A cashless economy is where transactions occur via cards, payment wallets and other digital modes, replacing traditional payment modes such as cash or coins. In other words, the concept of a cashless economy is where the flow of money is facilitated via digital means such as mobile wallets, debit cards, credit cards, or net banking. 

Cashless Payment Modes

1.      Mobile Wallet

A mobile wallet is a virtual wallet that you can access with the help of your smartphone, and it acts as a payment gateway for all your payment transactions. These include mobile wallets provided by different Telcom companies in Uganda such as MTN Mobile money and Airtel Money.

2.      Plastic Money

Plastic money is one of the most common and relied-upon cashless payment modes that people have been using for a long time now. It includes different categories of cards, such as debit cards, credit cards, and prepaid cards, in both physical and virtual forms.

3.      Net Banking

Net banking is different from how cards and wallets work; it is a mode of transfer of money from one bank account to another. Before using wallets and UPIs, net banking was a popular way to transfer funds and is still widely used.

With net banking, you can log on to your bank account online and initiate funds via Real-Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), or Immediate Payment Service (IMPS).

Advantages of a Cashless Economy

1.      Transparency in the system. Digital transactions bring transparency and accountability to the monetary system. Digitizing monetary transactions helps banks recognize customers and track money flow which helps to reduce financial fraud and crimes such as tax evasion and counterfeit money in the economy.

2.      Convenience. The entire process of cashless systems ensures easier payments anytime and anywhere. For instance, if you want to send money to your family residing in another city, you don't have to go through the hassle of visiting the bank to initiate the transaction.

3.      Reduced cash-related crimes. One of the primary reasons the government decided on demonetization was to restrict the use of counterfeit money. Moreover, digital transactions always help curtail black money practices that negatively impact the country's growth.

4.      Ease of international transactions. Earlier, engaging in international transactions was troublesome due to the absence of facilities such as net banking and plastic money. Government initiatives to regulate digital payments, have eased up the process of international transactions for people living within and outside the country.

5.      Reduced cost on currency production. As the country shifts to digital payments, production costs for currency reduce significantly, eliminating additional payouts required by the government.

Prepared by

Babrah Nandera

Accountant at BKI

0785553059