In the coming decade there will be numerous factors that shape the way the government delivers services to the citizens. Indian consumers are hungry for new, simple and personalised digital experiences. From 10,000 million transactions in 2016-17 to 20,540 million in 2017-18, there has been a large-scale adoption of digital transactions in India, because of the spread of smartphones and mobile internet at affordable prices. With Digital India, the government aims to make the country a faceless, paperless, cashless society. It has come up with a six-point formula.
* All cash counters in government offices should put up BHIM-UPI QR codes for accepting digital payments;
* Cash counters can send an indent to customers’ phones to enable payment through UPI;
* Campaign to cover all merchants through BHIM-UPI;
* Getting more vehicles to adopt FASTag;
* All government utility bills to carry a QR code; and
* Push to National Common Mobility Card in metros to cover common transportation needs.
UPI is a one-touch transaction for transferring money between parties using a ‘unique virtual address’. UPI-driven payments follow the IMPS (Immediate Payment Service) structure. Since launch, UPI has been adopted by banks and fintech companies. The Bharat Interface for Money (BHIM) is an extension of UPI and Unstructured Supplementary Service Data (USSD) technology launched in December 2016. BHIM enables digital payments through UPI.
Cash counters at government departments are a major source of payments. By putting QR codes (static or dynamic), the idea is to enable cashless payments. The dynamic code requires a screen facing the customer as well as cashier. A third option, which can be enabled on any government cash counter, is to ask for the mobile number of the payer and send a requisition or indent of the payable amount on the phone—through UPI the person can make a payment easily.
Similarly, government utility bills will now print a QR code on the bill or the envelope.
There are only 3.1 million POS (point-of-sale) terminals in India compared with nearly 60 million merchants, creating a challenge for the government. However, over the past two years, the POS terminal presence has improved substantially. Reduced debit card pricing for merchant payments, increase in use of cards for non-cash withdrawal transactions and improving adequacy of POS terminals are healthy signs for sustaining the cashless momentum.
There will be a saving of Rs 2 lakh crore if the country goes for digital payments, as the cost of handling and transporting cash would go down. For the digital dream of India to materialise, digital trust in the government will be at its core.
Providing security: With digitisation, IT infrastructure gets exposed to cyber attacks and data privacy breach. With banks introducing mobile wallets and payment apps, there is a motivation for cyber criminals to take advantage of these vulnerabilities. Against this backdrop, the key stakeholders need to be prepared with processes to safeguard themselves from potential cyber threats. Disruptive technologies such as AI, blockchain, Big Data can play an important role here.
Encourage collaboration with fintech companies: Government agencies have an option of either upgrading their digital infrastructure and incubating innovative culture internally, or growing inorganically through acquisition or collaboration with fintech companies, who provide banks with an option of testing newer technologies in a short span of time. Fintech companies can also provide access to talent pool and a digital-savvy customer base. Economies such as Kenya have greatly benefited by partnering with fintech companies. Kenya’s mobile banking system, M-Pesa, was initially used by mobile phone users to transfer unused air minutes to each other. The system transformed into a cash payment platform, offering micro lending, deposit or withdrawal, transfer money to other M-Pesa users and non-users, bill payment and purchase of airtime. Local banks partnered with M-Pesa to offer users a savings option for unused balances in their M-Pesa accounts by paying interest. As a result, more Kenyans started saving and borrowing, and the proportion of the population excluded from financial services fell below 17%. There are 18 million active M-pesa users in Kenya, and over 6 billion transactions as of date.
Indian is still at a nascent stage of digital revolution. To be successful, the government needs to continuously re-imagine its services and innovate the way it engages with customers. Continual digital evolution is the key to succeed.
By Sachin Seth
(With inputs from Vinay B Narkar, senior manager)