How Digital Transactions Enable Ethical Business Practices?

.Cash transactions have caused a host of problems for MSMEs including delayed payments, untimely credit, and issues with getting loans
How Digital Transactions Enable Ethical Business Practices?

India is a country where over 95% of the total transactions are paid for in cash. While various initiatives taken by the government are slowly moving us towards a Digital India, we have a long way to go to join the ranks of cashless economies like Sweden, Finland, and Canada. There are still a lot of people who are more comfortable reaching out for cash in our wallet to make payments – no matter how big or small.

Problems with Cash

Yes, it is easy to give your children cash to pay their school fees. Yes, it is convenient to offer cash at the supermarket. Yes, Cash on Delivery might be the most suitable online shopping payment option for the sites where you are not sure about the delivery of products. But do you know the kind of challenges cash transactions present? Let’s have a look:

  • Cash is anonymous: When you deal in cash, there is no accountability. In the absence of appropriate controls and measures in place (which generally is the case), it gets really difficult to identify the source of a transaction and to track it through the cycle.
  • Fraud is easy: The amount of fake money in circulation is unimaginable – in 2017 alone, 762,072 fake notes were detected. Counterfeit scams are mushrooming, and for the common man, it is not easy to tell the difference.
  • Risk of theft: No matter how careful you are with your money, there is always the risk of theft and robbery. So, whether you’ve just withdrawn money from the ATM, or you’re on your way to deposit it at the bank, you always have to be vigilant.
  • Difficult to track: In spite of all measures you take to keep track of the money in your wallet, it is easy to lose count, misplace cash, or mix up denominations. How you keep account of loose cash in your wallet?
  • Black market: Cash transactions are the biggest contributors to the black market. They are the reason for the illegal sale of goods, corruption, inflated prices, and tax evasions.

Benefits of Elimination of Cash

Eliminating cash and moving towards a digital economy brings the transparency needed in the system. The benefits of cash elimination are manifold:

  • Monitoring of business dealings becomes easy and convenient (transactions of more than 3 lakh registered companies are under the radar by the government)
  • Right beneficiaries get the right entitlements (the government makes a direct transfer of Rs.74,000 crores to the financial accounts of 35 crore beneficiaries annually)
  • More tax gets collected (thanks to demonetisation, in 2017, there was an increase of 24.7% in tax returns filed)
  • E-governance becomes a breeze (about 52.4 crore unique Aadhaar numbers have been linked to 73.62 crore accounts)
  • Money laundering and the black market gets minimized (more than 37,000 shell companies engaging in black money and hawala transactions have been identified) 

How Digital Transactions AreHelping Curb Fraudulent Transactions

The Micro, Small and Medium Enterprises (MSME) sector in India has primarily operated offline, with a majority of transactions happening in cash.Cash transactions have caused a host of problems for MSMEs including delayed payments, untimely credit, and issues with getting loans. However, now, especially post demonetisation, MSMEs are left with no option but to turn digital. According to reports, as many as 41% of MSMEs said their clients have moved to electronic payments since demonetisation. Electronic payments are now enabling them to reach wider geographies which would otherwise remain outside their scope. As social selling picks up steam, MSMEs have also started operating their businesses through Facebook, Twitter, and other social platforms. Having a digital presence is helping MSMEs to expand their markets, safely and quickly process transactions, improve transparency, and enable ethical and legitimate record keeping. 


People prefer cash because it is quick, easy, and convenient. If the digital payment options provide all these benefits, consumers dependence on cash will start to diminish.Countries like Sweden prove that cash-free living is not only beneficial but also desirable. Curbing of fraudulent cash transactions boosts the economic growth of the country, and I believe, as Indians, we are happy to contribute towards that.

The article has been penned down by Jose Thatti, CEO, and Co-founder, Phi Commerce


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