Though it was always clear people would go back to making cash payments once the central bank was able to print enough to replace the demonetised currency, the switch away from digital payments has been a lot slower than expected—that is, a large portion of those who switched to digital out of compulsion have decided to stay on thanks to the convenience. Based on representative data from four banks put out by RBI on a weekly basis, the use of debit/credit cards at outlets has fallen from Rs 16.8 crore a day in December to Rs 14 crore in the first 12 days of this month, but that is much higher than the Rs 11.7 crore in November, the month in which the demonetisation took place—based on data for all banks, it has to be kept in mind, debit/credit card payments in November were, in any case, 17% higher than those in October. Thanks to their much smaller base, other digital payments such as UPI and mobile wallets have seen their usage either rise or stabilise at higher levels. UPI usage was a minuscule Rs 3 crore a day in November and this rose to Rs 23 crore in December, Rs 54 crore in January and Rs 69 crore in the first 12 days of February; mobile wallets, based on representational data, saw usage rise from Rs 44 crore in November and stabilise at Rs 67-68 crore a day since—the highlight, of course, is that UPI payments are now on a par with wallets.
In terms of transaction volumes, of course, digital remains a small fraction, so the government must keep pushing to help it grow. The budget’s cash-back for merchants using UPI’s BHIM is a great idea and, prior to this, tax rates had been reduced for small merchants who accepted more digital payments. The budget also talks of augmenting the financial inclusion fund—the sooner this is done the better, since defraying the commissions will help fuel digital payment acceptance at the merchant level. Once NPCI is able to roll-out its common Quick Response codes for merchants for Master/Visa/RuPay cards so that these can be paid using mobile phones, this will further boost digital payments. AadhaarPay is critical in this context since this will allow even those without mobiles to make digital payments. The fact that there are 14 million BHIM downloads but just 4 million users, of course, suggests digital education is critical—progress in the government’s education drive for this is vital; through its common service centres, the government has reached out to over one crore individuals and merchants in rural and semi-rural areas to train them on making/receiving digital payments.