Given the dominance of cash—93.5% of debit card transactions still take place at ATMs, with a meagre 6.5% share going to Point of sale (PoS) terminals—it is necessary to find innovative ways to curtail the cash economy. RBI has come out with a paper on improving the card acceptance infrastructure for increasing the number of PoS terminals in proportion to cards issued, and the measures suggested include setting up of a fund for this and rationalisation of merchant discount rates (MDR) of banks and card companies. But while RBI and the government are contemplating the increasing use of electronic payments, technology may be of immense help in finding effective solutions.
The Unified Payment Interface (UPI) developed by the National Payments Corporation of India (NPCI) can help bank account holders to transfer money via mobile phone using the Immediate Payment Service (IMPS). Unlike the current IMPS where one requires either bank account details or a seven-digit code called Mobile Money Identifier (MMID), the UPI will allow users to set up a single unique ID to initiate payments without sharing of personal information. In terms of charges, too, the UPI is a better option than the MDR-based model. Clearly, the real solution for curtailing the cash economy is in extensive use of technology application.