According to the Oxford Dictionary, demonetisation is ‘the withdrawal of a coin, note, or precious metals from use as legal tender’.
Whenever we hear the term demonetisation, we immediately recall the evening of 8th November, 2016 when Mr. Narendra Modi announced, in an order issued by the Reserve Bank of India, that notes of Rs.1000 and Rs.500 would not be accepted as legal tender. It is a remarkable day in the history of India. Not only did the demonetisation lead to a massive change in the economic scenario of the country but it also created a political uproar; getting into the details of it would require another article.
Another case in point in the Scandinavian region is Sweden. It is amazing to see the way this country has progressed to become the World’s Fastest Cashless Economy. People in Sweden prefer to use debit cards and online methods of payment. In fact, it is estimated that about 50% of the Swedish Kronor lie useless in the house. Most retail shops in Sweden prefer to deal through online transactions too. Surprisingly, people in Sweden look down upon the use of cash for transactions and it is believed that only those dealing with the underworld or with black money are the ones who use cash. There have been many instances where people have actually called the police upon witnessing a transaction of large sums of money using cash.
The condition has actually progressed to such an extent that around 20% of the retail shops in the country legally do not accept cash payments. ATMs are being shut down and pulled out of the rural areas and just 2% of transactions happen through cash. The usage of physical money is phasing out of the lives of the Swedes.
There are several reasons for this. One of the biggest being that apart from the ease of using online transactions is the negative interest rates charged by the banks on deposits. This basically means that people would be paying the bank money to keep their money in the bank. Therefore, people prefer spending money as early as possible on other forms of investment rather than keeping it in banks at a loss. The circulation of cash has been receding since 2007. Going cashless was suggested in the first place owing to the growing crime rate and robberies of banks. It was said that if there was no money in its physical form then nothing could be stolen.
Another obvious reason is the ease of apps and net banking. The most popular instant payment app in Sweden is called Swish, set up in 2012 by seven of the largest banks in the country. More than half of the Swedish consumers are signed up on the app.
To contrast the positive effects, there have been a few negative impacts of this progression. Firstly, there are many people who find the usage of digital devices difficult like the elderly, illiterate, poor and refugees. Secondly, the rapid disappearance of cash will ultimately lead to the disintegration of the infrastructure needed to use notes and coins and undermine its task to promote a safe and efficient payment system. Additionally, in case of a natural disaster or national emergency some amount of cash is essential for survival to buy the bare necessities.
Despite all, a cashless economy is proving to be the force of the world today and, hence, it is of a great advantage to Sweden. They are ready for the future.
Conclusively, as the whole world is in the race to move towards a cashless society, Sweden is definitely in the lead with neighbouring countries Norway and Denmark close behind, as well as the U.K, seeing its own shift towards digital payments. In Britain, a wave of digital banks is emerging that offer just an app and a contactless debit card. The central bank of Sweden, Riksbank believes that they are prepared to aid the whole population when the country completely shifts to become the world’s first cashless country, which is estimated to be around 2030.
A similar wave can be said to have reached Asia and in particular India as well with the government promoting cashless transactions through campaigns, events and advertisements. The government has even taken huge steps by launching various apps like the BHIM app. It can be said that the effort in educating the public and promoting the advantages of the digitalization of transactions is positively resultant.
By Meghna Bakshi,
FYBA-A, Mithibai College
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