The rapid development of technology, information and communication have presented another way in making payments, cash is no longer the only choice because there are electronic or cashless payment methods. However, Kompas daily newspaper on August 14, 2014, stated that Indonesia was still in the initial stages of applying cashless payments, which was only 31% of total payments while the rest is still paid in cash. It is still behind other ASEAN countries where the use of cashless payments has exceeded 50% of total payments.
Bank Indonesia officially launched Cashless National Movement (GNNT) aimed at raising awareness among the public, business people, and government institutions to use cashless payment instruments. Bank Indonesia recognizes the importance of cashless payment in order to reduce the cost money printing and circulating, transactions are faster, safer, and more convenient. Furthermore, cashless transactions are also more transparent and accountable because each transaction is recorded and tracked.
There are other benefits from cashless transactions, banks can easily manage liquidity and increase turnover. Furthermore, users can also get benefits from the discounts and interest. The advantages offered by cashless payments will make people shift to using cashless money. This trend will reduce the need for cash, which in turn will reduce the money distributed by Bank Indonesia.
Dr. Wasiaturrahma and her team conducted a study on the effect of cashless payments on real cash demand in Indonesia. The method was the Error Correction Model (ECM) using secondary data from 2010 to 2015. The independent variable are the amount of money circulated by Bank Indonesia and transaction value of debit / ATM card, credit card, and e-money.
Research showed that the transactions with credit and debit / ATM cards in the long run significantly influence the amount of cash in Indonesia. The negative correlation was shown by the credit card variable. It means that the use of a credit card can reduce the amount of cash in Indonesia in the long run, while the debit / ATM variable has a positive correlation with cash in Indonesia. Debit / ATM card transactions actually increase cash in the community in the long run, because debit / ATM cards are mostly used to withdraw cash from ATM machines. The e-money variable does not significantly affect cash circulation in the community in the long run.
The short-term equation results showed that only one variable that affects cash, the value of debit / ATM card transactions while the value of credit card transactions and e-money does not significantly influence the money circulated in Indonesia. The debit / ATM variable has a positive correlation with cash. It means that in short term, one percent increase in debit / ATM card transactions can increase cash by 0.557211 percent, assuming the other things are considered constant (ceteris paribus).
All variables (debit / ATM, credit card), and e-money variables have not been able to replace the role of cash in Indonesian society. The amount of cash in circulation increases from year to year. If someone does not have enough cash to meet their needs, they will switch to cashless payments.
Based on the results of the study, there are several policy recommendations: banks and other financial institutions are expected to cooperate with various parties to increase cashless payments, such as by cooperating with traditional markets, big shops and small shops. Secondly, the government should improve dissemination on the use of cashless payments. Third, the issuer of cashless payments is expected to provide more incentives to the public so that people prefer using cashless payments.
Author: Shochrul Rohmatul Ajija
Details of this article available at:
Wasiaturrahma, Yuliana Tri Wahyuningtyas, Shochrul Rohmatul Ajija. 2019. Non Cash Payment and Demand for Real Money in Indonesia. Journal of Economics, Business, and Accountancy Ventura Vol 22, No 1.
