By Indira V.
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| Cover Image Attribute: Stickers displaying a digital-payment scanner is photographed outside an electrical shop in New Delhi, India, March 29, 2022. In 2021, digital wallets such as PayTM, GooglePay, PhonePe, Amazon Pay etc made up 45.4 per cent of the total e-commerce payments in India. | Source: IMF Photo/Saumya Khandelwal/Flickr |
The trend of turning back to cash is now seen all over the world, be it in Hong Kong (where the Uber app now offers meter-based taxi pricing with newly available cash payments), or the USA (where consumers still fuel stable demand for cash). Among all others, this is most noticeable and surprising in countries such as Sweden, Denmark, and Norway. For years, their advanced digital infrastructure, high levels of technological adoption, and proactive government policies have fostered a rapid decline in cash usage. This is why their recent statements that physical money needs to be protected, and its use promoted, came as a big surprise – but only to those who have not fully understood the full function and role of money in society.
One driver of this change has become the issue of inclusion, says Norway’s Justice Minister Emilie Enger Mehl: “In a digital world it can be easy to forget that there’s still a large group of people who are not digital, and they should feel confident that they can still pay with cash when they go into a store, a restaurant or a hair salon”. Others are primarily concerned about cybersecurity, potential for fraud, and the vulnerability of critical infrastructure to disruptions and regard cash as a buffer against cyber threats and an emergency instrument in times of crisis: “[Prevalence of cashless payments] is something that we as a central bank and also the central government see as a potential risk. Cash is the only form of payment that we can use if the systems for electricity or communications networks don’t work as they usually do,” explains Max Brimberg, a researcher at Sweden’s central bank.
All these musings and arguments have led to public discourse advocating for the preservation of cash. While specific legislative changes may vary, the overall trend indicates a move towards general reconsideration of cashless ambitions – and another surprise here is that there's a country that managed to go all the way from cashless to cash before northern Europe even began to realize that physical money is unable to be taken away from the economic system.
India’s experience
With a population exceeding 1.4 billion and a diverse economic landscape encompassing bustling urban centers and vast rural areas, India's relationship with physical money is complex and deeply rooted. Regardless of recent technological advancements in the country, a significant portion of local population still keeps their daily transactions in cash. For them, coins and banknotes offer a tangible and accessible way to conduct daily deals, especially when the Internet goes down or there’s an issue of privacy and freedom of choice. What’s more, cash is not just a means of payment here – locals often use it as a tool to control spending and a means of store of value. It was just the same in Sweden before it went all-digital, but the pro-cash voices were left unheard.
The Indian government, however, has recognized the reality, abandoned previous attempts to nudge the country to cashless payments, and focused on ensuring payment diversity: “For an economy to flourish, it is imperative that the payments ecosystem allows all modes of transaction. Cash payments are an indispensable complement to mobile, electronic, and other forms of digital payments", explains Anush Raghavan, President of CMS Info Systems, a company engaged in cash management at ATMs and retail pick-up points.
This pragmatic approach acknowledges the continued importance of cash in the hi-tech economic system of the country set to become $1 trillion digital economy by 2028. And while local digital transactions are growing rapidly as well, the state has fully understood and accepted the unique role of cash in the ecosystem. India now agrees that the convenience and security of the economy does not depend on the form of payments, but on a thoughtful and clear approach to the organization of payment systems as a whole.
Despite the strength of the argument, however, several obstacles still remain. Some of them are related to the need to modernize the very structure of cash turnover: “The current currency management infrastructure needs modernisation to ensure adequate capacities (factoring future needs), optimisation, as also making the process safer and environment friendly,” says the Reserve Bank of India (RBI). The other part pertains to more subtle matters related to certain biases about the cash, whether it's their general security or issues related to public health.
Modern cash is safer and more secure than we think
Fortunately, the modern world offers solutions to virtually every one of these problems. For example, the security of modern cash, coupled with adequate infrastructure, not only raises the safety of transactions, but also facilitates the quick and efficient search for criminals. The fact is that concealing traces of crime in the virtual world is rather easy, as shown by the experience of Sweden. The country became a haven for online scams after cashless began to dominate its economy, and no enhanced cyber defense mechanism could help. Worse even, one of the additional security measures, BankID, only exacerbated the situation: “It ends up not really being a security measure, but just another step in using a website. You don’t really think twice about what the BankID app might say you are logging into,” comments Bjorn Johansson, Swedbank’s head of group fraud prevention.
On the other hand, there are modern technologies embedded in banknotes and cash turnover systems, and they make it possible to effectively trace and solve crimes. Tools as intaglio ink, for example, make it easy to verify and trace banknotes: “Digital technology is crucial but needs to be complemented by material-based security. Secure track and trace are based on marking legitimate product securely so as to guarantee authenticity and gives each item a unique identity so that it can be monitored through its life cycle,” says Karen Gardner, chief marketing officer at security ink producer SICPA. Real case studies show that in combination with the latest identification methods such as chemical fingerprint of the UV ink, printing methods and the type of material, these technologies prove to be a versatile and powerful technique to dope out the trace of criminals and secure the turnover.
Apart from advanced security, modern banknotes are able to take care of even subtler matters like the health of users. Studies have long proved that banknotes cannot be pathogen spots, yet some prejudices, induced by the COVID pandemic, still remain. To deal with this problem, scientists have developed new solutions such as banknotes anti-pathogen treatment Bioguard.
The solution further secures the bills in circulation, prevents the growth of viruses and bacteria, and falls in line with the RBI's Clean Note Policy aimed at supplying the nation with clean and safe money, among others. The laboratory-proven properties of the treatment and successful experience of its use around the world help dispel preconceptions and keep payments convenient and safe for everyone, tells Etienne Couëlle, General Manager of Bioguard’s producer Oberthur Fiduciaire: “Our teams developed a treatment that was constantly tested and improved in order to make the surface of banknotes “hostile” to bacteria, viruses and other microscopic fungi – without having any negative impact on humans. This is an additional safeguard that should put an end to scientifically unfounded fears perpetuated by certain interested parties trying to discourage cash payments in order to push people towards electronic payments.”
A hybrid economic model for a new world
Analyzing recent trends and seeing the radical turns that some countries are making, it becomes evident that the anticipated transition to a fully cashless global economy is undergoing a significant reassessment. The experiences of nations like those in Northern Europe, coupled with India's strategic emphasis on cash infrastructure, underscore the continued relevance of physical currency in diverse economic and social landscapes. This evolving perspective is not a dismissal of digital innovation; rather, it reflects a pragmatic acknowledgment of cash's enduring value proposition.
Physical money provides critical resilience against systemic vulnerabilities, facilitates financial inclusion for underserved populations, and preserves individual financial freedom. And as technological advancements continue to reshape the financial sector, the future of payments will likely be defined by a balanced coexistence of cash and digital solutions. This hybrid model offers a robust and adaptable payment ecosystem, maximizing efficiency while ensuring equitable access and mitigating risk. For businesses and policymakers alike, understanding this dynamic interplay between traditional and digital finance is crucial for strategic planning, sustainable economic growth, and meeting evolving market demands and societal needs.
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