Essay - Digital Banking - Pros & Cons | SBI PO, BOB Manipal, NICL AO 2017 Descriptive


Hello and welcome to exampundit. Here are the winners of EP's Descriptive Contest Part 2. The topic "Digital Banking - Pros & Cons" is topped by Pallavi and the runner-up is Pruthvi Ghanta.


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Digital Banking – Pros & Cons by Pallavi (Winner)

The drastic digitalization over the past few years has indeed affected almost every sphere of our lives. One of the most recent effects has been the move towards a cashless economy in India. Starting with the note ban in November 2016 due to the sudden withdrawal of the notes of Rs.500 and Rs.1000 denominations from the economy overnight, the Indian economy is going cashless.

In other words, least paper transactions will be involved, substituted by more digital transactions with the help of internet banking, digital wallets, Point-of-Sale machines, credit and debit cards, etc. These are having multiple implications on the economy with the following advantages and disadvantages.

ADVANTAGES:

• A cashless economy will allow less tension of tackling a wallet full of notes along with us, which is not at all safe in a world full of anti-socials. We can rather use our mobile as a one-stop solution for all kinds of transactions such as bill payments, fees payments, funds transfer, recharge, etc.
• It will ensure a ‘black-money free India’ or rather the so-called ‘parallel economy’ where people collect money in their closets at home without coming under the purview of tax .
• Crime rates have already started diminishing due to cash ban as most of the terrorist activities are funded with black money that has bore the brunt of this. In addition to this, other crimes such as burglary, extortion, bank robbery, etc. are also declining.
• One of the biggest advantages is the increase in the span of the income tax. Due to least involvement of cash, transactions have to be done through banks where proper KYC verifications will be done prior to banking transactions and hence, it will be easier for the Government to monitor and mend the income tax evasion by the unscrupulous persons. This will, in turn, enhance the revenue received by the Government.

Above all, the cashless economy will lead to the most convenient and secure economy for all.

DISADVANTAGES:

Apart from the brighter side of the digital economy , there are also some darker side associated with it as explained below :

• The cashless economy will see a hike in the hacking of the personal information over the internet such as credit and debit card numbers, PINs, passwords and other sensitive information due to an increase of digital transactions. In short, cyber crimes will escalate like anything if proper internet security measures are not taken.
• The poor section of India who is in majority and is scarcely covered under conventional banking system will suffer a lot, as they are solely dependent on cash for their daily wages.
• Sectors such as real estate, retail, restaurants, cement and other MSMEs, where huge cash transactions are involved are going to be affected terribly.
• Inadequate internet facility, low internet speeds, limited smartphone and broadband penetration, very less PoS machines are the roadblocks towards achieving full digitalization that is here the main substitute for cash transactions.


In short, a cashless economy can only be possible with sufficient infrastructure and planning that are required for supporting an economy like India.


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Digital Economy – Pros & Cons by Pruthvi Ghanta

The term digital economy was first coined by Don Tapscott in his book “ The Digital Economy : Promise and Peril in the age of Networked Intelligence.

Few decades ago India faced severe problem , Nearly half of our country’s population didn’t have any form of identification, later Aadhar Cards provided digital identity to our people. Likewise now India is facing another problem of tax evasion and black money. So to curb these pitfalls Finance Minister Arun Jaitley in his Budget 2017-18 speech promoted digital economy with a string of measures to make e-transactions easier. Also Ratal.P.Watal who headed the committee on Digital Payments termed “ Digital payments are to finance what the wheel is to transport.”

Indian government is spending huge money for schemes to make people use digital currency like Digi Dhan Melas, schemes like Lucky Grahak Yojana, Digi Dhan Vyapar Yojana, No cash transaction above 3 lakh rupees, referral and cash back schemes to use BHIM app,etc., Government decided to remove all the duties on point of sale machines to promote digital transactions which is a part of govt’s target of 2500 crore transactions in 2017-18. Also banks have targeted to introduce additional 10 lakh PoS terminals by March 2017.

This is a good business opportunity for new companies like payments banks, Digital economy increases India’s tax base so that this amount can be utilised for more developmental activities. The cost benefit ratio is high using digital currency as there is no printing, manual security, life duration to the currency.

But in other aspects there are  several problems using digital economy , the first and foremost one is security from hackers as many confidential passwords are stored online there is high probability that hackers may steal one’s personal information.  In addition to this operational costs are high as the services offered charges as per your transactions like gateway fee, transaction fee etc. Another biggest problem vests with the illiterate as majority of Indians are living in rural and are illiterates, as they don’t know how to use these and they even don’t believe all this stuff.


So, by increasing banking penetration towards the masses, Decreasing the costs of Point of sale terminal, ensuring high security features to the digital economy may paves way to a New India.







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