Digital Transactions

Demonetisation impact on digital transactions:
  • After an initial surge in digital payments, largely attributed to a shortage of cash in the banking system, digital transactions have seen a dip. This indicates a slow reversal in the usage of digital platforms
  • This is despite doubling of point of sale (PoS) machines in merchant establishments across the country
  • Mobile wallets have also seen a dip in volumes and value of transactions after the initial surge
  • Unified Payment Interface (UPI), the payment platform of NPCI — promoted by RBI — had a slow takeoff even after the launch of BHIM (Bharat Interface for Money), which uses the UPI platform. The value of transactions through UPI are much below one percent of the total electronic payments in the country
  • Bankers and analysts said a complete switch back to pre-November 8 trends has not happened. It shows the possibility that there has been some behavioral change in transactions patterns
  • At a modest 11 percent, the country’s electronic personal consumption expenditure (ePCE) rate is a far cry from some leading economies with ePCE rates upwards of 60 percent
True reality:
  • With over 800 million debit cards and over 30 million credit cards in the market, almost every household in India now has access to a digital payment
  • This has not yet translated into digital transactions
  • At 3 times growth in payment volumes and over 3.5 times growth in transactions, consumers are beginning to enjoy the benefits of the debit card beyond its use as an ATM withdrawal instrument
  • The year after demonetisation was driven by innovation, mainly new mobile applications allowing merchants to receive digital payments via UPI, Link Based, Bharat QR Scan & Pay to mPOS
GST & digitization
  • GST has given the much-needed boost to the digitization initiative
  • It will now be difficult to make cash deals anymore with digital trails of every transaction
Way forward
  • Both the government and the regulators need to continue the initiatives taken by them
  • Principle-based policies, regulation versus current approach of product or entity based regulations, seamless access to payments network and other critical payments infrastructures like UPI and RTGS will make sure that incentives continue to grow for digital transactions

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