As more and more transactions go digital, or plastic so to say, we look towards the future with a model that does away with currency notes and coins altogether and yet keeps alive the essential principle that money serves, without attaching any tangibility to it.

1. The
Cashless
Society
Paper compiled and presented by:
Sayani Banerjee 11/CS/93
Anshuman Mahanty 11/CS/23
‘’An idea to make all our payments and transactions go digital, making
currency notes and coins a thing of the past…. ‘’
The End of
Cash and Our
Economic
Future

2. --------------Contents-----------------
Title Page No.
Abstract 1
Introduction 1
The Current Money System
And It’s Drawbacks 2
Possible Impacts Of A Full 3-4
Cash Abandon
How To Remove All The Cash 4
From The Economy?
Current Advancements Towards
A Cashless Society 5
A Simple Working Model- The Card
And Points Model 5-7
Management of The Card And
Points Model 7
Advantages of The Card And
Points Model 7-8
Challenges And Limitations To The
Card And Points Model 8
Solutions To Overcome The Challenges 9
Applicability of the model 9-10
Conclusions 10
Bibliography & References 11

3. Abstract
The objective of this paper is to dissect the current monetary system of paper
currency and coins and to devise a model that overcomes the shortcomings of cash.
As the global economy unknowingly ventures into a time when everything becomes
cashless, we discuss how the coexistence of cash with plastic money serves little
and rather a meaningless purpose. With the help of technology, a completely
cashless economy isn’t as far from us as one expects. The paper recommends a
cashless society in wake of the negative and fraudulent practices that are associated
with cash, something that can be fixed by adopting a new, smart, innovative and
hassle-free model that simplifies the exchange of money without attaching any
tangibility to it.
Keywords: Cashless, central bank, exchange rate, transaction, biometric card,
UID
Introduction
Akin to the proverbial fish that has no idea of what water is, we swim in an economy
built on money in the form of currency notes and coins, a monetary system that only
a few of us are fully able to comprehend.
There goes a cliché about change being the only thing that is constant. We see
change in almost every sphere of life surrounding us. Trade and exchange of goods
and services has also come a long way from the times of the barter system to the
modern currency system. Despite the fact that a transition to a cashless society is
already happening, there is reluctance among the high echelons of power to switch
over to the completely cashless economic system as it decentralises the power from
their hands. However, big banks and credit card companies are likely to be ardent
supporters of this revolutionary idea.
While at first impression, a complete doing away with money in the form we know it
might seem to be a very far-fetched idea but it feels so only because we are
accustomed to transactions being done through cash. In reality, in countries like the
United States and Sweden, transactions involving cash only account for 7 and 3 per
cent of the total transactions respectively. Some economies have already tried out a
small-scale cashless model using RFID microchips and digital coins. In a nutshell, a
cashless economic system is much closer than most people would imagine.

4. The Current Monetary System and It’s Drawbacks
Most economies in the world have a central bank or an authority that reserves the
right to manufacture paper and metal currency and is responsible to assure the
bearer of it’s assigned value. While this might come across as a fairly easily
understandable system, there is a lot more that goes into ‘money creation’. The
amount of cash in an economy at any instant is guided by the market forces of
demand and supply and the central authority in charge regulates the flow of cash
into (or out of) the market.
Cash, however, is only the physical instantiation of money. The reason why cash has
been a popular form of exchange for such a long time is because of the tangibility
that it provides to the entire idea of money. But does money really need to have a
physical form that people could identify with?
Perhaps not.
The reason being that money in the form of cash has more that it takes away from us
than it gives us. Outlined here are some major drawbacks of cash-
 At an individual level, cash is inconvenient to carry and manage. It
cannot be traced or insured as cash once lost or stolen cannot be
recovered.
 Cash is expensive to print, inspect, move, store and guard.
 Counterfeiting is always going to be a problem as long as paper
currency exists.
 Hand-to-hand currency is favoured by criminals as it does not leave a
paper trail.
 Cash transactions are not trackable in nature, thus providing no
transparency. This leads to corrupt practices and financial crimes such
as excessive money laundering.
 Monitoring of tax compliance is difficult for the Government.
 High cash usage results in a substantial amount of money outside the
formal economy, thus stunting the effectiveness of policies aimed at
managing inflation rates.
 From a global perspective, the economic growth imperative inherent in
the current monetary system plays a major role behind global warming
and other environmental crises.
In wake of the issues highlighted above, some governments are already viewing the
use of cash in a negative light. In fact, according to the U.S. Government, cash
payments are now thought of as ‘suspicious’ activity that needs to be reported to the
authorities.

