I have been reading the news items on the volume of counterfeit notes surfacing in India. It looks like more than half a billion dollars worth of fake rupees are circulating around the country. The banking industry must be quaking in their boots on the volume of menace they carry. It is distressing to note the thumb sucking responses and comments - terror trail, economic terrrorism, police cases.....
What is the most telling response to fake notes? Electronic money. Central Banks and regulators will be better off devoting their energies to promoting Electronic money (debit cards, credit cards, mobile payments, ACH, etc) rather than investing in technology to make currency notes more 'secure'. Till date, I don't think any country has managed to come up with a fool-proof currency note that can't be replicated.
But how does one bite the bullet here? While digital money is growing, it is still nowhere close to consumer spending on cash. In India, a considerable amount of spend occurs in cash to stay outside the tax net.
If you ask me, at least one country should take the lead and simply stop printing currency notes for mass circulation. Invest that money to strengthen the electronic payments network. Shock treatment may work well where medication hasn't so far! It may sound quite a drastic step; but may be the only way to get people to using electronic currencies.
It only takes one bold move to complete the revolution.
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