Dash to digitize cash

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By 2017-11-15

By Michael Gregson

There are many ways of spending your hard earned money.

Here in Sri Lanka, credit cards are fairly common. You can use your mobile phone to make payments with services like eZ cash.

But folding money, banknotes and coins – hard cash – is king on the island.

Try paying for your lunch at a roadside buthkade(eatery) with a credit card and you'll go hungry. The same goes for shopping in markets like Pettah.

You need cash for buses and tuk-tuks or you'll end up walking. But despite its convenience, cash is on the way out.

Sweden is the most cashless society on the planet, with barely 1 per cent of the value of all payments made using coins or notes, last year. Across the country, cash is now used in less than 20 per cent of transactions in stores, half the number five years ago, according to the Riksbank, Sweden's Central Bank.

"In general, consumers are very interested in new technologies, so we're quite early to adopt," explains Niklas Arvidsson, a professor at Stockholm's Royal Institute of Technology.

"Swedes tend to trust banks, we trust institutions ... people are not afraid of the sort-of 'Big Brother' issues or fraud connected to electronic payment," Arvidsson told the BBC.

Another surprising leader in ditching cash is Somaliland, a self-declared republic in East Africa.

The tiny country, which broke away from Somalia in 1991 but remains unrecognized by the international community, is competing with Sweden in creating the world's first cashless society.

Whether in a shack on the side of a road or a supermarket in the capital of Hargeisa, mobile payments are fast becoming the standard in the country.

This shift away from cash is in part due to the rapid devaluing of the Somaliland shilling, the breakaway republic's own currency which now trades at around 1 USD to 9,000 shillings. A few years ago it was just half that.

With denominations of 500 and 1,000 being the most common, just paying for a few groceries can require a wad of notes, while a medium-sized transaction requires a bag stuffed with the currency. Moneychangers often use wheelbarrows to move the piles of notes from one location to another.

With no internationally recognized banks and no formal banking system, two private companies – Zaad which was launched in 2009, and the newer e-Dahab – have filled the void, creating a mobile banking economy where money is deposited through the companies and stored on phones.

In a country with high illiteracy rates, simplicity and functionality has helped the technology flourish.Paying requires little more than typing in a few numbers followed by a code unique to the vendor. Such codes are everywhere, crudely stencilled on the sides of tin shacks or market stalls, and in more expensive establishments, printed out, laminated, and neatly placed prominently on an interior wall.

It requires no internet access, so, even the most basic of mobile phones can be used, with users moving money from their mobile banking account to another by dialling numbers and codes in a similar way to topping up a mobile phone.

In richer countries, like Sweden, digital money comes with surveillance by banks and Government, cybercrime and the exclusion of people who cannot access the formal banking system.

The Guardian newspaper reported that institutions like banks, payments companies, and governments – really do want the death of cash. They are waging a war on cash, publicly smearing it as an outdated social evil while contrasting it against a romanticized vision of cashless payments.

In China, WeChat and Alipay, have gained massive ground in mobile payments. But there are enormous surveillance implications to having hundreds of millions of transactions being routed through two companies that the Chinese Government can easily access.

According to the Central Bank of Sri Lanka, credit cards were introduced to the island in 1989. Since then the growth has been phenomenal, especially in the past few years.

Just six years ago, there were 824,309 card users in the country, with a total outstanding debt of Rs 29.99 billion. A pretty low penetration compared to global standards, particularly in comparison to advanced economies. But there are now more than 1.2 million credit cards in use – racking up over Rs 45billion in transactions in 2016.

However, the majority of the population remains wary of going cashless – and perhaps they have a point.



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