MONEY IN THE AIR

MONEY IN THE AIR

December 19, 2018

No matter which part of the world you are in, the need of equivalent exchange of goods with something of value, is the principle we all go by. You can consider this as the cycle of karma, that is what comes around goes around, or you can consider something as simple as buying groceries off your nearest vendor in exchange of money. The principle of exchange is something we have all seen and heard. When it comes to the exchange of monetary value for goods, foods, pleasure or excitement the first thing that comes to mind is currency. Whether in the form of cash or the brilliance of technology in bank cards or mobile apps, we have all seen it happen. So where exactly did the concept of money come from and where is it going TODAY?

HOW DID IT COME ABOUT?

Initially, the principle of equivalent exchange didn’t start off with money; let’s just say the economy wasn’t that rich, yet. The transactions were more subtle, to say; people would give off something they have of equal value in exchange for another, this was also known as bartering. That, however, was way back in the day. People came around the concept of using money (coins) around 5000 BC as metals were easily recyclable, available and thus, coins were molded. This also started off the general concept of how much people are willing to pay for an object and how much it should be worth. With its own form of ups and downs, the paper version of monetary value didn’t come around until China invented paper and that was around AD 960, which we now know as cash. This had traveled across countries and every nation made their own currency and the transaction methods set value for one another evolving into the whole economy that we know today.

The system that we are most familiar with, the cash economy, is the standard system of financial transactions that are carried out regularly in cash. Over the last few decades, we have been introduced to many banking features and technological advancements that have led us to use credit cards, debit cards, mobile applications, and online payment systems. While some of them are quite old and some are recently gaining popularity in the entire world, this is what we know as the cashless economy; a system that handles financial transactions but doesn’t require the involvement of money in cash.

The definition of a cashless economy might get you thinking, that before the invention of money (coins), bartering for the exchange of goods was still the same as it is cashless. It is true we went from cashless – cash – cashless. However, when we say cashless economy now and throughout this article, it is referring to the digital age and the prospects that technology is bringing to the table.

ON TOP OF THE CASHLESS BOOM

The cashless economy has been creating a hype for people around the world, some with happy projections and some with terrifying concerns. Many renowned brands have been slaying their game in the cashless society. Apple Inc. is in the top charts of the business dominating the cashless industry followed by Google, Uber, Alibaba.com, Amazon and so on. The e-commerce industry is now more popular than ever and the whole business is evolving towards the digital side, and the consumers are completely into it. Going cashless is not just company based, many European countries like Denmark has reached nearly a 100% cashless economy with their neighbor Sweden right behind. Even South-Asian countries like Singapore and India are leaning into the concept showing a rapid change in their numbers of going cashless. However, where does a developing economy like Bangladesh stand in this rapidly digitalized world of no-cash?

A GOLDEN OPPORTUNITY

Bangladesh might not be rapidly going into a 100% cashless society just yet. However, professionals believe it is making slow but steady moves towards becoming a cashless nation. Over the last two decades, Bangladesh has shown great potential in adopting into digitalization and has been handling whatever kind of technology is thrown at them with their fair share of the rise in the economy. However, when we are speaking numbers, we also have to remember that Bangladesh is still a developing nation with over 39% of the population still deprived of education and under the poverty line. So, the transaction might not be the smoothest but many organizations have been trying their level best to introduce easier methods of money transfer, transactions without involving cash over the internet. Changes that we can see are in using bank cards – debit cards and credit cards for payment. Mobile banking systems, mobile wallets, and various online systems have eased into it. The most common names that you may hear when thinking of payment through phone are bKash by BRAC Bank and Rocket by Dutch Bangla Bank. There are many more popping up and many more that are still yet to be announced, however, the citizens are being eased into it while experts are working on the best possible way of introducing them.

The government has also promoted the use of technology in their own offices as well as making it open to the consumers, availing loans, payment of bills and many more though many of these various organizations as well as leaving room in their own official pages for improvement. Prime Minister Sheikh Hasina’s dream goal of achieving a Digital Bangladesh by Vision 2021 is near and not only that, Bangladesh is trying its level best to follow the SDG goals set by the General Assembly, UN for a more sustainable and eco-friendly world.

