Steve Worthington is a Visiting Professor at the Business Research Institute
The world is going cold on cash. Successive moves by global governments to consider or act on a reduction of banknotes in a bid to, among other things, clamp down on illicit purchases. Digital payment methods are of course the beneficiaries.
It’s not all straightforward however – in India’s case especially, there have been unforeseen consequences. There are lessons in the experience for others around the globe.
And, as an aside, even though we haven’t even dispensed with cash, the global payment schemes like MasterCard already talking about the end of cards – within a decade – as the technology behind them migrates to smart phones, watches and other wearables.
The Indian Government’s announcement in November 2016 it would demonetise its then-highest denomination bank notes, the 500 and 1,000 Rupee, was an attempt to simultaneously flush out from the black economy, the illegal proceeds of corruption and reduce the scale of tax evasion in India.
At the stroke of a pen 86 per cent of India’s bank notes were made invalid, in a country where well over 80 per cent of consumer transactions were made in cash.