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The War on Cash is actually part of the War on Organised Crime

Anand Ramachandran
Chief Financial Officer-TechProcess
Tuesday, January 26, 2016
Anand Ramachandran
Two recent news reports have revealed some seriously disturbing trends. On Nov 26, news reports spoke about a heist in Delhi where Rs.22 crores cash was stolen by the ATM van driver, when he was left alone for just two minutes. Another news report talks about how prepaid cards were used to fund the terror attacks in Paris. Just imagine the consequences for a country like India, deeply addicted to cash and where prepaid card issuance (aka 'wallets') claims to have reached stratospheric levels. Both these news items send a loud underlying message: (1) there is no option but move away from cash and (2) prepaid cards is not an answer to the digital payments question.

Just analyse the cash heist. What was the need to transport such large amount of cash? Whilst this might seem a relatively small sum compared to the thousands of crores of cash transported every day, it is not an absolutely small number by any measure. How easy was it for the driver to just drive away with the cash! If not for his stupidity, he would've been roaming free somewhere with his loot. And there is no way the cash could have ever been traced as cash has no colour.

As for prepaid cards, what is the loophole in that was exploited by the terrorists? The answer is simple: Know-your-customer (KYC) documentation. Regular bank accounts need KYC documents like ID proof and address proof and in some countries even a credit report. Prepaid cards being of low-value denomination do not need any documentation till transactions have reached a threshold (about EUR 2000 in France). So it's perfectly legal to open multiple prepaid wallets and side-step the entire KYC requirement.

The underlying message is that we live in dangerous times where we need to choke every loophole, cash or prepaid cards that the terror financing chain exploits. Therefore, the larger question is, when we have so many payment options available on your regular account like debit card, credit card, net-banking and IMPS, why this obsession with cash and prepaid wallets? The answer lies in two parts: convenience and clever marketing. Cash continues to remain the most convenient payment mode for buyer and seller not with-standing the inherent risks. I routinely see customers checking out a large electronic store, paying large amounts in cash. Prepaid cards waded into this 'convenience' gap and lured customers with attractive discounts and 'cash-back' offers. Of course, prepaid cards are better than cash, but they're equally risky due to lack of clear title.

Granted that getting a credit card is an uphill task especially for self-employed people; and the numbers bear it out, just about 22 million credit cards for a country of 1.3 billion. But debit cards are today ubiquitous; at last count there are more than 600 million debit cards issued in India. With such staggering numbers, far higher than the estimated 20 million prepaid wallets, what explains their abysmally low usage? It is largely awareness, as most people in India refer to their debit card as ATM card. No wonder, Indians use their debit cards to withdraw cash 672 million times a month (roughly one per debit card) while they swiped it just 96 million times at merchant establishments (roughly one for 6 debit cards). Bear in mind, all this cash is not 'black money'; so it is being used to make legitimate consumer payments which could otherwise be safely done electronically.


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