5. Possible Impacts of a full Cash Abandon
Removal of currency notes and coins is likely to be the biggest monetary reform
since the inception of the former itself.
 Banks are likely to be in favour of a cashless society as it saves them
the cost of printing, inspecting, storing and guarding ‘paper’ money.
Costs also include the security and labour involved in processing and
transporting cash, maintaining automated teller machines, and
regulating the amount of cash in circulation. According to an estimate,
European banks could save between €45bn and €90bn annually if they
get rid of cash from their systems.
 Prohibition on the use of cash could restrict criminals such as drug
dealers and people involved in possible unregistered activities like
prostitution and betting from doing business.
 Eliminating cash could also mark an end to bribery and other such
corrupt motives as authorities would be able to track virtually all
transactions. Tax crimes would also stop.
 Restriction on the possession of currency would remove the ‘zero
nominal bound’ as a constraint on counter-cyclical monetary policy.
 According to a study by Wolman, countries could save about 1 % of
their GDP annually by switching over to ‘electronic’ currencies.
Every reform has some pros as well as cons. There are more than a few challenges
to our proposed cashless system, which are as follows-
 People still rely on the idea of money being ‘physically’ realisable. For
some psychological reason, ‘paper’ money is revered more than
‘plastic’ money or ‘digital’ money. Cash keeps a check on people’s
spending habits.
 Anything that’s technological comes with a baggage of risks and
security threats. A very high and unbreachable degree of security
would be needed as a deterrent to hackers and cyber criminals.
 The idea of a cashless society won’t be readily popular among a
certain section of our demographics. While a user-friendly model might
not necessarily require consumers to be tech-savvy, there would still

6. be some sort of digital awareness required to understand the working
of a society with no cash. People who have grown up and lived through
times when a substitute for cash wasn’t even thought of might face
some difficulty in adjusting to a world without currency notes.
 All the existing cash in the world cannot be removed or deemed
‘abandoned’ at one go. Also, when it comes to money, reassurance is
the thing that matters most. For a complete switch-over to the new
monetary model, the voluminous amount of cash presently circulating
in the market would have to be converted into an equivalent number of
‘digital’ points.
 Developing economies have an added challenge in the form of high
levels of illiteracy among the masses. For example, in India itself, there
are large sections of rural population who haven’t seen a bank in their
lifetimes, let alone owning a bank account. The only way they
recognise money is through currency notes and coins.
An ideal cashless economy should look to incorporate all the benefits of a digital
monetary system and to find solutions to the aforementioned challenges, in order to
achieve wide acceptance among the people who earn, spend and consume.
How to remove all the cash from the economy?
There are many possible ways of going about this but an outright prohibition on the
use of cash is certainly not going to work. Rather, the central bank or authority could
‘tax’ the use of cash, leading to the value of the paper currency depreciate relative to
the reserves, say by 10% annually. By managing the exchange rate between
currency and reserves and pushing it further, the central bank could remove the
‘zero lower bound’ and tax the use of currency, which would thus tax the criminal and
anti-social enterprises that largely rely on currency.
So a full restriction on the use of cash could be seen as a limiting version of mildly
extreme policies that tax currency by allowing it’s value to depreciate relative to bank
reserves.
When the exchange rate between currency and reserves becomes large enough,
cash in the economy would cease to exist.

7. Current Advancements Towards A Cashless Society
The first and the foremost pre-requisite for building an economy having no cash is to
have every single entity, whether an individual or a small-scale or a large-scale firm,
to be registered under unique IDs. This can be achieved biometrically, as has
already been done in India with the advent of the Government’s UID scheme named
‘Aadhar’. And already, nearly 40 million bank accounts in India have been linked with
Aadhar. Such feasible and low cost biometric systems could easily support electronic
payment systems which could replace the current hand-to-hand currency system.
In Nigeria, another developing economy, the Central Bank has launched a ‘Cashless
Nigeria’ Project whose objective is to reduce the usage of cash in transactions as far
as possible.
The use of EMV chip-cards is gaining momentum in Kenya and other countries in
Eastern and Central Africa. When used with a PIN (Personal Identification Number),
the chip verifies that the customer is producing his or her own card and only then
authenticates the transaction. This has reduced incidences of credit/debit card fraud
and helped in establishing faith in electronic payment systems among the masses.
Just recently, Master Card and Equity Bank unveiled a joint partnership that plans to
distribute 5 million EMV chips and PayPass enabled cards in Kenya over the next 18
months.
Far away in Canada, the Royal Canada Mint is looking to the future with the
MintChip, a new and innovative product that could become a digital replacement for
coins.
A Simple Working Model- The Card And Points Model
While in idea, this isn’t very different from the way debit cards and credit cards work
but in practice, this model integrates the biometric identification of each customer
with his/her account that stores points which could be credited or debited as and
when required.
The Biometric Monetary Card
The card could be electronic in nature wherein you feed the unique ID of anyone
you’re buying a good/service from and also key in the amount of points that you owe
to him. That particular amount of points is then deducted from your balance and
added to the service provider’s balance.
To ensure that a card is being used only by it’s rightful owner, we could have
passwords similar to the ATM pins that we have currently. An even less hassled
authentication system could use the details of your biometric data- facial definitions,
finger-prints, retinal scans and voice files to build your password. The latter will be
more suitable for illiterate people to do transactions.

