<p>In a recent TV interview, Niti Aayog CEO Amitabh Kant said that Indians will wholeheartedly embrace cashless transactions over the next six months. It is a tall order, despite the lucky draws announced for promoting digital transactions.<br /><br /></p>.<p>But then, the demonetisation may drive the “hesitant digital citizens” (people who are aware of cashless modes, but always preferred cash over debit/credit cards/net-banking etc) to adopt cashless transactions.<br /><br />“Cashless” is emerging as a global trend and the government, following demonetisation, is trying its best to create a cashless digital society. A major bank in Australia has declared that it will no longer accept notes/coins. In Nordic countries, most banks do not accept cash or dispense cash in their branches. Sweden expects over 99% of all transactions to be cashless soon, and is slated to be the first cashless country in the world.<br /><br />India’s cash-to-GDP ratio is 11%, much higher than the advanced economies and even other BRICS countries. A study reveals that India could save Rs 70,000 crore over five years even if 25% of the cash transactions move to cashless. Sample this: a recent report indicates that at least 90% of retail transactions in India are in cash. Compare this with the advanced countries, where the number is just 10%, while it is 40% in emerging economies. Hence, it is not surprising that India fares poorly in the 2016 Digital Money Index, published by Citibank and Imperial College, London.<br /><br />The Digital Money Index uses four pillars for rating - government support, financial and technology infrastructure, presence of digital money solutions and propensity (of consumers and businesses) to adopt digital innovations. India stands at 63rd position (out of 90 countries) while Finland tops the list and China is at 38th position.<br /><br />India has a better rating on financial and technology infrastructure compared to China, Korea and Malaysia, but fares poorly on propensity to adopt digital innovations. On this parameter, India is at 74th position, Korea and China are at 14th and 46th respectively. The US, UK, Sweden and Japan are among the top due to high propensity of consumers and businesses to adopt digital innovations.<br /><br />India has joined the United Nations’ “Better than Cash Alliance” (BTCA). The BTCA aims to encourage governments, development organisations and the private sector to commit to the digital transition. This, along with the government’s massive thrust encouraging people to use digital modes should help India securing a higher rank in the Digital Money Index over the coming years.<br /><br />A recent survey by a business daily states that six out of 10 people don’t believe India can go cashless. Well, that’s precisely how we would have responded 10 years back if had asked whether most Indians would own a mobile by 2016. Just as the mobile revolution surprised everyone, the cashless (or less cash) transactions could be the next revolution.<br /><br />The current demonetisation has provided an opportunity for the public to experience cashless transactions by adopting mobile wallets. Right now, the digitally literate Indian is spoilt for choice – among others, Paytm, Olamoney, Mobikwik, Freecharge Reliance’s Jio Money, with the latest addition to this list being Airtel Money.<br /><br />The government has been asking people across the country to understand different digital channels for transactions. There are quite a few examples where semi-literate road-side vendors have quickly adopted m-wallets for selling tea, vegetables and flowers, allowing even small value transactions of Rs 5.<br /><br />While India is gearing up for going cashless or less cash, there are definite challenges. Many shops, even established doctors have always discouraged customers from using credit/debit card payments citing a 2% additional surcharge. The 2% additional amount is charged despite RBI ruling against charging customers. We need a permanent ban on surcharge and convenience fees imposed by merchants.<br /><br />Despite the popular Pradhan Mantri Jan Dhan Yojna, over 160 million Indians are still unbanked. Sustained effort is needed from the government for inclusion of this segment.<br /><br />For debit card usage in the country to improve, the point of sales (POS) terminals needs to be significantly increased. A report suggests that India has only 14.6 lakh POS terminals. The number of POS terminals needs to increase five folds to reach the average in Russia or China. The RBI has established Acceptance Development Fund (ADF-corpus through contributions from banks) for subsidising and promoting installation of POS terminals.<br /><br />Banking services<br />Considering that credit cards and debit cards are vulnerable for hacking and also the fact that 99% of the adults have Aadhaar card, the Aadhaar-enabled payment set up as an alternative to plastic cards, must be aggressively pursued. How about using the ADF for strengthening the Aadhaar-enabled payment system?<br /><br />While a basic phone can be used for banking services, it is not intuitive. Availability of low-cost smartphones, localised content and digital literacy are needed. <br /><br />Considering that we have about 30 crore illiterates, simple user experience must be ensured. We also need special focus on improving the quality of Internet in terms of its speed.<br /><br />The National Payments Corporation of India launched Unified Payment Interface or UPI, a single mobile application that can be used for several banking services. However, for availing this service, smartphones are required.<br /><br />In the excitement to create a digital society, security should not be compromised. This means, even if it takes longer for improving the percentage of cashless transactions, secure transactions must be ensured. The government has already embarked on an awareness campaign.<br /><br />While the government’s plan for cashless transactions has drawn both applause and criticism, for its success, we need sustained awareness, coupled with simple, intuitive and secure payment system to be created. Only then, India could become a cashless (or less cash) digital society.<br /><br />(<em>The writer is Adviser, Centre for Educational and Social Studies, Bengaluru</em>)</p>
