ELC231 MID SEM TEST JUNE2020 SET1 (1) RAZI PDF

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CONFIDENTIAL

1

LG JUNE 2020/ELC231/ELC230/SET 1

PART A: READING COMPREHENSION (25 MARKS) Read the passage below and answer all the questions that follow.

Cashless Society I

A cashless society might sound like something out of science fiction, but it is already on our way. According to The Malaysian Reserve (2019), with 70% of the consumers favouring sellers that accept digital payments compared to those that only accept cash, Malaysia is one of the countries that is fast becoming a cashless society. Several powerful forces are behind the move to a cash-free

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world, including governments and large financial services companies. Even critics of the mainstream financial system and government-issued currencies favour doing away with cash. However, we are not there yet. In addition to logistical challenges, we need to address several social issues before giving up on cash entirely. According to the Visa Consumer Payment Attitudes Study

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(2018), there is a growing preference for digital payments among Malaysian consumers as seen in a similar trend based on their VisaNet data. Digital payments are becoming the method of choice with an increase of 21% compared to the previous year. There are many benefits and disadvantages of being cashless society can have on money and banking.

II

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First, the benefit of a cashless society is that lesser number of crimes can take place since there is no tangible money to steal. It is easy to steal money if we use cash, whether the amount is large or small. Illegal transactions such as drug trade also typically take place with cash so that there is no record of the transaction and that the seller can be certain about getting paid. The next benefit

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of being a cashless society is that performing money laundering becomes much harder because there is always a paper trail of the source of funds. Financial crime should also dry up as it is harder to hide income and evade taxes when there is a record of every payment made and received. Next, it costs money to print bills and coins. Businesses’ owners need to store the money, get more

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when they run out, and deposit cash when they have too much on hand. By going cashless, less time is used and cost is lowered compared to handling paper money. Hence, it lessens the cash management hassle. In addition, the benefit of going without cash is international payments can be done easier. © Hak Cipta Universiti Teknologi MARA

CONFIDENTIAL

When visiting a foreign country, buying local currency is always a must.

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However, payments are easy if both nations can handle cashless transactions. Instead of figuring out another currency, the smart device handles everything that is needed. Therefore, it makes currency exchanges easier while traveling internationally.

III

However, there are several disadvantages in moving towards a cashless

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society. Depending on the perspective, going cashless is not all roses. The first drawback of a cash-free world is privacy issue. Electronic payments mean less privacy. We might trust the organizations that handle our data, and we might have nothing to hide, but our payment information could turn up in ways that are impossible to predict. This is because cashless transactions allow us to spend

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money and receive funds anonymously. The second disadvantage is that going cashless provides opportunities for hackers who are the bank robbers and muggers of the electronic world. In a cashless society, the consequences are higher if somebody drains our account because we might not have alternative funds to turn to. Though we are protected under federal law, we will still face

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significant inconveniences and other consequences after a breach. Then, many are concerned that we are not technologically prepared for a cashless economy. In the event of a glitch or power outage, consumers might be left unable to purchase basic essentials when they need them. Likewise, merchants have no way to accept payments from customers when systems malfunction. Even

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something as simple as a dead phone battery could leave us ‘penniless’.

IV

Moreover, going cashless could fuel inequality in the society. The poor and unbanked will have an even harder time in a cashless society. A recent study found that 6.5% of households in the United States were unbanked in 2017. They do not have smart devices for making payments, and those who operate in

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the informal economy would have no way to get paid or receive aid. In addition, when we spend with cash, we feel the “pain” of every dollar we spend. In contrast to electronic payments, it is easy to swipe, tap, or click without noticing how much you spend. Consumers will need to renew their efforts to avoid overspending. Finally, when money becomes electronic and if the government charges banks a negative interest rate, they can pass it on to customers in the

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form of fees. Dropping the interest rate is typically a move to stimulate an economy, but the result is that money loses its purchasing power.

V

Payments happen electronically without using cash. It means instead of using paper and coins to exchange for a value, a transfer of funds is authorized to

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another person or business. The logistics are still developing, but consumers have some hints on how a zero-cash world look like and how it might evolve them. Credit cards and debit cards are among the most popular

cash

alternatives in use today. Nonetheless, cards alone are insufficient. Electronic payment apps, like Zelle, PayPal, and Venmo, are helpful for peer to peer

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payments, or P2P payments. In addition, bill-splitting apps allow friends to split their bills easily and in a fair manner. In addition, mobile payment services and mobile wallets like Apple Pay provide secure, cash-free payments. In most countries that use cash sparingly, mobile devices are the most common tools for 75

payments.

