Essay on Cashless Economy: Meaning, Advantages and Disadvantages

Meaning of Cashless Economy

Cashless Economy refers to a situation where there is a negligible flow of cash within an economy, and all transactions are settled digitally. This is achieved through extensive use of digital payment channels such as NEFT (National Electronic Funds Transfer), RTGS (Real Time Gross Settlement), credit and debit cards, digital wallets, IMPS (Immediate Payment Service), etc.

Our Indian Economy has mostly been dependent on paper currency since ages. However, the current Indian Government has seriously been trying to make India a cashless economy. Demonetization was a big step in this direction and significantly promoted the use of digital payment channels over the traditional paper currency.

There are numerous advantages and disadvantages to having a cashless economy. In this article, we will take a look at both of them.

Advantages of cashless economy:

  • No need to carry your wallet anymore.
  • Puts a lid on black money.
  • Saves time.
  • Hassle-free.
  • Put checks on tax evasion.
  • Cost-effective as it reduces the necessity to print cash currency as well as minting of coins.
  • Specific illegal activities like money laundering, drug trafficking, etc. are carried out only in cash. Promoting digital transactions will make their operations impossible.
  • Eliminates the threat of counterfeit currency.
  • Easy to monitor by the Government and Revenue Departments.
  • Reduces long lines in banks, thereby, enabling the staff to focus on their core business.
  • Ensures a transparent system in the economy
  • Might lead to a reduction in real estate prices as the massive chunk of black money that is invested through cash in this sector inflates the prices.
  • Cards and smartphones are more comfortable to carry than having to carry a considerable amount of cash in your pockets.
  • Various welfare programs initiated by the Government can be successfully implemented as the funds would be transferred directly to the beneficiary’s account without having to pass through unscrupulous middlemen and corrupt Government officials.

Disadvantages of cashless economy:

  • There still are millions who don’t have a bank account of their own.
  • Many small retailers deal in cash only as they don’t have the necessary insight or the affordability to invest in digital payment systems.
  • Lack of financial awareness among the masses.
  • Taxes and surcharges need to be subsidized to make people more accepting of the changes.
  • The burden on banks as they would be tasked with newer methodologies and techniques.
  • There is threat of hackers, cyber-crimes, etc.
  • Not many in India are tech savvy.
  • Riskier than the traditional means of transactions.
  • One has to place complete trust on third parties as they are the ones who actually control the transactions.
  • Digital mode of payments gives rise to impulse buying behavior.
  • Credit card payments, internet banking, etc. involves transaction fee which is not there against cash payments.
  • Limited mostly to urban and semi-urban cities only.
  • Lack of adequate internet network at many places in the country.
  • Specific sectors might be affected due to lack of cash such as the cement industry, jewelry, and retail industry.


With more significant challenges such as illiteracy and lack of adequate infrastructure facing the country, it would be a herculean task to make India one of the few countries to have a cashless economy. However, the merits associated with a cashless economy are far more than the demerits.

By Abhishyand Kumar