“Ladies and gentlemen, as of January 1 of next year we will begin a process of withdrawing physical banknotes from the market and all commercial transactions will be carried out exclusively through digital means” announces a President 4.0 with a view to taking an orderly step with a destiny towards a future that we can already imagine.
Claudio Zuchovicki, a Bachelor of Administration and one of the country’s leading finance analysts, thinks about it “we must take the context into account. It is something that is going to happen and is already happening in many countries where physical money tends to disappear from everyday transactions“Indeed, and according to a recent study, countries that move towards the complete digitization of their economy obtain great savings and benefits for society as a whole.
I invite you to think about this scenario: we will not need to move physical money, therefore, the costs and times of replacement, printing, transport of flows, maintenance of ATMs, associated insurance, and risks of theft of tickets would disappear completely. And not only this, heThe benefits would also be social, environmental, economic, tax, and strategic. “We must consider that, in Latin America and especially in Argentina where around 50% of the economy is informal, which becomes a challenge to implement a complete digitization,” he says. Zuchovicki, so we have to weigh the costs versus the benefits. For this I propose a “traffic light” for the expected results of this transformation: in green we would have the great benefits or winners, in yellow some annoyances or obstacles to overcome and in red some warning signs.
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Besides issues inherent in banknote printing and coin minting – within the category verde we could add el laundering of the economy, higher collection and the possibility of reducing tax pressure due to this situation. Perhaps we could expect to halve taxes such as VAT, think about eliminating income tax for employees (or leave it in some cases, but applicable on the difference between what is received and what is spent) and define reduced steps for the SMEs, among other alternatives. In addition, if we handle ourselves exclusively digitally with cards, transfers, digital wallets and even with instruments such as SUBE for everyday purchases such as a prepaid card, businesses, their suppliers, employees, will only be able to exchange products and services with digital money, so that they will have no choice but to be within the system.
José Dapena, MSC in Finance and Economics from the London School of Economics and UCEMA professor affirms “if we manage to digitize 100% of economic transactions, all decisions and definitions of economic policies will be made with much more transparency, speed and efficiency. Transactions remain registered, they will be done almost instantaneously, and at a cost several times less. ” This situation will allow making decisions based on data since, by making visible the movement of flows of digital money in real time in different areas, will enable the “digital government” to know, for example, what is (or will be) the impact of a reduction of a tax on a basket of products and how this measure impacts (or will impact) the total economic ecosystem, with the possibility of rely on analytics and artificial intelligence tools. A) Yes, a government may outline segmented incentive policies, even with a seasonal, regional or sectoral perspectivel. There will no longer be average decisions for average problems, but instead informed decisions based on true, measurable, auditable, and real-time data.
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And what about inflation? Could full digitization be a cure, or at least an aid, to treat this scourge? In this regard, Dapena indicates “What serves to control inflation is to avoid a significant fiscal deficit, and its corresponding monetization through issuance, and on the other hand, generate confidence and predictability to generate investment conditions. What it does allow (digitization), which Mercado Libre has achieved, for example, among other online transaction platforms, is to reduce price volatility in an inflationary environment, where it is not entirely clear what the true price of goods and services is, and therefore the instant comparison through technology allows to have reference prices. “
In the yellow category we must consider high informality as a problem to incorporate these workers into the system and that companies do not die on the road. The first step is to give advance notice, to give everyone involved the opportunity to plan the process, knowing that it will be imminent and for everyone the same. And it is not impossible today. That a person works informally does not imply that they cannot have a cell phone, a prepaid card (SUBE) or an account to receive some social assistance. Gentlemen, luckily there are also successful models like Ualá! There is no reasonable excuse for not taking this step. In addition, we can consider some aspects to normalize the incorporation of people who are currently outside the system during this transition, for example, defining a minimum vital salary below which any transfer received by this informal worker is not affected by any tax or burden. Simple, as if it were kept informal, but with a digital formality that will allow you, based on having your digital money, to formally transact within the economy.
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Within the yellow category we must also add the need for the State to integrate its systems because, without them, data analytics will only be in the hands of those who own the platforms or wallets. Incorporating into the Mi Argentina app the possibility of integrating the different means of digital payments is something that can help to this end. It is true, within this initiative it will be necessary to rethink the role of the Banks since the State would act as a payment provider. Dapena adds, “Although the digitization of economic transactions makes the economy more transparent, it should also be taken into account that informality is a defense mechanism against the arbitrariness of political decisions. Therefore, management must be extremely responsible.”
In the red group there are several observations from different points of view, beyond the connectivity issues in some regions, which we must quantify. First, people who do not work and do not receive a pension, retirement or subsidy, would have no way of accessing physical money to survive. It is true, and precisely this requires a specific plan for this segment, which does not imply abandoning the initial hypothesis since it may ensure greater collection and transparency, which implies that this group of people may be incorporated into some of the instruments of social help.
Another hot topic has to do with confidentiality and cybersecurity. Although it is true that today Banks, Fintechs and Bigtechs have high standards for this, that is why today they work and have done so without major inconveniences after the strong acceleration in their use due to the pandemic, processes based on blockchain, digital onboarding and other mechanisms for the protection of personal data to avoid new crime schemes. Although in a digital world everything is much more traceable, precautions must be taken.
We are at a good time to implement an economy cashless to help us build a fairer, more ethical and efficient society
“Today we are in a world of services. We become owners to be users: everything is rented, an AirBnB, an UBER, etc., so digital credit will be the only letter of credit that exists for the future. We can see how is the payment history of a person and based on that grant a loan. It will not be necessary to request a mortgage, have guarantees, demonstrate equity, present balances, as when we do not have that history in the face of informality “, indica Zuchovicki.
We are in a good moment. People are already used to transacting digitally. The businesses have done it to survive. However, the transformation has occurred more from individuals than from strategic planning by the State.
More taxpayers, less taxes, more collection, more data and transparency, lower costs and risks, it may even help to sustain the required pension system. We are at a good time to implement an economy cashless to help us build a fairer, more ethical and efficient society, as required by the new world to be part of it. Today we have everything to make it possible, the only thing missing is the decision to take this (big) step.
* Engineer specialized in strategies, innovation and digital transformation. Author de Inspiración Extrema, Head of Innovation & Digital at Stefanini Argentina and lecturerto. Member of the Board of Directors of the Buenos Aires Tech Cluster.
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