India is a largely cash dependent economy. Even after
extensive drive for digitization of transaction, cash still remains the go to
option for many individuals. Cash transactions have yet again come on par with
the pre-demonetisation levels. Though there is huge progress in the number of
digital transactions, there is still a long way to go. Here is why cash is king
for most individuals.
1) Habit
Indians for long have been accustomed to cash transaction
for daily spends and it is only in the last couple of years that digital
transactions have started to gain pace. Thus cash is the default choice of
payment. Besides, many people, especially from the older generation find it
difficult to operate digital transactions.
2) Liquidity
Cash is the most liquid asset, meaning you can immediately
spend it. Payment or receipt in the form of cash is easily and quickly
processed. It can be used almost everywhere and by anyone. It also gives
advantage when you have to make down payment for big purchases like car or
property. Other assets which are not a liquid cannot be used anytime as per our
convenience. You might also have to wait for the right time to sell those
assets, which is not the case with cash.
3) Risk
Hacking is a big risk which deters digital transaction. One
hears lot of stories of hacking, phishing, identity theft, etc. It therefore
makes sense to have certain savings which are away from the risk of online
threats. Cash is a safe and secure way of transacting.
4) Contingency
Everyone needs to have few months of salary saved for
emergencies, preferably in the form of cash. This can be for emergencies not
covered by insurance such as legal issues. Having cash on hand helps you to
deal with such unexpected expenses without having to take high interest debt.
5) Cost
Cash transactions do not have any charges or fees for
processing them. It can prevent you from taking debt which normally have high interest
rates. If you pay using credit card, you will have to pay high interest for
delay or default in payment. There may also be charges levied for using credit
card. It is seen that those who use cash instead of credit card are likely to
spend less as they can witness their cash vanishing away and start be careful
about their spends.
6) Cash-only transaction
There are lots of businesses which only accept payment in
the form of cash. These include public transport, small shops, hawkers, etc. Carrying
cash in this case will be easier for both customers and sellers.
Cash forms an important part of our daily life and it is
unlikely that our dependence on it will reduce any time soon.
