by Ruchita Deshpande
“Why are you going to the ATM? I accept cards”, the street-side vegetable vendor tells me as he takes out a swiping machine, with a shiny PAYTM sticker on it. The vendor, 45, was convinced by his 20-year-old son to step into the cashless domain. The move was further encouraged by the bank which provided them with a card-swipe machine for free for transactions of more than Rs. 50,000 a month. Now, I swipe my card even for a Rs. 200 transaction at the grocery shop.
First came the credit and debit cards; then digital wallets. Now, even the banks enable the user with virtual cards that make it unnecessary to carry the credit/debit card for payments. Gone are the days when bulky purses and fat wallets were an indication of your buying capacity. Gone too, are the days of Bank visits and ATM withdrawals. Now, the Indian consumers are encouraged to do all transactions using cards or digital transfers. With increasing use of smartphones and growing internet penetration, smartphones are doubling up as wallets and virtual cards for quick transfer of money. All you now need, be it to buy a product/service or transfer money between individuals, is your smartphone with data and the means to spend.
Cashless economy is no longer a thing of the future. It is on a fast track to becoming the foundation of a sustainable cashless economy with the launch of Unified Payment Interface (UPI), the Indian government's initiative to make bank-to-bank payments easier by linking a unique identifier (name/phone number/aadhar card) which acts as your virtual address. The payments system is designed to serve as a replacement for all the apps that you needed to make money transactions on online shopping websites, pay electricity bills, barcode-based payments, and deposit college tuition.In short, this virtual address can be used for any monetary transaction.
The government is enabling the cashless economy by making the processes shorter, easier and safer. UPI offers a considerably wide payment range — between Rs. 50 to Rs. 100,000 in one transaction. Any bank with over 1,000 pilot customers, 5,000 transactions, and an 80 percent higher success rate is eligible to adopt UPI on their app and offer it to the general public through the Google Play. It is the first time in the world that a project of such a scale is being introduced to customers.
But wait. Weren’t digital payment introduced in US, China and Japan as early as 2004? Why did it take 12 years to reach India?
India uses too much cash for transactions. The ratio of cash to gross domestic product is one of the highest in the world—12.42% in 2014, compared with 9.47% in China or 4% in Brazil. There has been a jump in electronic payments since 2007 with its share increasing from 2.6% to 6.8% in 2014.
While we see a lot of interest for this mode of payment, the adoption is seen in very small pockets of the consumer base. The only reason we have deigned to pay for Uber through digital wallets is because we pay for it after we consume the service.
The digital payment scenario is changing… but slowly. Too slowly in my opinion. The number of non-cash transactions per person in India is only six per year. It needs the mind-set that enables them to trust the digital/online/cashless transaction as much as they trust the physical exchange of money.
But we believe that it is a dream that needs more than just the infrastructure or means to carry out the transaction. We as Indians would like to be a part of the exchange – we need goods in exchange of money; Cash on delivery instead of online payments.
Considering the growing requirement of replacing currency notes and to reduce the burden of cash transactions on the economy, the government is rewriting the policies to make electronic/digital payments a norm for the society at large. Innovations in the electronic payments space would not only deliver greater transparency but more importantly, they will also simplify transactions, enhance security, increase efficiency and have the potential to dramatically reduce costs. Sounds like a win-win situation right?
The majority of the population does not agree. Let’s take a look at points of contradictions between the users and the government about cashless economy:
“Madam, Saara Dhanda white ho gaya to humara gujara kaise hoga?”
If all my business becomes white (legit), then how will I survive
Small businessman woe about the fact that not all of their goods are accountable through receipts of purchase. Neither are their transactions as they would involve different types of payments based on the personal relationships. Credits also pay a huge role in the financial bottom-line for the merchant and he needs certain amount of cash to float him till the customer pays. The merchants would not like to have all transactions accounted for and leave his coffers empty in case of a rainy day.
About cashless transaction – “Itna aasan nahi hai yahan. Sabke paas internet nahi hota, range chali jaati hai, power cut ho gaya to chalta nahi hai. Amount daalo, PIN daalo, OTP daalo. Phir transaction hoga. Bank apna commission kaatti hai. Kaun itna jhanjhat karega. Cash deke kissa khatam.”
It’s not that easy here. Not everyone has internet (data) connectivity. You cannot depend on the phone range. Does not work if there is a power cut. You have to put in amount then the PIN or the OTP then the transaction will be completed. Banks cut a part of the amount as commission. Who would go through all this hassle. Pay in cash and finish the transaction.
Neither the merchants, nor the consumers have the patience to wait for these ‘lengthy’ processes to authenticate the electronic transactions. Also, in certain instances or service situations of unorganised trade like auto and bus rides, roadside vendors, and house maids, there is a need to conclude the transaction and not keep it hanging.
“Mein apna credit card number online nahi daaloongi. Hack ho gaya toh! Internet ka koi bharosa nahi. Mein apna personal information online nahi store karoongi. Aur phone chori ho gaya toh? Mera paisa toh gaya. Wapas kaise milega?”
I don’t put in my credit card number online. What if the site is hacked? I can’t trust the internet. I won’t store my personal information online. And what if my phone is stolen. I’ll lose my money. How will I get it back?
Majority of the users still do not trust their personal/financial information online. Hacking and data security is a huge concerns. They are unaware of the security protocols that can be put in place to safeguard this information. It will be a massive exercise to educate the populace about this.
“Paytm ko jab tak RBI ka support nahi milta, main aisa kuch bhi nahi lene wala. Mera paisa doob gaya toh kaun laake dega?”
Unless Paytm is recognised by RBI, I am not going to accept digital payment. If I lose money then who will reimburse that?
Banks are still looked up to as organisations that safeguard the common man’s interest. They govern the financial transactions and are accountable in case of any issues. If and when the newer forms of payments are accepted by the financial institutions, the consumers will use it more often and with less trepidation.
In the last financial year, RBI spent Rs. 27 billion on just the activity of currency issuance and management. Also 70% of India’s GDP comes from urban areas if government can convert that into cashless it will be a huge gain. Think of how much money can be saved and the possibilities that it will offer the nation. The negative impact of fake currency can be avoided. The economy will definitely benefit from going cashless.