all financial activity from banking transactions and online shopping to taking out loans. The beauty of these platforms is that digital interaction eliminates any bias banking officials may have when dealing with rural or impoverished citizens and it will open a new door for financial inclusivity.

“Technology enables financial inclusion and financial independence by cutting [out] the middleman and facilities,” commented Sanjiva Shankar Dubey, head professor of IT Strategy and Management at BIMTECH, India, former IBM Asia Pacific and contributing author of IGI Global's publication Handbook of Research on Advanced Data Mining Techniques and Applications for Business Intelligence. “These devices would cut down operations and logistical costs and transcend cultural, caste and gender barriers.”

With an 87 percent mobile phone penetration, the governor is encouraging citizens to utilize technology for financial transactions. Additionally, he is calling for the younger generation to assist the older generation into adopting this new emerging technology. Even Visa showed this call to action in their latest commercial that aired in India.



“On the contrary, older generations are adopting cash less economy very fast due to their curiosity as well as convenience. Older generations living in villages, who are supported by their children, working in other cities, don’t have to go to bank or post office to withdraw cash. Their Mobile phone--even if it is not smartphone--works to help,” explained Dubey.

Although this model may be the solution, many are not convinced. According to the Guardian, many citizens are revolting and demanding cash. Street vendors fear that they will be unable to afford the necessary technology while many major telecom companies are trying to find a simpler way for those in poverty to adopt this technology. Technology could be the solution to financial inclusivity, but first India must solve the problem of getting this technology into the hands of every citizen.

Additionally, with the adoption of new technology comes the question of security. India has been vigilant in their cyber security efforts—narrowly avoiding and containing the recent Wanna Cry ransomware that infected over 45,000 computer systems. But there are questions and concerns of the misuse of the technology and how people are more susceptible to fraudulent activity and scams.

“We need more research to understand the role of technology, its cost and risk factors. The journey has just begun,” stated Dubey.

A sincere thank you to Prof. Sanjiva Shankar Dubey for taking the time to speak with IGI Global and sharing her thoughts and research on financial inclusivity. For more information on financial inclusion and technology, please take the time to review the publications below:

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