by Raunak Mittal (MALD 2018)
Demonetization, a bold move executed by the current government in India took everyone by surprise. Good or bad, it is one of the biggest policy decision taken by an economy as large as India in the recent past. The aspects that interest me in this big policy decision are the effects of this move towards the digitization of finance, including digital payments and alternative lending.
There has been a focus on alternative modes of credit lending ,not just in developing economies but also in the developed economies like the US. As part of my ongoing research, I had the opportunity to talk with the founders and leaders of alternative lending startups like Numerated, DistilledAnalytics, Branch.co and Entrepreneurial Finance Lab in the US. However, for getting a closer look on what is happening in India post the biggest strike on cash, I continued my research with the help of IBGC by visiting India during in August 2017. My research plan was two-fold: to meet startups that are operating in the space of digital finance or alternative lending; and to observe the change in people’s behavior in dealing with day-to-day transactions nine months post-demonetization.
When can we stop using cash?
by Kai Ryssdal & Maria Hollenhorst
Here’s a question: How much cash is in your wallet right now? If you answered not a whole lot, that’s not very surprising. It’s getting ever easier to operate in this economy without carrying cash. You tip your Lyft driver on your phone, you pay your dinner bill with a credit card and you Venmo your friends to split the check. Consider then, the future of cash. Bhaskar Charkravorti, the senior associate dean of international business and finance at The Fletcher School at Tufts, has done a number of studies on the subject, including the “Cost of Cash.” Marketplace host Kai Ryssdal spoke to him about the future of bills and coins in this changing world. The following is an edited transcript of their conversation.
Listen to the interview with Dean Chakravorti on Marketplace
Cash is falling out of fashion – will it disappear forever?
Cash is being displaced in so many ways that it’s hard to keep track. There are credit cards and electronic payments; apps such as Venmo, PayPal and Square Cash; mobile payments services; cryptocurrencies that operate outside the purview of central banks; and localized offerings such as Kenya’s mPesa, India’s Paytm and Bangladesh’s bKash. These innovations are encouraging cashlessness across communities worldwide.
It’s reasonable to expect cash to follow the path of other goods that have been replaced by digital alternatives, such as photos, music and movies. Will cash – and the ATMs that dispense it – experience a “Blockbuster” moment and disappear from our neighborhoods?
Read the full piece from Dean Chakravorti in The Conversation
The End of Money
by Emily Cashen
Bhaskar Chakravorti, an economics scholar and Executive Director of the Fletcher School’s Institute for Business in the Global Context, said: “The initial argument made by Modi was that these bank notes were demonetised to flush out the underground economy – known as the ‘black economy’ in India – or to flush out the illegal activities carried out by underground groups and terrorist groups.”
Read the full piece at World Finance
Early Lessons from India’s Demonetization Experiment
Did India just pull off a monetary and political miracle?
Consider the sequence of events in its demonetization saga. In November the government made a high-risk, high-stakes economic intervention in the world’s largest democracy, with an objective to reduce corruption. Overnight, 86% of cash in circulation was voided. In a country almost 90% cash reliant, chaos ensued. As I said at the time, it was a case study in poor policy and even poorer execution.
Read the full piece from Dean Chakravorti in Harvard Business Review
by Kim Wilson, CEME Senior Fellow & Lecturer, The Fletcher School
Predictably, the long tentacles of financial inclusion have coiled themselves around the most vulnerable targets of humanitarian aid: low income refugees, migrants and displaced populations (hereon: “refugees”).
Just as predictably, the financial inclusion agenda is driven by suppliers (aid providers, donors, financial intermediaries and governments). Few refugees are demanding to be included in a digital/formal ecosystem. That does not mean they don’t appreciate the shelter, food and cash that humanitarian agencies have mustered on their behalf. They do. They also appreciate the efforts of those same agencies to make cash assistance easier. E-cash that can be transformed into physical cash at convenient times and places is an example. Use of debit cards at ATMs to withdraw cash from digital accounts can cut valuable time otherwise spent waiting in long cash distribution queues. Very appreciated, indeed.
Tackling the SDGs: are business targets clear, measurable and down-to-earth?
I was struck by the rather unprecedented linking of arms recently at Cannes by CEOs of the advertising industry’s “big six” competitors; WPP, Dentsu, Havas, IPG, Omnicom and Publicis, announced they would commit to the UN Sustainable Development Goals (SDGs) to collectively build awareness and work with their clients in achieving them. Visionary commitments to sustainable development are inspiring and create halos for corporate brands. However, meaningful change will require companies to go beyond visionary intent or uplifting hashtags. Companies need to focus, declare specific targets and invest resources, people and time in a few, carefully chosen areas. Moreover, these priorities should be set at the very top of the organisation.
Read the full op-ed from Dean Chakravorti in The Guardian
After more than 2,000 years as king, cash is facing competition. From credit cards to the myriad new payment technologies available today, there are now safer, cheaper, and more accessible payment options for both consumers and businesses. Yet cash continues to hold on. Why? What are the intrinsic benefits of cash that no alternative can provide?
Read more about Fletcher’s original research on the topic:
As part of our “10 Questions” Series, we delve into hard questions of international business not easily answered by a single book, class, discipline, or school of thought. They herald a future where the world and the world of business are ever more interconnected, where decisions can’t be made in a bubble, where real expertise demands deep ‘contextual intelligence.’ This series reflects that contextual intelligence we cultivate in our students in the MIB program.
The cost of cash isn’t stopping people from using it
by Guy Dixon
More than an inconvenience, the real pressures on physical money is the sheer cost of cash. “For a number of reasons, cash is a drag on the economy. It imposes costs on consumers. It imposes costs on businesses. And most significantly, it imposes costs on the Treasury,” argued Bhaskar Chakravorti, senior associate dean of international business and finance at the Fletcher School at Tufts University in Medford, Mass.
Read the full article on the cost of cash, with quotes from Dean Chakravorti, in The Globe and Mail