Although it is difficult to believe in the twenty-first century, there are indeed countries with large...

Although it is difficult to believe in the twenty-first century, there are indeed countries with large businesses that have a cash-only policy. Cuba is one of them, and Armenia used to be one. Credit cards are either not accepted or are risky to use. Looking at this issue from the point of view of the country, do you think that this policy is a help or a hindrance to the economic strength of their country? Would someone from the United States be able to do business with a company in a country like Cuba under these circumstances?

Expert Solution

Ya Well Definetly cash only policy of Cuba and Armenia is hindrance to the economic strength ot their country,I throwing light on how cashless payments help economy grow

Cash is no longer king. In fact, economies that are more cash intensive tend to grow slowly and miss out on significant financial benefits. Conversely, economies that switch to digital are more successful; the switch can boost annual GDP by as much as 3 percentage points, BCG research shows.

Numerous examples around the world illustrate how cashless payments are economic propellers. Bangladesh’s bKash, which enables transfers via mobile phones, has spurred growth and boosted financial inclusion in that country. The upside comes not from more money but from digital’s role in simplifying the process of sending and receiving payments. Among advanced economies, Sweden and South Korea have moved steadily away from cash. (Cash transactions in Sweden made up less than 2% of the value of payments in 2018, for example.) The result has been a shrinking gray economy, booming online commerce, and a sharp reduction in fraud.

ash is inherently problematic. Undeclared payments in cash lead to tax gaps, and there are costs associated with handling, printing, transporting, and safeguarding cash. One major North American bank spends approximately $5 billion per year processing cash and check transactions and servicing ATMs. In the UK, the cost of free-to-the-customer ATM withdrawals is estimated at about £1 billion a year. Where ATM fees are charged, they are regressive, impacting lower-income demographics more than others.

Payments using a card, app, or computer, conversely, are transparent, clean, and usually quite simple. No trips to the ATM are required, and there’s no need to worry about carrying large amounts of cash in public. There is no cost of handling (although those savings are more than offset by card fees paid by merchants and indirectly by customers).

Further, because cards, apps, and other digital solutions make it easier to send and receive money, they increase economic activity and generate a wide array of financial and nonfinancial benefits.

BCG estimates that a move to a cashless model would add about 1 percentage point to the annual GDPs of mature economies and more than 3 percentage points to those of emerging economies. (See Exhibit 1.) One reason is that mobile money can increase the velocity of value transfers. In addition, digital transactions provide more transparency, making it easier to offer and obtain financing.

jeff jeffy answered 2 years ago

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