Policymakers looking to eliminate financial exclusion, a payments expert says, should be mindful of the reality that half of the world is dependent on cash.

The Narendra Modi government has been constantly endorsing the idea of cashless India post demonetisation to help formalise the world’s sixth largest economy but a consensus is evolving that that is not possible. When top financial experts from around the world got together yesterday in Delhi, what transpired was that cashless economy is a pipe dream — for India as well.

In a session on digitisation as a tool for financial inclusion, David Panetta of SEEP Network said that while going digital can create new consumer experience, it cannot eliminate the need for cash. “Poor people will continue to use both cash and digital platforms as they provide different values,” he added.

Guillaume Lepecq, a payments consultant, shared the same view. Policymakers looking to eliminate financial exclusion, he said, should be mindful of the reality that half of the world is dependent on cash. “Cash is well suited for the most fragile segments of the population,” he said.

In India, before the sudden announcement of note ban two years ago, 95% of transactions were done in cash. For some time, demonetisation forced India to switch to the cashless mode of transactions such as debit/credit card, mobile wallets, net banking etc but it did not last even 18 months.

A study by Nomura Global research on digital payments in May showed that cash-to-GDP ratio has jumped back to the pre-demonetisation level of about 11.3% on April 27 this year. “This is close to the pre-demonetisation levels of 11.5-12 percent of GDP,” Nomura had said.

A high cash-to-GDP ratio is not a phenomenon seen in India. Even countries like Russia and Singapore have cash-to-GDP ratio of 8.8% and 9.3% respectively.

This is not to say that financial inclusion via digitisation does not have its benefits: what it needs is a heart and soul. “Financial inclusion to uneducated and those living in remote areas requires technology that has heart and soul and a face – the financial advisor,” said Jorge Solis Espinoza, President, Federation of Peruvian Savings Banks, indicating the need to assist the poor into using the digital platforms.