VI

Several nations are already making moves to eliminate cash, with the push coming from both consumers and government bodies. Sweden and India are two notable examples for such countries. It is common to see “No cash accepted” signs in Swedish shops and some banks are no longer handling cash. Cash payments are only 15% of retail sales in Sweden and at some point,

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Sweden has become the model for a modern cashless society. Consumers are mostly happy with this situation, but the poor and elderly still struggle with an electronic world. Meanwhile in India, the government banned 500 and 1,000 rupee notes in November 2016 in an effort to penalise criminals and those working in the informal economy. The implementation was rushed and

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controversial, and roughly 99% of those banknotes were deposited; meaning criminals did not lose much money. Electronic transactions increased temporarily, but they fell to pre-demonetization levels in the following year. Those examples suggest that going cashless is possible with sufficient infrastructure and gradual progress. The remaining questions centre on how the deprived consumers will fare when cash is history. Adapted

from

https://www.thebalance.com/pros-and-cons-of-moving-toa-cashless-society-4160702

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QUESTION 1 State whether the following statements are TRUE (T) or FALSE (F).

i.

Digital payment is the only preferred method by Malaysian consumers

T

when making cashless purchases. ii.

Financial crimes are more evident with cash transactions.

F iii.

Managing spending is more difficult with cashless transactions.

iv.

The majority of Swedish consumers are pleased to practise zero-cash transactions.

T T (4 marks)

QUESTION 2 What do the following words mean as used in the passage?

i)

evade

(line 23)

: AVOID

ii)

glitch

(line 48)

: MALFUNCTION

iii)

stimulate (line 62)

: RESTORING

iv)

notable

: SIGNIFICANT

(line 78)

(4 marks) QUESTION 3 All of the followings are TRUE about cashless society except (circle two (2) answers)

i.

The critics of mainstream financial system and government-issued currencies have issues with going cashless.

ii.

Travelling is more convenient with cashless international transactions.

iii.

Cashless society provides opportunities for cyber criminals to breach consumers’ privacy.

iv.

The society perform can only perform digital payments by using mobile devices. (2 marks)

QUESTION 4 State two (2) advantages of moving towards cashless society. 1) that lesser number of crimes can take place since there is no tangible money to steal.

2)performing money laundering becomes much harder

(2 marks) QUESTION 5 Based on the passage, how can privacy breach occur in a cashless transaction? our payment information could turn up in ways that are impossible to predict. This is because cashless transactions allow us to spend money and receive funds anonymously. The second disadvantage is that going muggers of the electronic world. In a cashless society, the consequences are higher if somebody drains our account because we might not have alternative funds to turn to.

(2 marks) QUESTION 6 Explain what the author means by the following statement. “Depending on our perspective, going cashless is not all roses.” (line 36)

It means being cashless also have their own challenges to through it

(2 marks) QUESTION 7 Based on the passage, why is inequality possible in a cashless society?

This is because the poor and unbanked will have an even harder time in cashless society.They do not have smart devices for making payments and those who operate in the informal economy would have no way to get paid or received aid.

(2 marks)

QUESTION 8 How is a transaction being done in a zero cash world? BY USING CASH ALTERNATIVE SUCH AS DEBIT OR CREDIT CARDS. FURTHERMORE SERVICE LIKE APPLE PAY ALSO PROVIDE SECURE, CASH FREE PAYMENTS.

(2 marks) QUESTION 9 What can you infer from the following statement? “In addition, when you spend with cash, you feel the “pain” of every dollar you spend.” (lines 56-57) By using a traditional transactions method,you will acknowledge how much money that you would be spending.

(2 marks)

QUESTION 10 Should Malaysia become a zero-cash nation? Provide two (2) reasons to justify your answer. YES. MALAYSIA BECOME A ZERO CASH NATION BECAUSE IT WILL MUCH CONVENIENCE TO DO TRANSACTIONS BY USING DIGITAL TRANSACTION LIKE DEBIT/CREDIT CARDS AND ONLINE PAYMENT SYSTEMS ESCPECIALLY DURING THIS CURRENT SITUATION COVID-19 BECAUSE WE MUST FOLLOW SOP AND KEEP DISTANCE FROM OTHER PEOPLE IN ADDTITION SMALL ENTREPRENEURS CAN GET OPPORTUNITIES TO EXPAND THEIR BUSINESS INTO THE INTERNATIONAL MARKET.

(3 marks)

END OF QUESTION PAPER...