8. The Points
To put it simply, ‘points’ in our model are basically the replacement for cash money.
Analogous to how cash works, points could be debited or credited from one’s
account depending on the transactions performed. Since points will not have any
physical existence, they will be far more reliable against stealing, burglary or any
other such loss.
The worth of goods and services will be judged on ‘points’ similar to how it works in
the modern monetary system.
Common Transaction Machine
Since the electronic card methodology prescribed above needs a lot of technological
groundwork and digital awareness among common people, a better system for a
start should be to have simple transaction machines similar to card swapping
machines that we now only see in sophisticated retail stores. Such transaction
machines would only be given to business owners or in retail markets and not for
personal use.
Such a machine would accept the biometric monetary card for payments and
transfers, authenticate the card after receiving it’s password and then allow ‘point’s
to be transferred from one individual to another. An extensive database that stores
and updates the point balance of each registered individual would also be needed to
be built. The update would have to be instant in nature.
Point Transfer
Since for a transaction between two individuals, i.e. third-party transfers, the
common transaction machine would not be available, such an exchange could be
done through either an electronic biometric card or a separate automated machine
wherein your card is to be inserted following which it asks for your password. After a
valid authentication, the lender inputs the unique ID of the borrower along with the
number of points that he/she wishes to transfer. After the transaction, the point
balance of both the parties involved is updated.
Alternative Techniques
Given the ever-increasing accessibility to cellphones in India, cellular technology can
also be used to make the third-party transfers simpler. Funds could be transferred on
the go by simply keying in the unique ID of the third party and the number of points
to be transferred on your mobile phone. Some telecom networks like Airtel have
already tried out some cashless transfer techniques wherein one user can transfer a
fraction of his mobile balance to some other user on the same network.
The card-and-points model could thus help in facilitating the exchange and flow of
money, or rather points in the economy without attaching any physicality to the whole

9. idea of money. As the monetary system becomes digital, people would become
more and more assured of the reliability that ‘points’ hold over paper currency. You
can never lose or misplace your points, something that is quite common with paper
currency.
Management of the Card and Points Model
In case of cash, a central bank reserves the rights to issue paper currency in the
market. But in our cashless model, the power will be distributed between the central
bank and the other smaller banks. The central bank is to be held responsible for the
supervision of the point issuing institutions. By supervision, we mean the control of
any activity which might interfere with monetary variables or with the sound
functioning of the monetary system.
The role of the central bank as a supervisor should not only be limited to
microeconomic criteria to certify the quality of the point-issuing institution. In a
cashless society it should also use macroeconomic criteria to guarantee the quality
of the point issue. The use of macroeconomic criteria will be crucial precisely
because the central bank will have lost most of its traditional instruments to influence
macro-economic variables such as the money stock and the interest rate.
Our card-and-points model thus distributes power equally among all the banks and
monetary institutions while still retaining the centrality and the authority of the central
supervising bank. A major advantage that this system has is in the case of fraudulent
private money-making schemes and chit funds that betray investors. Under a
cashless system, they would lose all power to circulate currency and their activities
would also be easily trackable as every point exchanged would be registered, unlike
in cash payments which have a high level of anonymity associated with them.
Advantages of the Card-And-Points Model
Following are the benefits of this model over the current monetary system-
 All transactions being through a single card, people won’t have to face
the burden of carrying cash with them, making the exchange system
more hassle-free.
 A digital system of payments ensures more security. ‘Points’ are more
reliable and less vulnerable to be stolen or misused in any form as
compared to notes and coins.
 The false bill problem will be redressed. Bribery or corruption in any
form is likely to be rooted out from the scratch.

10.  Exact payments could be done without people having to worry about
‘change’, a problem that is quite common in the cash system.
 Tax dodgers and criminals will lose out as with the points model, their
every transaction will be tracked.
According to Arvidsson’s analysis, the primary stakeholders, i.e. banks and
businesses would be the biggest beneficiaries in a society with no cash. He also
goes on to say, “It is first and foremost small businesses that risk having problems if
the cash system is phased out - but given the competition between payment service
providers and the lowering of fees, even small businesses will stand to see some
benefits.”
Challenges and Limitations to the Card-And-Points Model
To lay down each and every facet of our model is undoubtedly going to be a very
tough task. Particularly in a developing economy like India, there are going to be a
few hurdles in our way such as-
 Having grown used to seeing money in ‘paper’, people at first are likely
to not warm up to the idea of a single card handling all of their
transactions. Plus, there’s a large section of our demographics that
isn’t just aloof from technology but even has some sort of a phobia
towards it.
 The system would need good and reliable emergency backups. People
would need to be able to pay even during power cuts, link failures or
even when electronic systems get crashed or hacked. Currently cash
payment is the only system that never fails.
 Lack of network access in remote corners and far-way rural hinterlands
is a major challenge towards establishing a fully digital monetary
system.
 For this new monetary system to be successful, every player involved
in it shall see some benefit to adapt to it. While Governments and big
banks would prefer an economy that goes cashless, small businesses
might perceive a cashless economy as something that risks their very
existence.
 The biggest challenge towards establishing a card-and-points model in
a developing country like India is illiteracy and the lack of awareness.
As of now, only a small share of our transactions are done through
‘plastic’ money. Payment through debit/credit cards is still seen as
something very urban. For our cashless model to be successful we
don’t need everyone to be tech-savvy but a little level of compatibility
with digital mechanisms is expected.

11. Solutions To Overcome The Challenges
 There needs to be a high-speed network access even in the remotest nook
and corner of the country. A high-speed internet and a high-security biometric
database are pre-requisites for establishing this model at ground level.
 Technological awareness needs to be created among people so that they
warm up to the idea of this model readily.
 There has to be incentives for all parties involved so that no one is robbed of
his/her right to purchase and sell. Small businesses and banks should not feel
done with under this new system. They should be made to be feel empowered
by having their own right to issue and manage ‘points’.
Applicability of the model
Is our model feasible for a developing economy right now?
Perhaps not but a few years down the line, when technology seeps deeper into our
society and when more and more people become aware of how getting rid of cash
saves their money from being vulnerable, the card-and-points model could be tried
out. The phasing out of all the cash that is in circulation now should also take a fair
bit of time.
Meanwhile, we can work towards making this future model more and more feasible
and foolproof so that our economy switches over to this new system wilfully and with
little to worry about.
The groundwork can be laid first in the metropolises and big urban centres. From
there on, the transition could be taken forward into smaller cities and towns and then
into the rural areas of the country.
In the future, it is inevitable that national governments and big financial institutions
will want to have all of us transition over to using biometric identity systems in order
to combat crimes and frauds in the financial system. As hackers employ new
techniques for identity theft, our biometric system needs to be guarded against any
possible malpractice.
Only when we are technologically and psychologically ready to welcome this change,
can the model be considered to be applicable and ready to replace money in the
form of paper currency and metal coins.
This model can be given a green signal in the developed economies now itself. Most
developed countries are unknowingly switching over to a largely cashless economy
anyway and cash serves little purpose in their day-to-day lives. Even the most basic

12. of transactions, such as the ones at the petrol station or at the food store, are now
carried out with the help of debit and credit cards instead of cash. Such economies
are ready for the ‘points’ or ‘virtual money’ to usher in and bring a revolutionary
change in the way people define or know money.
Conclusions
It can thus be concluded that with the increasing popularity of transactions through
cards, cash is slowly but surely expected to die a natural death. In a world where
payments go online, cash serves very little purpose apart from creating a burden on
the State. Doing away with cash addresses a very wide spectrum of problems,
starting from counterfeiting, money laundering and bribery to tax dodging and
criminal businesses.
While a cashless economy might take some time to get fully realized, it is something
that’s surely coming our way in the near future. Like everything else, a cashless
society has it’s own set of pros and cons. But the positives that we can get out of it
outweigh any negative impact that it might have.
The distribution of power between a central bank and the smaller banks is an
important aspect of the model proposed in this paper. The role of the central bank as
a ‘money-maker’ would cease to exist and its new found role would be to supervise
the smaller parties who get enabled to be a part of the money, or point-issuing
process. A switch over to the cashless economy thus decentralizes the power from a
central hand at the top of the hierarchy, which is what is needed.
Overall in a nutshell, a cashless society has an innumerable number of benefits over
the current monetary system. The paper currency stays on because it is the only
form of money that is built in our psyche. The future generations though will live
through a time when the idea of money creates an image of credit and debit cards
inside their head. That will be the time when cash will have to give way to a world
where exchange will take place as it does now, but without the money being visible
to us. Exciting, isn’t it?

13. Bibliography and References
1. The End of Money: Counterfeiters, Preachers, Techies, Dreamers And The
Coming Cashless Society ~ David Wolman
2. The Coming Cashless Society ~ Thomas Ice, Timothy J. Demy
3. www.cenbank.org Official Website of the Central Bank of Nigeria
4. www.urbanizationproject.org