The benefits of going cashless are more than being just efficient and productive. Digitalizing has a wider impact on the economy, and it is growing as we speak. It is faster, effort free, tangential, transparent and global; there are no limits. Since all transactions are done using digital means or through the internet, it greatly reduces the transmission of physical currency. This reduces instances of tax since there are no trails of the transactions left behind. Not only that, but it also reduced the involvement of middle-man, long waiting lines and crimes that are associated with cash. This system also offers methods of tracking and really getting a clear look at what you are dealing with instead of a banker needing it to explain things to you in their convenience. It is not just for the consumer benefit; it also has its perks on national security. It creates a way for all purchases and movements to have a digitalized record which can work towards the inhibiting black-market sales, as well as detect and minimize terrorist activities. A system where you don’t have to give an effort into it, and something that is always in the palm of your hands, surely is a better advantage compared to everything else, especially since this provides more security. But how far do these benefits stretch up to?

THE CHALLENGES THAT LIE AHEAD

In the past, choosing to pay via a card was a choice and now it has become a necessity in many places and not everyone can accommodate to that. In a country like Bangladesh, we can take a look at the population who owns a bank account and how many of them have the ability to use the card facilities taking into consideration the annual service charge some banks take. Leaving banking cards to the mobile applications, even though we might take most of it for granted, we are aware that more than 39% of the population is uneducated. While some modes of technology are still catered to them, some actually use them as a muscle memory or specific one or two functions of a vast application which fails the entire purpose of these users being able to do something impromptu when needed. For reasons like this, this leaves the consumers the only option of using cash as a mode of payment, and if that is taken away from them, the nation will face a more economic downfall than the current uprise. There also remain more issues like loss of jobs for employers as their work is easily being adapted by AI (Artificial Intelligence) or digital services and therefore these human transactions are no longer necessary. While efficient for some, others are facing a downward spiral in the job market raising the unemployment bar to the highest it has ever been. These problems are not just for consumers in Bangladesh alone. Concerns about going cashless had risen globally. Starbucks with 40% of their consumers opting out for going cashless in their transactions, the rest still depends on cash. An international brand like itself is failing to go cashless for the uproar of the people and their needs, so this tells us a lot about this economic bloom. While it may be an efficient and more practical way of transaction, the use of this system entirely is still a good few years away.

Cash is often used in helping the underground economy, dodging tax, and illegal settlement. But cash also offers vast benefits and independence to millions of innocent citizen. In fact, cash-less society could have controversial consequences for everybody. Authorizing that every purchase or expense will be recorded electronically would provide the government with the right and the ability to monitor every aspect of a person’s life. This might be considered as a threat in their freedom for some, which is true to some extent because all actions are monitored. So even though there are numerous benefits from the movement towards a cashless society, however, if we dive deeper, there is more than what meets the eye and not everyone in the scenario is benefiting from it. No economy can directly jump into the cashless pool, it comes upon various difficulties even hypothetically and that is why developing nations are easing into the use, rather than going commando.

THOUGHTS FROM PROFESSIONALS – BANGLADESH

The future lies in digitalization and so comes in the cashless economy. Muhammad Yunus, founder of Grameen Bank and Nobel Peace Prize winner stated: “Cashless economy is a boon”. Whereas President Syed Mahbubur Rahman of ABB (Association of Bankers, Bangladesh) said that the nation is moving towards a cashless society as around 52% of bank cards are maintaining the international standard of EVM. While in a public press conference earlier this year, Bangladesh Bank officials did state there are challenges in turning into a nation with a cashless economy, however, we have already discussed those demerits before. Abul Kashem Md Shiri, the Managing Director and CEO of Dutch-Bangla Bank Limited, has reportedly said: “People need to make long-term investments in mobile banking services because future banking will depend on online banking.”

From what is understood from industry veterans and professionals, is that cashless economy will remain in bloom as it is a more convenient way of money transaction for the mass public (for whom these campaigns are targeted towards). From a global viewpoint, Bangladesh is indeed miles behind when it comes to embracing fintech systems. While the entire world is getting consumed in the bitcoin bubble, we are embracing the earliest versions of cashless transaction processes. We are indeed a lot behind than others. On the brighter side of things, this indeed points out to a huge range of opportunities that can impact the socioeconomic status of Bangladeshis in general. However, for now, the introduction of these new digital applications is just for the sake of getting people more comfortable with the use, rather than an enforced permanent change in the economy. It will still take a decade or more to reach the possibility of thinking of going cashless on a whole. Since Bangladesh is still a developing country, with the right amount of time, the nation will easily recover and stand with its head held high with all the other nations of the world.

By Farhat Chowdhury

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