Digital payments: India takes to cashless payments, but much more needs to be done

By: | Published: October 6, 2017 5:01 AM

Naysayers who had cited the slowing digital-payments figures—volume and value of such transactions both fell from a March 2017 high of 893.9 million transactions and Rs 149.58 trillion, respectively, in March 2017 to 883.4 million and Rs 109.81 million in August 2017—to say that the post-demonetisation digital-payment momentum wouldn’t sustain should look at RBI’s provisional data for September.

digital payments, cashless payment in india, india cashless paymentSome of the impressive September showing could be because of one-off factors like festive season spending—hence, much more needs to be done to get the digital payment momentum to achieve, in a manner of saying, cashless-economy criticality.

Naysayers who had cited the slowing digital-payments figures—volume and value of such transactions both fell from a March 2017 high of 893.9 million transactions and Rs 149.58 trillion, respectively, in March 2017 to 883.4 million and Rs 109.81 million in August 2017—to say that the post-demonetisation digital-payment momentum wouldn’t sustain should look at RBI’s provisional data for September. As per a report in Mint, the total amount transacted digitally has risen to Rs 124.69 trillion last month even though the number of such transactions fell 865.8 million. September, thus, records the second highest total amount transacted digitally in a month after demonetisation on November 8.

Some of the impressive September showing could be because of one-off factors like festive season spending—hence, much more needs to be done to get the digital payment momentum to achieve, in a manner of saying, cashless-economy criticality. The RBI figures cited by Mint are themselves telling. Unified Payments Interface (UPI) transactions in September recorded a whopping 85% growth in volume and 28% growth in amount transacted over the preceding month. Ease of transaction is one of the reasons why UPI has been favoured so. On the other hand, what should have seemed intuitively as ubiquitous tools of digital payment, debit/credit cards, are hobbled by poor penetration of Point of Sale (PoS) devices—there are just 28.82 lakh online PoS deployed by all banks. Compare that with the nearly 18 million downloads for BHIM (launched December last year) by September 3, even though the volume of transactions and value transacted still have a lot of room for growth. What is worse, the government wants to cap merchant discount rates (MDR) at Rs 200 in the hope that a low MDR would spur more merchants into becoming more accepting of debit card payments. However, forcing banks to pick up the tab for rolling out digital payment this way will discourage them from deploying more PoS machines, and ultimately affect the digital-payment momentum. The government must fund the effort to drive PoS transactions. Similarly, for BHIM, as per an internal NPCI study cited by The Wire, a rethink in design and interface is needed. While digital-payment is not flailing—it is more than twice of what it was in July 2016—sustaining the momentum is critical.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition