India as a cashless society

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Appan Ghosh, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

The “Digital India” campaign is the flagship program of the Government of India. And as a part of this initiative, payments in the country is one of the key focus of the government today. Recently we saw the government taking a step towards a cashless society by demonetization of 500 and 1000 rupee notes. Explaining the step as a strategy towards a cashless economy , PM Narendra Modi on the show “Mann ki baat” emphasized on mobile banking transactions as a means to achieve this objective. Even the finance minister, Arun Jaitley, spoke of the necessity to reduce the “implicit costs of printed currency”.

Over the past 2 months we have seen different options of cashless transactions being promoted to increase awareness and acceptance of the digital payments. Some of them are:

  • Debit / Credit cards
  • Mobile banking apps like Paytm,BHIM, UPI enabled apps from banks, etc
  • Bank prepaid cards
  • Micro-ATMs
  • Internet banking
  • USSD codes for feature phones

The steps are not only taken by government, but initiatives are also taken by the private players in the payments industry. We saw Paytm and other digital wallets waiving off the processing fees from 4% to 0% up to transactions of Rs. 2000, at the same time when banks were waived off the NEFT transaction charges post demonetization.

All these steps are promising, and our own survey has shown many folded increase in cashless transactions in the retail sector. But there are other factors related to acceptance of a cashless society, which also need to be addressed:

  • Infrastructure – which will include free WiFi or internet made available to do the transactions, better network coverage from telecom providers to avoid transaction failures, better
  • Security – RBI can introduce mandated guidelines for the payments facilitators to follow like: PCIDSS, instant lock features of accounts/transactions to avoid security risks upon lost mobiles/cards.
  • Awareness – People needs to be made more aware of the transactions and needs to trust the digital payments, so awareness programs has to be launched across the country with emphasis for rural India

With all these factors addressed, it will certainly become easier for the Government of India to on-board the citizens on the digital-economy platform and accelerate towards a cashless society.

References:

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