Kicking the cash habit

The government has created a huge behaviour change movement. It now needs to support this with adequate follow-up measures and communication programmes

Photo: Reuters
Photo: Reuters

Jennifer Cross, professor of sociology at Colorado State University, has a fascinating TEDx video on “Changing behaviour versus changing attitudes”. She picks up on behavioural economics fundamentals to say that often it is too difficult to change attitudes to get people to change behaviour; it may be easier to get people to change behaviour first (through the right communication or trigger) and then attitudes will follow.

One interesting example she speaks about is how hotels tried getting their guests to reuse the towels, to avoid unnecessary laundry/water use. In one set of rooms, they had put up a poster saying how much water is saved if a guest reuses his towels when he stays for two nights and how the water saved can have a positive impact on the environment. In a matching set of rooms, a different poster, this time saying that 83% of the guests who stayed in the rooms reused their towels. When the behavioural experiment results were tallied up, the difference between the two sets of rooms was nothing less than dramatic; the behaviour-reinforcing rooms outperformed the attitude-changing message rooms by a factor of 3:1.

I am seeing something like this unfolding as an aftermath of the government of India’s move to demonetise Rs500 and Rs1,000 denomination notes.

In consumer behaviour terms, the government has been trying to change attitudes by telling people how it is bad to hoard cash and avoid paying taxes. How easy it is to open a bank account and how there are so many easy options to the cumbersome task of carrying hard currency notes. They even had an amnesty scheme a few months ago. Those messages seemed to have had limited impact.

What we are now seeing is the effort to change behaviour in the hope that attitude will change in due course. People who were not used to visiting banks or depositing money in the bank are now standing in queues to deposit cash. People who used to pay for their luxury purchases with high-denomination notes are now taking out their credit cards. (I wonder why it is that Paytm thanked the prime minister for the latest monetary move and not Visa and Mastercard, who have been at it for years. A missed opportunity?)

A number of economists have opined on the subject, including some who are convinced that this could lead to a recession, at least in the short term. While most financial market experts do feel this move will have a beneficial effect on the long-term status of the Indian economy, many have pointed out the need for the government to use big data analytics tools to ensure that the guilty do not get away by having their employees/staff to deposit huge hoards of cash in their multiple accounts (apparently that was the way the last demonetisation was handled by the ‘kaala dhanda walas’). That was in the late 1970s. But now, all banks are computerized, all bank account holders have a permanent account number and they also have an Aadhaar number. So, if big data analytics kicks in, we may end up having the guilty coughing up significant amounts as taxes. There is, of course, the lurking fear that this may unleash a new form of tax police raj.

In marketing, we often try to get consumers to change behaviour and then expect attitudes to follow. For example, when toothpaste brands started telling us to brush our teeth twice a day, they did not spend too much time to explain the dental hygiene story. They just told us to brush before going to bed. Or when the government wanted to tackle iodine deficiency in the Indian population, they did not go about telling us all about the importance of iodine. They just made it mandatory for all salt brands to add iodine to their products. There are numerous other examples.

The first step towards kicking the cash habit has started in full earnest, albeit with a lot of time wasted in queues. But the shock and awe of the demonetisation will have many other side-effects. Will consumers rush to gold as a safe haven? Or will they start using their bank accounts for the purpose for which it has been opened, to keep their savings? Will it motivate those who were running a parallel business in black to take a fresh look at their operations and switch to an all-white mode of operation? A number of people in the salaried class do not even understand how almost all small businesses in India run on two parallel tracks. Some accounting software products even have a parallel account system, maybe even three accounts.

The government has created a huge behaviour change movement. It now needs to support this with adequate follow-up measures and communication programmes. Kicking the cash habit is not going to be easy, but with the right prods, it can happen. And that is something that behavioural economists can speak about in their future TEDx lectures.

Ambi M.G. Parameswaran is a brand strategist and founder of He will take stock of consumers, brands and advertising every month. The views expressed here are personal.

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