<p>In a recent TV interview, Niti Aayog CEO Amitabh Kant said that Indians will wholeheartedly embrace cashless transactions over the next six months. It is a tall order, despite the lucky draws announced for promoting digital transactions.<br /><br /></p>.<p>But then, the demonetisation may drive the “hesitant digital citizens” (people who are aware of cashless modes, but always preferred cash over debit/credit cards/net-banking etc) to adopt cashless transactions.<br /><br />“Cashless” is emerging as a global trend and the government, following demonetisation, is trying its best to create a cashless digital society. A major bank in Australia has declared that it will no longer accept notes/coins. In Nordic countries, most banks do not accept cash or dispense cash in their branches. Sweden expects over 99% of all transactions to be cashless soon, and is slated to be the first cashless country in the world.<br /><br />India’s cash-to-GDP ratio is 11%, much higher than the advanced economies and even other BRICS countries. A study reveals that India could save Rs 70,000 crore over five years even if 25% of the cash transactions move to cashless. Sample this: a recent report indicates that at least 90% of retail transactions in India are in cash. Compare this with the advanced countries, where the number is just 10%, while it is 40% in emerging economies. Hence, it is not surprising that India fares poorly in the 2016 Digital Money Index, published by Citibank and Imperial College, London.<br /><br />The Digital Money Index uses four pillars for rating - government support, financial and technology infrastructure, presence of digital money solutions and propensity (of consumers and businesses) to adopt digital innovations. India stands at 63rd position (out of 90 countries) while Finland tops the list and China is at 38th position.<br /><br />India has a better rating on financial and technology infrastructure compared to China, Korea and Malaysia, but fares poorly on propensity to adopt digital innovations. On this parameter, India is at 74th position, Korea and China are at 14th and 46th respectively. The US, UK, Sweden and Japan are among the top due to high propensity of consumers and businesses to adopt digital innovations.<br /><br />India has joined the United Nations’ “Better than Cash Alliance” (BTCA). The BTCA aims to encourage governments, development organisations and the private sector to commit to the digital transition. This, along with the government’s massive thrust encouraging people to use digital modes should help India securing a higher rank in the Digital Money Index over the coming years.<br /><br />A recent survey by a business daily states that six out of 10 people don’t believe India can go cashless. Well, that’s precisely how we would have responded 10 years back if had asked whether most Indians would own a mobile by 2016. Just as the mobile revolution surprised everyone, the cashless (or less cash) transactions could be the next revolution.<br /><br />The current demonetisation has provided an opportunity for the public to experience cashless transactions by adopting mobile wallets. Right now, the digitally literate Indian is spoilt for choice – among others, Paytm, Olamoney, Mobikwik, Freecharge Reliance’s Jio Money, with the latest addition to this list being Airtel Money.<br /><br />The government has been asking people across the country to understand different digital channels for transactions. There are quite a few examples where semi-literate road-side vendors have quickly adopted m-wallets for selling tea, vegetables and flowers, allowing even small value transactions of Rs 5.<br /><br />While India is gearing up for going cashless or less cash, there are definite challenges. Many shops, even established doctors have always discouraged customers from using credit/debit card payments citing a 2% additional surcharge. The 2% additional amount is charged despite RBI ruling against charging customers. We need a permanent ban on surcharge and convenience fees imposed by merchants.<br /><br />Despite the popular Pradhan Mantri Jan Dhan Yojna, over 160 million Indians are still unbanked. Sustained effort is needed from the government for inclusion of this segment.<br /><br />For debit card usage in the country to improve, the point of sales (POS) terminals needs to be significantly increased. A report suggests that India has only 14.6 lakh POS terminals. The number of POS terminals needs to increase five folds to reach the average in Russia or China. The RBI has established Acceptance Development Fund (ADF-corpus through contributions from banks) for subsidising and promoting installation of POS terminals.<br /><br />Banking services<br />Considering that credit cards and debit cards are vulnerable for hacking and also the fact that 99% of the adults have Aadhaar card, the Aadhaar-enabled payment set up as an alternative to plastic cards, must be aggressively pursued. How about using the ADF for strengthening the Aadhaar-enabled payment system?<br /><br />While a basic phone can be used for banking services, it is not intuitive. Availability of low-cost smartphones, localised content and digital literacy are needed. <br /><br />Considering that we have about 30 crore illiterates, simple user experience must be ensured. We also need special focus on improving the quality of Internet in terms of its speed.<br /><br />The National Payments Corporation of India launched Unified Payment Interface or UPI, a single mobile application that can be used for several banking services. However, for availing this service, smartphones are required.<br /><br />In the excitement to create a digital society, security should not be compromised. This means, even if it takes longer for improving the percentage of cashless transactions, secure transactions must be ensured. The government has already embarked on an awareness campaign.<br /><br />While the government’s plan for cashless transactions has drawn both applause and criticism, for its success, we need sustained awareness, coupled with simple, intuitive and secure payment system to be created. Only then, India could become a cashless (or less cash) digital society.<br /><br />(<em>The writer is Adviser, Centre for Educational and Social Studies, Bengaluru</em>)</p>
